Titel Department of Computer and System Science Factors affecting E commerce adoption among Small and Medium Enterprises (SMEs) in Developing Countries The Context of Kenya Examensarbete Författare Va.
Department of Computer and System Science Factors affecting E-commerce adoption among Small and Medium Enterprises (SMEs) in Developing Countries The Context of Kenya Examensarbete Fưrfattare: Vanessa Kimana Huvudområde: Informatik Hưgskolepộng: 15 hp Nivå: Kandidat (C) Termin: VT 2020 Handledare: Karin Ahlin Examinator: Thomas Persson Slumpi Kurskod: IK100G Utbildningsprogram: Informatik med inriktning systemutveckling Acknowledgments I would like to acknowledge and express my sincere gratitude to all my teachers at Mid Sweden University for their priceless impact throughout my bachelor's degree and for allowing my dream to come true My special gratitude goes to my research supervisor Karin Ahlin for her invaluable insight, support, and feedback throughout this study I am also deeply thankful to my informants Although their names cannot be disclosed, I want to acknowledge and appreciate their precious time and generous information that helped me to shape this study Finally, I would like to express my deepest gratitude to my dear husband, parents, siblings, and friends who have always encouraged and believed in me This accomplishment would not have been possible without them Thank you ii Sammanfattning Elektronisk handel har radikalt revolutionerat de traditionella affärsmetoderna över hela världen E-handel erbjuder stora fördelar och möjligheter för företag Trots fördelarna har dock flera forskare visat att små och medelstora företag har släpat efter inom e-handeln Syftet med denna studie var i detta avseende att undersöka de faktorer som påverkar införandet av e-handel bland små och medelstora företag i utvecklingsländerna, i Kenya Studien använde sig av ett kvalitativt ansats genom vilket, empiriska data samlades in genom halvstrukturerade intervjuer Målgruppen bestod av chefer/ägare av små och medelstora detaljhandelsföretag som använder någon form av e-handelssystem i sin affärsverksamhet Studien identifierade ett antal motiverande faktorer som ligger bakom implementation av ehandel Dessutom, för att undersöka dessa faktorer, används den forskning (TOE) ramverk som bistår av den tekniska, organisatoriska och miljömässiga faktorer Studien identifierade en till faktor som är relaterad till kulturella sammanhang Studien identifierade ett antal faktorer som omfattar bland annat kostnaden för IT, de fördelar som erbjuds av e-handel, kompatibilitet, brist på tydliga statliga bestämmelser, samt brist på infrastruktur Denna studie identifierades ytterligare en nationell faktor som är i samband med sociala och kulturella sammanhang i Kenya, såsom motstånd mot att anta en kultur av handel på nätet, brist på förtroende, bristande av IT-medvetenhet, nationella postadressystem etc Abstract Electronic commerce (EC) has radically revolutionized traditional business practices across the globe It is also believed that EC offers considerable benefits and opportunities for enterprises Despite the benefits, however, several scholars have shown that Small and medium-sized enterprises (SMEs) have been lagging in EC adoption In this regard, this study aimed to explore the factors that influence EC adoption among SMEs in developing countries, in the context of Kenyan retail SMEs The study employed a qualitative approach through which empirical data was collected by semi-structured interviews The target population consisted of managers/owners of retail SMEs that use some form of EC technology in their business operations The study identified several motivating factors for the adoption and implementation of EC Moreover, the research used (TOE) framework, the technological, organizational, and environmental (TOE) framework with an added national factor, to study and understand the factors affecting EC adoption among SMEs The study identified some factors ranging from, but not limited to the cost of IT, the benefits offered by EC, compatibility, lack of clear government regulations, the role of managers, lack of infrastructure The study further identified a national factor associated with the social and cultural context in Kenya such as the resistance to adopt a culture of purchasing online, lack of trust, lack of IT awareness, national address system, etc Keywords: Electronic Commerce (EC), Online retailing, E-commerce adoption, Developing countries, Kenya, Small and Medium-Sized Enterprises (SMEs) iii Contents ACRONYMS INTRODUCTION 1.1 1.2 1.3 1.4 THEORETICAL BACKGROUND 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 EC DEFINITION TYPES AND BUSINESS MODELS OF EC MOTIVATIONS AND DRIVERS FOR EC ADOPTION THE BENEFITS OF EC CHALLENGES OF EC SMES AND EC ADOPTION IN KENYA 10 REVIEWING EC ADOPTION FACTORS IN SMES 10 TECHNOLOGICAL FACTORS 11 ORGANIZATIONAL FACTORS 11 ENVIRONMENTAL FACTORS 11 RESEARCH DESIGN AND METHODS 13 3.1 3.2 3.3 3.4 3.5 3.6 BACKGROUND PROBLEM STATEMENT THE OBJECTIVES OF THE STUDY RESEARCH QUESTION QUALITATIVE STUDY 13 DATA COLLECTION 13 SELECTION OF ORGANIZATION 13 PARTICIPANTS PRESENTATION 14 DATA ANALYSIS 14 ETHICAL ISSUES 15 RESULT 16 4.1 INTRODUCTION 16 4.2 MOTIVATIONS OF EC ADOPTION FROM THE RESPONDENTS 16 4.3 FACTORS INFLUENCING EC ADOPTION AMONG RESPONDENTS 18 4.4 TECHNOLOGICAL FACTOR 18 4.4.1 Technology Cost and Compatibility 18 4.4.2 Potential and Realized Benefits 18 4.5 ORGANIZATIONAL FACTOR 19 4.5.1 IT expertise and Managerial Support 19 4.5.2 Financial Resources 20 4.6 ENVIRONMENTAL FACTOR 20 4.6.1 Competitors 20 4.6.2 Government Regulations 21 4.7 NATIONAL FACTOR 21 ANALYSIS 22 5.1 5.2 DISCUSSION 25 6.1 6.2 6.3 EC ADOPTION MOTIVATIONS ANALYSIS 22 FACTORS INFLUENCING EC ADOPTION IN SMES IN KENYA ANALYSIS 23 CHALLENGES WITH DATA COLLECTION 26 METHODOLOGY DISCUSSION 26 SOCIETAL IMPLICATIONS 27 CONCLUSION 27 LIMITATIONS OF SUGGESTIONS FOR FUTURE RESEARCH 28 REFERENCE 29 APPENDIX A 32 INTERVIEW QUESTIONS 32 Acronyms EC, E-commerce: Electronic Commerce ICT: Information and communications technology SMEs: Small and medium-sized enterprises (SMEs) EDI: Electronic Data Interchange EFT: Electronic Funds Transfer E: Represent Electronic and communication retail firm S: Represent