Small Business Performance in Oman
Introduction
This is an exploratory study conducted to learn about business enabling environments and the general performance of small businesses with reference to Oman. The paper discusses the varying opportunities in Oman as well as the impacts of ICT infrastructure, application of software, drivers for ICT investments, individual perceptions about the benefits of small businesses, and performance outsourcing trends within small businesses in Oman. Ssewanyana and Busler (2007) indicate that a few businesses among the growing firms recognize the benefits of ICT in their operations, and therefore the rate at which ICT is adopted is lower in Oman than in most developing or developed countries.
Within the frameworks of ICT investment by SMEs, Oman Economic Review (2007) notes that the driving force is for businesses to provide better, efficient, and sufficient services to customers, and also stay ahead of other businesses in terms of operation. Over the past few years, SMEs in Oman have reported positive performance, which accounts to proper application of ICT in areas of production and sales outsourcing. Other than the mentioning of benefits of ICT, Houghton and Winklhofer (2004) make observations on the challenges small businesses in Oman face, such as limited capabilities, increasing costs of ICT, and inadequate information on suitable ICT solutions and benefits of adoption.
Based on the mentioned challenges, the study recommends introduction of more training facilities in ICT within small businesses, efficient measures to enhance release of ICT products and services at relatively lower costs as well as providing free professional advices to SMEs to improve their performance and contribution to Omanis Economy. These factors are the founding reasons for establishing an enabling environment for small businesses and improving business performance for the benefit of Oman and its population.
Literature Review
Importance of Small businesses in Oman
According to Caldeira and Ward (2002, p. 121) small businesses are crucial to a country’s development and ensures that the country’s economy is not only stable but also sufficient to sustain the life of a growing population. Other related studies show that New Zealand economy is made up of 99 percent small businesses, which contribute up to 60 percent of the country’s total employment (Caldeira and Ward, 2002, 123). In the US however, half of the country’s total employments is an attribute of small and medium businesses with a decreasing employment rates from some of the big firms. The same trend is indicated in the UK where SMEs employ up to 67 percent of the country’s total employment capacity (Caldeira and Ward, 2002, 122). With such an increasing record of employment, the GDP of these countries improve each year, opening new opportunities for investment and compel respective governments to create breeding grounds for imparting entrepreneurial skills and new business ideas to member of the public.
With a similar experience, Chibelushi (2008, p. 35) states that the government of Oman today focuses on making policies in order to facilitate growth and development of small businesses. The country’s record on strong use of ICT in areas of production since 2011indicates that the government spends 10 percent of GDP on ICT investment. The estimate figures from World Bank also indicate that small businesses in OECD countries contribute about 55 percent, and most middle income countries of the world like Oman generate between 60 to 70 percent of their employment from small businesses (Chibelushi, 2008, p. 21). In general small businesses in Oman improves the country’s economic performance on a wider perspective; creating opportunities for employment, ensuring market stability and growth, enhancing growth is social welfare through a rise in earning and ensuring that the county engages its population in more production and innovative processes.
The diffusion of ICT in Small Businesses
Clarke (2004) points to the adoption of internet and proper application of e-business in small businesses in developing countries like Oman. The Government of Oman recognizes the importance of ICT adoption and has responded by establishing special groups charged with the responsibility of studying the various aspects of ICT adoption and its effect of business operations. As already stated in our introduction, most small businesses in Oman were initially slow to adopt ICT in their operations because of the challenges associated despite the call from the government and emphasis to incorporate ICT in production, management and distribution of goods and services.
As opposed to large organizations, Dawn, Podonik and Dhaliwal (2002) indicate that small businesses in Oman have limited access to applicable financial and human resources, which businesses can adopt in order to facilitate growth through ICT. Dawn, Podonik and Dhaliwal (2002) also identify inadequate ICT skills and SME knowledge as part of the major challenge Oman faces towards ensuring full implementation of a more integrated production process in small businesses. The spread of ICT and business growth in Oman is also affected by internal and external factors. On the side of internal factors, Dawn, Podonik and Dhaliwal (2002) state that ICT adoption and therefore the general performance of small businesses respond to owner-manager characteristics, business characteristics, projected cost of production and returns the business expects after investment. At the same time, the decision to adopt ICT in order to improve business growth faces constraints from the country’s level infrastructural development, socio-cultural and political factors as well as legal and regulatory factors (Doczi, 2002). The role of the government in controlling business operations in the country should extend to creating an enabling environment for small businesses and ensuring that the external conditions do not become a major challenge towards business growth.
