PUBLIC E-PROCUREMENT IMPACTS IN SMALL- AND MEDIUM-ENTERPRISES

PUBLIC E-PROCUREMENT IMPACTS IN SMALL- AND MEDIUM-ENTERPRISES

CHAPTER ONE

 

INTRODUCTION

1.1 Background to the study

In a competitive and globalized business environment, corporate sectors and business houses need to be at breast with new technological developments as well as manage reduction of operational costs while meeting the organizational goals and objectives (Shaw &Subramaniam, 2012). The coming of innovative intrusion into the commercial center, have made e-showcases in each business segment. This cleared route for a quicker network somewhere in the range of business to business (B2B) trades. The advantages of web based obtaining not just show instances of the expenses of funds yet in addition enhance the manner in which organizations work (ibid). It encourages them to manage a picked couple of providers with better purchasing vital and in addition cut down the organization costs. The present mechanical business world has swung to an electronic obtainment framework (Pushmann 2005). E- Procurement has conveyed to unmistakable quality as of late by the advancement and commercialization of web.

Notwithstanding the client situated procurement of the web, e-procurement is honed through electronic markets and electronic data interchange (EDI). Croom& Brandon-Jones, (2004) define E-procurement as alludes to the utilization of web based data and correspondence advances (ICTs) to do individual or all phases of the acquisition procedure including sourcing, arrangement, requesting, receipt, and post purchase audit. While there are different types of e-procurement that focus on one or numerous phases of the procurement procedure, for example, e-tendering, e-commercial center, e- auction/reverse and e-catalogue/purchasing , e- procurement can be viewed broadly as a the end arrangement that incorporates and streamlines numerous acquisition forms all through the organization/institution. This incorporates theresults of Davenport (2008) who concluded that e-procurement implementation involves a mixture of different models. E-procurement system basically revolves around intranets and extranets which consist of both the hardware and software that can be self-developed or acquired through third party software providers of e- sourcing suite (Handfield& Robert 2011).

The e-procurement systems are designed to allow the procurement manager to oversee the sourcing cycle, track spend, and apply authority over contract administration in a safe domain. It requires a venture by the purchasing association and requirement for intermittent refreshing and also preparing of clients. The e-tools are basically the Electronic Data Interchange EDI, Internet and Extranet. The web-based EDI commonly used by SMEs is basically designed to allow electronic communication between the buyer and supplier which include request for quotation, processing online payments and tracking product related information. It also involves real time monitoring of inventory and automatic order placement by the buyer’s computer, online catalogues, emails and e-auctioning (Clara 2009).

E-marketplace or commonly known as E-shop is another e-procurement platform mostly utilized by small and medium size organizations and individuals. It operates on three major models of SMEs which are the sell-side system which contains products or services of one or more suppliers e.g. Jumia Nigeria and Olx. Product information is placed on the site and buyers can access the information with ease and at a low cost. Secondly is the buy-side system which unlike the sell-side systems they are controlled by the buyers and are tied to intranet and extranets. The third model is the third-party marketplaces which consist of independent firms that neither buy nor sell goods but seek to facilitate the electronic purchasing process through value enhancemente.g. Alibaba.com and walmart.com (Memba et-al 2012).

In Ireland a research by the Global Entrepreneurship monitor (2005), discovered that people beginning/starting and planning new organizations expanded to 9.8 percent up from7.7 percent in 2004 which is equal to very quarter of a million people in 2005. The report further proposed that there is an expansion in the extent of the populace in the 25-44 ages bunches thinking about enterprenual activities.

Regionally, the adoption of E-procurement of SMEs is viewed as a viable approach to sustainable development because it suits the resources in Africa. MSEs are the main source of employment in developing countries and comprise of over 70% of African business operations. They contribute to over 50% of African employment and GDP. In Nigeria, MSEs contributed an estimated 37 per cent of the GDP (SMEDAN, 2011).In developing nations, for example, Nigeria, it needs extensive innovation movement and benchmarks to realize acquisition. The business networks too don’t have the activity in changing practices to grasp e-procurement. This has enormously influenced the SMEs.

1.2 Statement of the Problem

Adoption of e-procurement is thought to be a way to empower organizations to contend on a worldwide scale, with enhanced effectiveness, and nearer client and provider connections. It is hence pleasant that SMEs should consider Information and Communication Technology (ICT) as an important approach in business to grasp high ground from the overall markets. Also, ICT is an advantage of SME’s which may help them to get to information remembering the true objective to update its power. Today’s business world has been significantly affected by (ICT) and the determination of ICT among business far reaching. Appropriation of ICT especially inprocurement, organization is rapidly changing overall era, work, business procedures and trade and use plans in and among undertakings and buyers (Memba, Gakure & Karanja, 2012).

The recent trend of growth of SMEs in Nigeria, has led to increased competition among the business to business. This has seen SMEs expanding rapidly to cater for increased demand. The expansion is accompanied by massive movement of online services in procurement. This requires efficiency in the procurement process through which can be achieved through implementation of E- procurement.

SMEs have to contend numerous challenges such as lack of capital and stiff competition from more established firms which hinder them from being profitable, growing and staying in business (McIntire, 2012). With increased E-procurement activities SMEs shall be able to address these challenges, these activities are expensive and require specialized knowledge that these  SMEs do not have. This inability to market their goods and services has led to numerous negative impacts on SMEs especially on their sales volumes, customer service, market awareness, branding and product and service promotion. These effects can also be felt on a macro level by the employees that work in these companies and the economies that they operate in due to loss of employment and taxes.

1.3 Objectives of the Study

The general objective of this study was to investigate the effect of e-procurement on performance of Small and Medium size enterprises in Abuja. Specific objective were;

1. To establish the effect of online customer service on performance of small and medium size enterprises in Abuja
2. To establish the effect of organizational culture on performance of small and medium size enterprises in Abuja
3. To determine the effect of environmental barriers on performance of small and medium size enterprises in Abuja
4. To assess the effect of technological integration on performance of small and medium size enterprises in Abuja

1.4 Research Questions

1. what is the effect of online customer service on performance of small and medium size enterprises in Abuja ?
2. what is the effect of organizational culture on performance of small and medium size enterprises in Abuja ?
3. what is the effect of environmental barriers on performance of small and medium size enterprises in Abuja ?
4. what is the effect of technological integration on performance of small and medium size enterprises in Abuja ?

1.5 Significance of the Study

The discoveries of this study will be of great significance to SME’s in Abuja. The findings will address the need to set policies on SME’s, owners of the businesses will get a guide of the best procedures in e-procurement adoption, scholars will gain knowledge on what has been done and researchers will establish the gap in e-procurement adoption and carry out further research. It will also enable SME’s to understand how different approaches taken by the administration influence the utilization of e-procurement therefore guaranteeing they adjust between the way to deal with control asset imperatives and specialized skills required. The study will be carried out at Abuja because it’s a growing county and historically was well known as a trading center for the colonial government, also it has small and medium industries like cement production, steel rolling mills and others. It is a hub for many foreign investors. The findings of this study are of great significance to SME’s in Nigeria. The findings will address barriers to e-procurement adoption amongst SME’s in Nigeria.

1.6 Scope/Limitation of the Study

The study fixated on identifying the key barriers to e-procurement adoption amongst SMEs Nigeria and specifically in Abuja. Different SMEs with 1 to 50 employees located in wuse and Maitama Axis were used to carry out the study. The study will concentrate only on SME’s within Abuja.

PUBLIC E-PROCUREMENT IMPACTS IN SMALL- AND MEDIUM-ENTERPRISES

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