Supermarket products retail firm F: Represent Flower retail firm B: Beverage and Food firm COD: Cash on delivery B2B: Business-to-Business B2C: Business to Consumer C2B: Consumer-to-Business C2C: Consumer-to-Consumer KICA: Kenya Information and Communications Act Introduction 1.1 Background The rapid penetration of the Internet and other advanced information technologies have given rise to the concept and practice of electronic commerce Though there is no consensus of ECommerce (EC) definition, it has often been referred to as the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, mostly through the Internet and intranets (Turban et al., 2015; Kutz, 2015) Although EC may appear as a relatively recent concept, the history of EC dates back in 1960 when technological developments implied that information could be shared electronically The two main leading technologies during this time revolved around Electronic Data Interchange also known as EDI and Electronic Funds Transfer (EFT) The increase of these technologies was more noticed in the late 1970s and allowed business organizations to transfer commercial documentation electronically However, access to these applications was limited to large corporations and financial institutions (CompuServe, 2020; Tian & Stewart, 2006; Laudon, K & Traver, 2017) The popularity of the internet and the genesis of the World Wide Web allowed large access of the internet to the public and commercial enterprises This allowed numerous companies to utilize EC applications in their operations As a result, EC has increased over time with more companies generating communication channels with its customers to enhance trade relations (Villa et al., 2018) EC is considered as a powerful concept that has fundamentally transformed business processes in a good number of enterprises worldwide It has undeniably revolutionized the business practices; thus, businesses now regardless of their size, understand that the adoption of EC in their business activities is no longer an option but a requirement for survival and competitiveness (Wanzu et al., 2018) Thanks to the advances in information technology, as well as the high internet penetration and mobile communication connection, people now can a variety of commerce activities online (Yang, 2017) Prior studies hold a common view that EC along with other technological innovations have a positive impact on business operations and bring with them significant benefits (Abukar et al., 2018) Some benefits are often related to improvement in operational efficiency, access to a wider range of markets, competitive advantage, information consistency, the ability to operate across the various platforms in real-time, limitless geographical location, etc (Kanyaru and Kyalo, 2015) Unfortunately, Small and Medium Enterprises in developing countries are yet to realize the benefits from EC, Kenya not being an exception The latest report of UNCTAD (2019) depicts the significant EC gap between developed and developing countries While EC creates opportunities for businesses worldwide to reach new markets, developing countries have not been able to reap the benefits of these opportunities According to Abukar et al (2018), many challenges have been diverse for SMEs in developing countries as far as EC adoption is concerned Despite these challenges, Kanyaru and Kyalo (2015) refer EC among SMEs as the catalyst to achieving economic growth and development Additionally, various studies agree on the low uptake and stringent impediments faced by EC adoption among Small and Mediumsized businesses in Kenya (Sokobe, 2018) In this regard, this research seeks to study the factors influencing EC adoption among SMEs in Kenya 1.2 Problem Statement SMEs in Kenya and Africa in general, face many challenges to achieve effective and efficient business performance (Achiando, 2019) Yet, the socio-economic importance of SMEs is unquestionably essential as they constitute more than 90% of all businesses in Kenya (African Review, 2017) In the current digital era, many businesses, regardless of size are unlikely to survive without better use of information technology, particularly SMEs Given the competitive challenges faced by many businesses today, several studies suggest the necessity for SMEs to adopt EC and other innovative information technology According to Achiando (2019), EC offers enormous benefits for SMEs and considerable prospects to increase effectiveness, efficiency, global market, etc According to OECD research, EC opens a range of opportunities for SMEs Thus, they can widely benefit from EC and other related information systems (OECD, 2017) However, previous studies confirm that there has been a relatively low uptake of EC by SMEs in Kenya While there are many studies regarding EC adoption in developed countries, there is little empirical evidence to explain the factors affecting EC in developing countries Similarly, empirical research regarding the factors affecting EC adoption by SMEs is quite limited This study, therefore, seeks to explore the factors affecting EC adoption among SMEs in Kenya 1.3 The objectives of the study The main objective of the study is to describe the factors that affect the adoption of EC among SMEs in Kenya 1.4 Research Question What are the factors affecting the adoption of EC by SMEs in Kenya? Theoretical Background This section covers the literature review to understand the concept of EC and the factors that affect EC adoption among SMEs The existing literature on EC offers several model theories to study the factors of the adoption of EC by SMEs Based on the existing theories on the previous EC studies, it is noticed that Technological-Organizational-Environmental (TOE) model has led the research on the adoption of EC SMEs The TOE framework describes various factors that influence the adoption of technological innovation in Firms (Tornatzky & Fleischer, 1990) Moreover, this study is followed by a review of studies that have been conducted on EC in Kenya Finally, the section concludes by presenting the theoretical background (TOE) that has been used to guide this study 2.1 EC Definition The term EC is broadly used to denote various meanings, very often depending on the context for which it intends to serve Presently, there