Application of ICT in Oman
The report by the UN indicates that among some of the ICT adopters, Oman internet connection is approximately 12.22 per every 100 small business users with 5.06 PCs per 100 businesses, 69. 6 Cellular subscribers for every 100 businesses, 10.56 telephone connections and 0.58 broadband per 100 small businesses (Duan, Mullins, Hamblin, Stanek, Sroka, Mavhado and Araujo 2002). The country represents an e-business participation rate of 0.204, which ranks 61 among the world’s users of e-business. After the government conducted a situational study over its market viability and the processes that could lead to extensive growth, investment in ICT became the major option for the country (Duan, Mullins, Hamblin, Stanek, Sroka, Mavhado and Araujo 2002). In this line of production, the Omani Government puts greater emphasis on creating a digital economy as an alternative to process towards realizing a more diverse production and stable economic growth. Today, the government of Oman is heavily investing in ICT in order to improve business performance and diversify the country’s economic production. Specific to this venture is the step the government took in September 2003 in establishing Knowledge Oasis Muscat otherwise known by abbreviations KOM (KOM 2008, p. 23). KOM was a technology initiative Oman government took create productive skills, and to attract both internal and foreign investment alongside serving the population as an incubator for business ideas. This led to the development of Information Technology Authority in 2006 as a national strategy towards the facilitation and implementation of ICT infrastructure (KOM 2008, p. 25). The authority was also charged with the responsibility of overseeing the implementation process of the country’s digital strategy in business operations.
Apart from investing in actual technologies, the Omani government encourages both private and public sectors to open more universities and technical institutes specific to ICT training with an intention of improving the country’s ICT literacy (Dutta, and Coury 2003, p. 117). The decision by Oman to establish a Sanad program helps in encouraging entrepreneurship (Dutta, and Coury 2003, p. 117). This program also improves the country’s position as far as small business investment is concerned by providing young business innovators with the necessary finances, guidance and technical training that can best be applied in small businesses (Dutta, and Coury 2003, p. 117).
According to Harindranath, Dyerson and Barnes (2008, p. 91), private institutions also play vital roles in ensuring growth in small businesses and country’s general economic performances. For example, in 2011, Shell set aside 10 million US dollars as part of capital and on-going support for small businesses in Oman. On the same note, the Microsoft Company signed a memorandum of understanding with Omanis’ Ministry of Education as the main supplier of computers, computer software and other important components of technology (Harindranath, Dyerson and Barnes 2008, p. 93). The Microsoft Company also offers training on how these computers and their respective software can be used to improve business performance. The Omani government works hard to realize its major objective of ensuring that the country operates as a digital economy, and all these initiatives are projected to improve ICT diffusion in small businesses within the country (Houghton and Winklhofer 2004, p. 373).
The state of Small Business in Oman
The 2012 report released by the Middle East Bank indicates a rough estimate of between 15,000 to 20,000 small businesses in Oman generating about 10 percent to 20 percent employments (Illuminas 2006). The gaps in business operations and the rising demand provide opportunity for higher investments in small businesses in the country. Through an expanded growth, the small businesses contribute immensely towards creating employment, making the Oman to be competitive both at regional and international levels (Inno Vest Group 2008). All the evidences presented in this case point to the observed changes in small business settings and the reasons behind ICT investment, the environmental restrictions as well as the barriers for technology adoption and ICT implementation in small businesses (ITA 2008). However, one important factor to note is the extent to which the government contributes to small business performance in Oman. From the discussions, we can note that small businesses form the foundation for national growth (Kapurubandara and Lawson 2006).
Other studies show that small businesses in Oman perform well because of their ability to differentiate their businesses and products from close competitors. Small businesses in Oman have chosen a market approach of providing products and services of high quality. These businesses maintain high product and service quality throughout their operations as the principle methods for differentiating, or creating a long-term business relationship with customers across the region. The strategy of competitive advantage also links to how small businesses in Oman use technology in they operations.
The information given in this study also point to unavailability of internal skills as the major factor affecting small businesses in Oman (GulfBase 2008). As far as the issue of internal skills is concerned, businesses in Oman tend to outsource their operations and including ICT related work. The inventions of ICT recognized process outsourcing as common practice that businesses can apply in order to maintain a productive and competitive business environment (GulfBase 2008). Majority of small businesses in Oman involve themselves in market researchers with an intention of coming up with the best ways to outsource portions of their activities and work to other market operators.
ICT usage within small businesses in Oman is moderate to common technologies and less concentrated to more sophisticated new inventions such as online marketing, online merchandizing, operation and network security as provided by the changes in ICT (Fink and Disterer 2006, p. 605). The studies conducted indicate that Omani small businesses are today giving their ICT investment a comprehensive approach and becoming more focused on strategic and operational aspects of the business (Gregor, Fernandez, Holtham, Martin, Vitale & Pratt 2004, p. 119). The decision by businesses to engage in ICT investment was connected to the changing demands of customers and the need to provide more improved services, retain a higher market share and remain competitive throughout market operations. Most businesses in the country work on a completive strategy of providing high quality products and services in order to gain customer loyalty.