is no universally agreed definition of EC it has been defined in so many ways The following are some definitions offered by different kind of literatures Kutz (2015) defines EC as the electronic where powerful ICT systems and a globally standardized network infrastructure are used to exchange goods and services between organizations and individuals According to Turban et al (2015), if EC was limited to only commerce activities, its usage would be fairly narrow Hence, EC is not only referred to as selling and buying EC online but conducting all types of business activities using the internet, intranet, and extranet These activities include servicing customers, collaborating with business partners, delivering e-learning, and conducting electronic transactions within an organization Huy and Filiatrault (2006) describe EC as any business or economic activity that makes use of ICT-based applications to facilitate the transaction among businesses, business-to-business (B2B), individuals, customers to customers (C2C), or business to customers (B2C) For the purposes of his study, EC has been viewed as a concept that refers to any type of transaction or information exchange through the internet, within the context of performing any business electronically 2.2 Types and Business Models of EC There are several possible EC models for business These models can be interrelated or combined; it all depends on the nature and characteristics of the market The classification of EC follows the nature of transactions and relationships between the participants Hence, EC can be classified into six major categories (Kang et.al 2016; Turban et al., 2015; Kuz 2016) Business-to-Business (B2B) consists of transactions between business entities or organizations Business-to-Consumers (B2C) include retail transactions of products or services from business to individual customers Consumer-to-Business (C2B) consists of EC in which individuals use the Internet to sell products or services to businesses or organizations Intra-business EC category refers to transactions among various organizational departments and individuals Business-to-Employees (B2E) refers to the delivery of services, information, or products from organizations to their employees Consumer-to-Consumer (C2C) category is where individual consumers sell or buy from other consumers The type of EC that this study focused on is Business-to-Consumers (B2C) where retail businesses deal directly with consumers 2.3 Motivations and drivers for EC Adoption There are many factors underlying EC adoption According to Turban et al (2016), the drivers of EC can be divided into many categories depending on the industry, company, and application involved A good number of literatures suggests studies on motivation to EC and usage and adoption There is no agreement on a standard framework that can be applied in all countries, companies simply by the fact that these operate in different dynamics, environments, and sociocultures (Aljowaidi, 2015) A good number of literatures have examined the motivations leading the companies to use and adoption of EC A study done by Aljowaidi (2015) investigated the factors motivating enterprises to adopt EC The table below (Table 1) summarizes the motivating factors in the context of different SMEs across various developing countries Ghana Studies on the main reasons for adopting EC among Ghana’s SMEs: E-commutation, advertising and disseminate information significantly motivated owners for such technology Egypt Marketing, competition, and improving business performance Malaysia Improving customer, services, marketing, reducing operation costs, improving business performance South American Increased sales, improving customer service, and improving business efficiency were important drivers for EC usage Thailand Trading partner requirement, e-mail and company image motivated Thailand ‘s organizations to adopt B2B EC Table 1: Motivating factors to EC across SMEs in different developing countries 2.4 The Benefits of EC The benefits of EC have been largely discussed by many researchers and they commonly agree on the positive impact that EC brings to companies According to Turban et al (2016), in comparison to a typical brick and mortar store, EC brings numerous advantages and benefits that are rarely found in traditional stores Furthermore, it’s widely recognized that EC could play an imperative role in organizational performance, as it contributes to creating new business opportunities and enables enterprises to perform their tasks efficiently and effectively It also enables enterprises to successfully compete in the market Notably, EC has transformed business processes in many ways and brought positive impacts to many enterprises Thus, these positive impacts of EC are not only advantageous for businesses but also benefit consumers The literature proposes an extensive set of benefits for enterprises that opt to adopt and • • • Better customer service and relation Suppliers connection Better information management Table 3: Motivating factors among interviewed companies 4.3 Factors Influencing EC Adoption among respondents In addition to the motivating factors above, the participants reported the factors affecting EC in their businesses based on the TOE framework The findings revealed a number of factors which have influenced and still influencing the process of EC adoption The results are outlined in detail below, starting with the technological factor and followed by the organizational, and environmental and national factor 4.4 Technological Factor Under the technological factor, the study identified four factors that affected EC adoption namely cost of technology and compatibility, potential and realized benefits among the retail businesses The factors relating to each other have been grouped together in the presentation below 4.4.1 Technology Cost and Compatibility The four participants agree that the cost of technology is prohibitively high According to them, it is the main impediment when they decided to implement EC tools and it continues to be a big challenge The CEO from company adds: “In terms of the major barriers; yes, the cost of technology itself, because you find that when you have a team of IT guys who are more focused on web and App, that's gives you that means that I have to more or less invest the money that I would ideally have put in the business.”(Firm S) Furthermore, the participants have provided several examples of EC technology that are found to be an obstacle for them For instance, the owner of company B who also has an IT background developed an application and website when he started, just to realize that the tools were too advanced for the locals He then had to start over and build another EC technology that was more suitable to the local community and context To ensure compatibility, the four interviewed companies take into consideration the adjustment of available technology for customers For instance, the participants stated that most transactions of online product purchases and payment take place via smart mobile phones and through social networks Hence, IT developers focus more on enhancing mobile technology As firm E mentioned: “Most Kenyans use mobile phones, so our web site is mobile responsive.” Firm E 4.4.2 Potential and Realized Benefits The participating retail businesses emphasized and agreed on the opportunities and benefits that EC adoption has brought to their businesses Furthermore, they stated that potential and realized benefits are the major drivers behind their fervent desire to invest in other innovations These innovations include the need to upgrade the 18 internal IT infrastructure, develop other communication platforms such as Facebook and Instagram for brand awareness and employ “commissionaires” whose main task generally involves recommending the Website and application to promote its visibility Overall, the findings show that the respondents were enthusiastic regarding the benefits brought by EC The findings show that the participants acknowledged the benefits of adopting EC including the cost reduction in operations, efficiency, effectiveness, ability to trace the transactions, access to a larger customer base, easy access to suppliers, convenience, accuracy, productivity, thus these benefits implied an increase in sales Firm B, S and F add: “Customers see what they are buying and from our side information is consistent we are able to reduce some errors that could be done on paper traditionally.” Firm B “In terms of benefits it was gained in terms of a cost reduction, like I said earlier we just agree with the gains of course The fact that we offer our partners a different perspective in terms of ability to sell online, that has actually worked in our favor in terms of getting more clients and yeah I think also with the fact that online business means overhead cost, costs are low, so I guess, cost reduction is a benefit.” (Firm S) “If I wasn’t gaining from my online business, I don’t think I would still continue This is my leaving and source of income.” (Firm F) 4.5 Organizational Factor As discussed earlier, the organizational factor was categorized into three major factors influencing EC adoption: IT expertise, managerial support, and firms’ financial resources 4.5.1 IT expertise and Managerial Support The findings indicate that all the participants emphasized the importance of having a strong, knowledgeable, and dedicated professional IT team as they play a vital role in the innovations, maintenance, and customizations that the retail businesses are looking for Furthermore, the study indicates the increase of mobile shopping with participants highlighting the importance of a mobile version as well as the integration of social media The four retail businesses have in house IT developers which implies a higher cost of doing business for the company The next crucial factor that affects EC adoption among the four participants is the awareness and commitment of the managers and owners It was noticed in this study that the attitude of the managers and owners play a vital role in EC adoption as they oversee the entire EC operation Furthermore, the decisions are often made by one person, most of the time the manager In developing a new EC project, the manager of company B mentioned that it is very imperative to communicate across his entire team the necessity of new features to the system and ensure that the proper training is offered to them As he had previously worked in IKEA, he had a chance to navigate different positions which means he uses his previous experience in his own company to ensure a smooth flow between his employees and customers ” The experience acquired abroad has helped me to understand the needs of the customers and be able to communicate with my team I’m the one in charge of web development so I have to make sure that my employees are well trained as they will be the ones in front, I think they need 19 to master the system firsthand to be able to work the customers through it appropriately So, I see it as a plus.” (Company B) On the other hand, company B revealed the importance of partnering with an IT person who has a piece of good knowledge Even though he is the owner; he had an idea of what he was looking to but he had a limitation on how his ideas could be materialized He also mentioned that many managers or owners don’t explore the possibilities of EC adoption because they are not aware of the potential outcomes of the company It was noticed that the four participants agree on the importance of management support in adopting EC Furthermore, it was evident that in their retail firm context, the management participation in EC adoption may not be a hindrance as they all have an open culture and easygoing approach due to various factors such as management composition and firm’s size 4.5.2 Financial Resources Four firms mentioned the financial constraints There are tremendous resources associated with the adoption of EC, they stated Further, they agreed on the continuous budget for system maintenance and website update According to these participants, the budget and capital constraints are one of the major obstacles to adopt EC and integrate new features for electronic commerce While three participants have postponed developing applications that was needed for business enhancement due to insufficient financial resources, the owner of company S sees it as an urgent requirement to keep the good quality of EC ” In terms of financial