Recommendations
Overall, the study indicates only a few businesses recognize the importance of adopting ICT, and that those businesses with elaborate knowledge on how ICT works fear the cost of implementation. For those businesses with inadequate information on applicability of ICT in operations, there is need to develop mechanisms for knowledge and skills impartment, open opportunities for better business advices and support. Therefore, the Omani Government should convert all its efforts towards increasing awareness among small businesses on the benefits of adopting ICT. The small businesses must be made to understand the extent to which ICT improves business performance, makes activities more productive and competitive. At the same time, the government should accept the role ICT plays towards national growth, subsidize the cost of ICT products, services, business solutions and the cost of providing professional advices. In general, the need to address the gaps and issues addresses in the study arises as the first step in ensuring a complete and more improved business environment for SMEs.
Conclusion
The study reveals that a half of small businesses in Oman already benefit from the extensive growth in ICT, as one of the business-enabling environment. From the foregoing, all small businesses are motivated to ensure better customer relationships, increased revenues and reduced costs of operations by putting in place efficient means of production (Lange, Ottens and Taylor 2000, p. 88). The study also indicates that two-thirds of entrepreneurs are positive towards increasing their business operations through application of ICT and training on entrepreneurial skills.
In relation to the mentioned barriers to business performance, majority of small businesses in Oman believe that inadequate internal skills are the main barrier. Other businesses feel that the costs of production and implementation of relevant technologies like ICT as well as unavailability of relevant entrepreneurial information and advices on suitable technologies are the main factors preventing small businesses from ensuring full growth and expansion (Lange, Ottens and Taylor 2000, p. 91). Apart from the stated barriers, there seem to be a general agreement on time limitation during process implementation, lack of top management support, bad experiences small businesses have with harsh government regulations and requirements yet other factors affecting small business operations.
On a personal view, the findings of this study are consistent with the literatures presented on the business processes, the need to emphasize on training facilities within ICT for the purposes of improving the performance of small Businesses. This study also indicates that small businesses in Oman are driven by the need to search different markets for varying opportunities, product ICT products and services at relatively lower costs while making available free professional advices and consultation to new businesses. Also notable is the fact that the findings of this research have important implications for policy creation and implementation that will improve ICT adoption in most small businesses in Oman. This is because most small businesses in the country aim at outsourcing their activities, which can only be possible and adequate if these small businesses and trading partners apply ICT in their operational strategies.
References
Caldeira, M. M., and Ward, J. M., 2002. Understanding the Successful Adoption and Use of IS/IT in SMEs: an Explanation from Portuguese Manufacturing Industries, Information Systems Journal, Vol. 12, No. 2, pp. 121-152.
Chibelushi, C., 2008. ICT industry challenges in adopting ICT: a case study from the West Midlands, UK, in proceedings of the 2008 International Conference on Information Resource Management, May 18-20, Niagara Falls, Canada.
Clarke, J., 2004. Information Systems Strategy and Knowledge-based SMEs in the Australian Biotechnology Industry: Does IS need to reorient its Thinking? 15th Australian Conference on Information Systems, Hobart, Australia, 1-3 December.
Dawn, J., Podonik, P., and Dhaliwal, J., 2002. Supporting the E-business Readiness of Small and Medium-Sized Enterprises: Approaches and Metrics, Internet Research Vol. 12, No. 2, pp139-195.
Doczi, M., 2002. Information and Communication Technologies and Social and Economic Inclusio, Information technology Policy Group, Ministry of Economic Development, Manatu, Ohanga, NZ, March.
Duan, Y., Mullins, R., Hamblin, D., Stanek, S., Sroka, H., Mavhado, V., Araujo, J., 2002. Addressing ICTs Skill Challenges in SMEs: Insights from three country investigations, Journal of European Industrial Training, Vol. 26, No. 9, pp. 430-441.
Dutta, S., and Coury, M, E., 2003. ICT Challenges for the Arab World, Chapter 8, in Dutta, S., Lanvin, B. & Paua, F. (ed.) “The Global Information Technology Report 2002-2003: Readiness for the Networked World”, World Economic Forum/Oxford University Press, New York, pp116-131.
Fink, D., & Disterer, G., 2006. International Case Studies: To what extent is ICT infused into the Operations of SMEs?, Journal of Enterprise Information Management, Vol. 19, No. 6, pp 608-624.
Gregor, S., Fernandez, W., Holtham, D., Martin, S., Vitale, M., & Pratt, G., 2004. Achieving Value from ICT: Key Management Strategies, Department of Communications, Information Technology and the Arts, ICT Research Study, Canberra.