barriers, I know it’s a big challenge, but we need it, so we have to find a way to finance.” (Firm S) 4.6 Environmental Factor Within the environmental factor, the study identified two main factors affecting EC adoption among the participants The factors identified from the study findings are competitors and government regulations also considered as an external influence 4.6.1 Competitors The findings indicate that competition is an influential factor in EC adoption among all four participants The participants stated that even though the competition is huge, there is a sense of relatability, noticeably some sectors experience more competition than others These sectors include electronics, fashion, food, and homeware According to company F, “Everything is online right now in Kenya, the only thing you can’t find online is the physical meeting with people.” (Firm F) Firm S also added that due to the high penetration of the internet in the region, Kenyans can now access many online stores, thus they have the access to the searching of product information such as price, models, etc One of the strategies is to stay cost-competitive and deliver a quality of service 20 “We have other international players who have aggressively entered the Kenyan market, companies like Jumia, Alibaba and Amazon…” (Company S) The study findings indicate the increase of competition due to the growth of EC , a wide range of online shopping for consumers All four participants are quite aware of the rising competition and have developed various strategies to remain attractive to their customers These strategies include the integration of social media, Website update, competitive price, having a mobile App, building a Mobile Responsive Website, competitive payment solutions such as (Pay upon delivery) 4.6.2 Government Regulations All four participants confirm that there are no clear regulations that regulate the use of EC “Basically, in Kenya there is no set of rules that regulates the process We only have terms and conditions for the company and when the company is registered, then the company is good to go and that is ok.” (Firm B) “If we have a policy framework, more people are going to trust EC and EC is going to grow.” (Firm E) The study findings indicate that the absence of clear policies affect the adoption of EC as the privacy of the consumers is not guaranteed This poses a threat and challenge for security and privacy protection Consequently, this causes uncertainty for both customers and business owners Most of the customers are therefore reluctant to provide their private information or use their credit card online as they believe their privacy is not protected “At the moment not, many people use credit cards …they use mobile money…people don't trust using their credit cards buying online, they think their cards may be used for other issues people are scared really to use their credit card that's why they prefer using Mobile money We don’t have card options.” (Firm S.) From all participants, the results show the ongoing challenges in terms of regulation which include but not limited to; the protection of transactions, security, unconventional taxation and compensation, privacy (data protection) 4.7 National Factor According to all participants, despite the surge in EC opportunities and conveniences, most Kenyans still choose brick and mortar stores over EC The ability to interact, see and touch the products is still a preference for many Kenyans ” Because most of the people in our country have not been adopted to the shopping online method, they always prefer the traditional methods but currently we are doing fine.” (Firm E) The respondent from company F revealed a lack of trust and confidence in EC He related this challenge to the general culture of Kenyan people, lack of trust and suspicion with each other This lack of trust impedes the online payment and results in cash on delivery According to the CEO of company F, S, B the challenge with cash on delivery (COD) is that very often the customers are absent or refuse ordered products upon delivery 21 “What I can say is that when it comes to door-to-door deliveries sometimes you operate at a loss Sometimes you may deliver Goods to the customer and find out that the customer is not available and then you reschedule a delivery for another day Sometimes you will find out that they are not satisfied, and you return the products.” (Firm F) However, the owner firm S is positive about the advancement that has been made and emphasized on mastering patience while adopting a new culture The same way Kenyans eventually adopted the mobile payment, EC will eventually pick and thus becomes optional for many Kenyans “We don’t have standardized product quality, people still have to go to the stores otherwise they can be cheated very seriously, therefore we need to build a culture.” (Firm S) Analysis 5.1 EC adoption motivations analysis This section specifically examined the motivations for EC adoption among the four retail firms in Kenya following the literature review Several factors were further recognized as drivers behind EC adoption in Kenya The literature emphasizes the importance of having predetermined purposes before adopting EC in firms Per Turban et al (2016), the reasons that motivate enterprises to adopt EC are diverse, they vary from company to company Thus, the ultimate purpose depends on the perceived benefits which the firm intends to achieve In this study, the motivations for adopting EC are defined from the perspective of the anticipated benefits as well as the realized benefits The study also indicates the positive influence of the benefits of the adopted EC technologies The participating retail businesses agree and emphasize on the opportunities and benefits that EC adoption has brought to their businesses Overall, the findings show that the respondents were enthusiastic regarding the benefits brought by EC From the findings, the researcher has categorized the benefits into two groups; the benefits offered to the business and customers The findings show that the participants acknowledged the benefits of adopting EC including the cost reduction in operations, efficiency, effectiveness, ability to trace the transactions, access to a larger base of