GulfBase., 2008. GCC Common market set to enrich ICT sector, [online] http://www.gulfbase.com/site/interface/NewsArchiveDetails.aspx?n=49939 [11 March 2008]
Harindranath, G., Dyerson, R. and Barnes, D. 2008. ICT Adoption and Use in UK SMEs: a Failure of Initiatives? The Electronic Journal Information Systems Evaluation Vol. 11, No. 2, pp. 91-96.
Houghton, K.A. and Winklhofer, H., 2004. The Effect of Website and E-commerce Adoption on the Relationship between SMEs and Their Export Intermediaries, International Small Business Journal, Vol. 22, No. 4, pp. 369-388.
Illuminas., 2006. “Net Impact Canada 2006”, [online], http://www.netimpactstudy.com/ca/ {20 March 2008]
Inno Vest Group., 2008. The Technology Small and Medium-Sized Enterprises (SMEs) in Middle East Region, [online], http://www.theinnovestgroup.com/43.html [12 March 2008]
ITA (2008), Information Technology Authority, Oman [online] http://www.ittf.gov.om/english/about_ita.html [15 March 2008]
Kapurubandara, M., and Lawson, R., 2006. Barriers Adopting ICT and E-commerce with SMEs in Developing Countries: An Exploratory Study in Sri Lanka, CollECTeR ’06, 9 December, 2006, Adelaide, [online], http://www.collecter.org/archives/2006_December/07.pdf [13 March 2008]
KOM., 2008. Knowledge Oasis Muscat [online] http://www.kom.om/ev.htm [12 March 2008]
Lange, T., Ottens, M., and Taylor, A., 2000. SMEs and Barriers to skills development: A Scottish Perspective, Journal of European Industrial Training, Vol. 24, No. 1, pp. 5-11.
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Ssewanyana, J., Busler, M., 2007. Adoption and Usage of ICT in developing Countries: Case of Ugandan Firms, International Journal of Education and Development using ICT, Vol. 3, No. 3, [Online] journal, available at http://ijedict.dec.uwi.edu/viewarticle.php?id=349 [March 13 2008]
Appendix
Progress Report
Supervisor’s Name…………………………………………………………………………
Student’s Name………………………………………………ID. NO. ……………………
Date of submission:
Subject: Small Business Performance in Oman
Introduction
The aim of this assignment is to learn about business enabling environments and the general performance of small businesses in the context of Oman, and the report discusses the progress made by the researcher between 12th October 2014 and 6th January 2015.
Phase I: from 12th October 2014 to 11th November 2014
A background study is developed to present varying opportunities in Oman as well as the impacts of ICT infrastructure, application of software, drivers for ICT investments, individual perceptions about the benefits of small businesses and performance outsourcing trends within small businesses in Oman. The study background indicates that only some of the few businesses among the growing firms recognize the benefits of ICT in their operations, and therefore the rate at which ICT is adopted is lower in Oman than in most developing or developed countries. The data collected over the periods specified are true evidences of rising business opportunities and retrogressing factors as far as process applicability is concerned.
Phase II: form 20th November 2014 to 19th December 2014
Between the specified periods in this phase, the researcher engaged in data collection, development of ideas and presentation of knowledge concerning the importance of small business in Oman, the diffusion of ICT in small business and application of ICT in Oman. During these periods, the research was able to find out that small businesses are crucial to a country’s development and ensures that the country’s economy is not only stable but also sufficient to sustain the life of a growing population and like any other developing nation, Oman focuses on small businesses best solution to the growing unemployment. However, the research was able to establish that amidst the new technologies, small businesses in Oman finds it very difficult to apply ICT in their areas of operations because on the high costs of installation, operation and maintenance. Under the literature review, the research presents that various cases comparing growth in ICT in Oman and other developed countries like USA, and the gap rises as one narrows to application of ICT in small businesses in Oman.
Phase III: 27th December 2014 to 6th January 2015
The next area of investigation was to analyze and understand the state of small businesses in Oman and the challenges these businesses experience. Based on the mention challenges, the research had to define an in-depth recommendation and solutions to the rising business challenges. Between the periods given above, the information the researcher collected indicated that there are between 15,000 to 20,000 small businesses in Oman generating about 10 percent to 20 percent employments. The details of the research indicate that through an expanded growth, small businesses in Oman would contribute immensely towards creating employment, making Oman to be competitive both at regional and international levels. The researcher was able to identify the changes in small business settings and the reasons behind ICT investment, the environmental restrictions as well as the barriers for technology adoption and ICT implementation in small businesses as the main challenges small businesses in Oman face in their everyday operations. As a recommendation, the study advises on government subside in ICT purchase, creating awareness among uses and proving technical skills and basic knowl