customers, easy access to suppliers, convenience, accuracy, productivity, thus these benefits implied an increase in sales The owners/CEO and the managers who participated in the interviews provided the details about the process through which they established EC in their enterprises Furthermore, they shared their motivations underlying the implementation of EC in their firms Noticeably, each firm has a different journey thus different strategies and expectations However, the data showed the similarities across the motivation behind the four participant’s responses The motivation underlying the four companies is not far from what was described by (Villa et al 2018; Turban et al 2016 & Aljowaidi 2015) from their prior studies Prior studies revolve primarily behind the pragmatic motivations such as perceived benefits that EC can offer to the company including efficiency in operations, access to global markets, increase in sales, etc A crucial observation is that the major reasons reported by the participants were more directly related to the increase of sales, expansion of customers and cost reduction 22 While three companies (S, E & F) were mainly motivated by increasing sales, efficiency, enlarging customer base, etc Firm B was motivated by resolving the problems encountered while ordering items online As a result, he accomplished the perceived benefits he expected such as sales performance, customer base, the list goes on It’s important to note that firm B didn’t quite have a clear picture of why he needed to implement EC The main motivation for him was just to respond to what he perceived as a hindrance to the existing online order system, which takes us to the next part of the study analysis; the factors influencing EC adoption in SMEs in Kenya 5.2 Factors Influencing EC Adoption in SMEs in Kenya analysis The TOE framework was developed by Tornatzky and Fleischer (1990) to explain the factors that affects a firm’s decision to adopt IT innovation In this study’s context the TOE framework provided a ground to describe the factors influencing EC adoption in Kenyan SMEs Based on the data collected from the four companies – ‘S’, ‘F’, ‘E’ and ‘B’, a model (Figure 2) was illustrated to provide an overview of an extended TOE framework with an added factor relating to a national factor From the respondents’ inputs, the author has proposed an extended TOE framework by adding another factor associated to a cultural context in Kenya Within the national context, the study shows that many factors influencing EC adoption by SMEs are primarily related to the context of the business environment and cultural context One of the subfactors that have been repeated by the respondents is that, in Kenya, the culture of buying online has not been conventionally embraced The respondents point out the trust issues among Kenyans, lack of structured system address and infrastructure being the main factor that inhibits EC adoption Figure below presents the extended TOE framework highlighting the national factor in yellow Factors Technological Organizational Environmental National EC adoption factors Figure2: TOE framework with an extended national factor It can be seen that in the technological context, the perceived and realized benefits have a positive impact on EC adoption among the four participants As shown in the findings above, the potential and realized benefits are the key factors influencing the EC adoption of SME retailers in Kenya These EC benefits are regarded in terms of reduction in operating cost, market expansion, increase in customer base Hence, this statement confirms prior studies ( Nazir and Zhu, 2018; Rahayu and Day 2015; Tiago & Maria 2010) Regarding the cost of technology and compatibilities, the study found that the cost behind the implementation of new technology is extremely high This causes many companies to rely on less advanced EC 23 software Consequently, the cost of technology has a negative impact as it slows the implementation and integration of new and advanced systems in the business Even though the four participants agreed on the importance of organizational factors in EC adoption, including the IT expertise, managerial support, and financial resources (Kurnia et al., 2015; Lacka et al 2014), the study found out that financial resources are a big challenge for SMEs Contrary to Wachira's (2014) study, IT expertise and skill are not difficult to find, but it is very demanding to maintain them due to their high cost On the other hand, the role of managers with positive attitudes in adopting EC seems to play a vital role in adopting EC This study indicates that top managers and CEOs are the driver force behind the expansion of EC adoption, which confirms prior studies Rahayu, and Day (2015) In the environmental context, five factors are negatively affecting the EC adoption These factors consist of competitors, external infrastructure, and government regulations Prior studies (Achiando, 2019; Kanyaru, 2015) suggest the government regulations are one of the major factors affecting EC in Kenya All four participants confirm the absence of regulations that control the use of EC This study suggests that while determining the influence of technological, environmental, and organizational factors on EC adoption by SMEs, the effect of their interaction should be taken into consideration Earlier studies by, Nazir and Zhu (2018) suggested that all these factors should be paid attention to as they give a comprehensive overview of the entire EC adoption system The table below (table 4) summarizes the analysis of the foregoing findings according to TOE framework for the participants: Technological Context ● Potential and Realized Benefits ● Access to larger market ● Operational Cost Reduction ● Efficiency ● Effectiveness ● Ability to trace the transactions ● Access to a larger base of customers ● Easy access to suppliers ● Productivity ● Increase in sales ● Source of income Organizational Context ● IT expertise ● knowledge able and dedicated IT professional ● Understand ing Kenyan Market ● Regional EC culture Environmental Context ● Competitors ● Threats from bigger companies (Alibaba, Amazon, Jumuia) ● EC Strategy: ● Integration of social media ● Website update ● Competitive price ● having a mobile App ● Competitive payment solutions (Pay upon delivery) ● Customer Feedbacks National Context ● Brick and mortar stores over EC ● lack of trust and confidence in EC ● Cash on Delivery ● Informal sectors ● Lack of Legal address ● Lack of standardized product quality 24 Cost of Technology ● Investment in EC technology ● Innovation ● Maintenance Compatibility ● Integration with Social Media (Facebook and Instagram) ● Website Update ● App Managerial Support ● Communica tion ● Employee Training ● EC Awareness ● Team Support Financial Resources ● Limited financial resources ● Budget constraints External infrastructure ● E-payment methods ● Delivery services ● Mobile Money ● Low internet penetration in rural areas Government regulations Lack of: ● Protection of transactions ● Security ● Privacy (data protection) Table 4: Analysis of factors affecting EC adoption based on findings Discussion The results of the study indicated that SMEs in Kenya have adopted some form of EC applications Furthermore, it was noticed that among participants only one company is using advanced EC applications The three remaining have only adopted web sites and social media tools to conduct their businesses These findings are in harmony with prior studies as it confirms the low uptake of EC adoption among the SMEs in Kenya (Sokobe, 2018; Achiando, 2019; ) Furthermore, the factors affecting EC adoption among Retail SMEs were explored using the technological, organizational, and environmental context Besides, the study identified another national factor that has more or less shown the negative impact on EC adoption at the national level The most prominent factors that are found to affect EC adoption negatively and positively among the participants are related to technological, environmental, and national factors Within the technological context, the perceived and realized benefits offered by the EC adoption are found to be appealing, motivating, and attractive for all participants This observation is in accordance with a number of previous studies (Ruhayu, 2015; Nazir and Zhu, 2018; Zhu et al., 2006; Kurnia et al., 2015) This study, however, indicates that SMEs consider the costs of technologies and maintenance to be expensive, which, in return, affects the rate and quality of EC adopted within SMEs Compatibility shows a low impact as EC tools used are largely well perceived by customers The study further indicates the low influence within the organizational context The reason is that top management and the company size facilitate the communication flow regarding the needs of technology updates The financial constraints are however the major impediment among these firms acquiring adequate IT resources required for EC adoption Within the environmental context, the most salient factor is the lack of government support in terms of 25 clear regulations and building IT infrastructure to support EC adoption Furthermore, the study indicates that even the existing laws governing EC are not known by the managers and CEOs Finally, the study indicates that Kenyan culture generally leads to an overall negative impact on EC adoption among SMEs Within the national culture, the researcher discovered various contextual factors underlying and affecting EC adoption These factors are found to be unfavorable and hostile for effective EC adoption among SMEs The national factor explains an overall culture context, such as trust issues, lack of awareness of laws governing EC, traditional purchase, lack of infrastructure, lack of legal address, payment methods, context business environment, etc Also, the research revealed that the national culture serves as another impediment to the adoption of EC among SMEs This national context deals in areas such as the national address system wherein, it is a challenge to locate places as some localities have no specific address or customers changed location without an update Another example of that is the laws of the land regarding EC and in this sense, the SMEs have little, or no knowledge of the existing laws and they not feel obligated to know Under the cultural umbrella, is also the perception of e-payment by the people who have little or no confidence in an electronic payment system but would rather prefer cash payment Culturally, most retail customers in Kenya adopt only the traditional purchase system which is a system wherein the customer has a physical feel of the goods/product before payment Furthermore, this research reveals that the level of existing infrastructure is another strong impediment to the adoption of EC This technology includes both basic infrastructures such as roads, energy, and power, security, internet network, electronic devices (cellphones and computers) 6.1 Challenges with data collection This study was conducted during the challenging time of COVID 19 and this has affected the process of getting smooth access to respondents The researcher contacted 20 companies via Facebook Messenger, WhatsApp, and email without much success Even the ones that responded rejected my request to participate in the interview To overcome these challenges, the researcher contacted her friends from Kenya and ask them for a recommendation This strategy was successful afterward and was the best to adopt to advance the thesis Another challenge was that some of the questions were not answered as expected due to the lack of information in some areas such as regulations 6.2 Methodology Discussion This study employed a qualitative methodology as the researcher found it to be the most suitable approach to respond to the objective of this study The strength of qualitative research in this study’s context was the ability to directly access the participants’ experiences, own words, opinions, and perspectives Hence, the chosen approach was effective in allowing a deeper understanding, broader and richer perspectives that would not have been possible otherwise Even though qualitative methodology has proven to be beneficial in this study, some limitations and weaknesses are obvious I have found data interpretation and analysis to be more complex as it requires much time and the ability to assess the rigidity of data Therefore, a combination of qualitative and quantitative would have provided a deeper insight into some questions 26 Looking at the results, there are some aspects of the study that the researcher would not have had access to if the qualitative methodology were not used For this purpose, interviews were regarded as the staple and main method to collect data Nevertheless, the technic of conducting semi-structured interviews would have been taken account of and mastered by the researcher before the interview The main challenge encountered was the presumption of the participants' understanding of the concepts, technical terms, and ideas behind EC Consequently, the formulation of some questions generated a sort of ambiguity and inadequate responses among participants The clarification and desired responses were therefore attained by repeating and explaining further the said questions to the informants In this regard, the respondents were confident to respond adequately to those questions Another challenge faced was how to manage the silences during the interviews as it became difficult to assess whether the participants needed more time to explore their ideas or did not understand the questions being asked 6.3 Societal implications This study offers valuable insights for existing and potential owners/managers of EC looking to adopt or develop EC in their operations in the context of Kenya The managers/owners of online retail SMEs need to study, analyze the factors concerning their context to adopt the right EC technology in their enterprises Furthermore, EC should not be considered as an isolated case related only to enterprises but a very effective tool for improving society as a whole In this regard, Kenyan society needs to be educated and more informed about EC benefits and impacts on society The government of Kenya plays a big role in enabling a good environment for EC First, the Government needs to improve EC infrastructure, particularly in rural areas to foster EC development Secondly, the Kenya Information and Communications Authority (KICA) the ICT regulatory authority in Kenya needs to create awareness of its existence and role to online retailers Nevertheless, the responsibility for enhancing a successful EC adoption lies across all stakeholders Conclusion The overall purpose of this research was to study the factors influencing the adoption of EC by retail SMEs in Kenya Based on the literature, the results and analysis of this research, a framework was developed to identify possible factors that affect the adoption of EC by SMEs The results showed that all participants have adopted some form of EC applications even though the applications in place are less advanced, such as simple applications, websites, and social media In terms of motivating factors, the study showed that all participants were relatively motivated by the potential and realized benefits offered by EC such as efficiency in operations, reduction of cost, global market, sale increase, etc The study also exposed several factors affecting the EC adoption among SMEs in Kenya by adopting the TOE framework with an observed factor relating to an existing contextual culture within the business environment in Kenya In terms of technological factors, the study concluded the impact of the high cost of IT adoption and other costs related to IT labor and maintenance About organizational factors, the size and finances of the enterprise as well the role of managers and CEOs were found to be significant for EC adoption among the interviewed enterprises On the other hand, within environmental factors, the study concluded that the regulations governing EC are not clearly communicated to 27 online retailers which affect the growth of EC in the long run In terms of competitors, the penetration of the international EC market by firms like Amazon, Alibaba poses a big threat to local online retail SMEs, which in return affects the adoption of EC among SMEs in Kenya Finally, the study concluded an additional national factor associated with the social and cultural context The study concluded that the effect of culture on EC technology was a key determinant in EC adoption among SMEs It was found that Kenyan society has its values and perceptions related to general business practices Hence, the study concluded that the resistance among Kenyan people to adopt a new culture of purchasing online, lack of trust, lack of IT awareness, lack of proper physical addresses are among the major factors affecting EC adoption among SMEs In conclusion, all stakeholders should be involved to address the factors affecting EC among SMEs to develop a favorable environment for EC in Kenya Limitations of suggestions for future research The scope of this study was limited to only four retail SMEs in Nairobi which consequently excludes rural areas of Kenya More companies including rural enterprises would have been an ideal representative element to have a broader perspective in terms of factors that affect EC adoption among SMEs Besides, this study was conducted in Kenya within SMEs, it would have been interesting to 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How long has your business been operating? When did you start using EC in your firm? What are the major motivations behind implementing EC in your firm? What are EC applications you use in your enterprise? And did your employees have previous IT knowledge? How are your EC applications perceived and experienced by your customers and Employees? What are the benefits have your firm been gaining from adopting EC ? What are the major barriers or challenges in relation to EC adoption by your firm? What are your opinions regarding the impact of EC on the performance of your daily tasks? 32 ... Small and medium- sized enterprises (SMEs) have been lagging in EC adoption In this regard, this study aimed to explore the factors that influence EC adoption among SMEs in developing countries, in. .. EC by SMEs in Kenya While there are many studies regarding EC adoption in developed countries, there is little empirical evidence to explain the factors affecting EC in developing countries Similarly,... connection Better information management Table 3: Motivating factors among interviewed companies 4.3 Factors Influencing EC Adoption among respondents In addition to the motivating factors above,