Social Media Adoption by SMEs and Entrepreneurs in the Gulf Region

Introduction and Research Background

Internet technology has revolutionized the communication landscape among businesses in both developed and emerging economies, largely because of the unprecedented growth of social media. Social media is an interactive technology system that businesses and individuals use to collaborate, connect, and create personal and organizational profiles. A growing consensus among marketing professionals and academic communities confirms that social media is critical to the business world. It has become a new phenomenon that has radically changed the strategies by which businesses communicate and operate. Through social media, businesses globally have been able to gain access to resources that would have been difficult to secure internally.

Advances in internet technology have led to the rapid growth of social media platforms. At the time of this study, Facebook reported 1.5 billion active monthly users, Google+ had 359 million monthly active users, LinkedIn had more than 270 million active users, and Twitter had 215 million monthly active users. Moreover, competitive pressures have led many firms in the Fortune 1000 in the United States to turn to social media to achieve competitive market advantages (Ngugi et al., 2010; Jones and Holt, 2008). Small and medium enterprises (SMEs) are also increasingly using social media to diffuse information about their products and gain competitive advantages (Peltier & Naidu, 2012). Social media thus assists organizations in collaborating with and reaching consumers, suppliers, distributors, and consultants.

Through interactive social networks, increasing numbers of SMEs are able to achieve market advantages in the competitive and ever-changing landscape. For example, 75% of SMEs in the United States have networking pages on social media. Moreover, 61% use social media to attract new customers, 57% use LinkedIn to attract new customers, and 45% use other social media platforms to generate profitable business (Taneja & Toombs, 2014). As one example, Merchant Circle uses Facebook (70.3%), Twitter (39.8%), LinkedIn (58.2%), Myspace (19.2%), and Bing (33.2%) to promote its business.

Social media has therefore become a key networking and information tool that organizations use to source new market opportunities. Similar to large firms, many SMEs have been able to use social media to reduce transactional costs and improve communication platforms. SMEs that have subscribed to top social media platforms have, in many cases, increased their customer base twofold (Miller & Washington, 2013). Social media sites provide platforms that assist companies in reaching people at a faster rate, building relationships, and connecting with potential customers.

Despite the market benefits that SMEs in advanced countries derive from social media platforms, many small businesses in the Gulf Cooperation Council (GCC) countries have not yet taken advantage of these tools. This study develops research objectives to enhance a greater understanding of how small businesses and entrepreneurs in the Gulf countries can use social media to achieve competitive market advantages.

This study explores the motives and benefits that small businesses and entrepreneurs in the Gulf countries derive from the adoption of social media. The sub-research objectives are as follows:

1. Identifying and discussing the status of social media tools among small businesses and entrepreneurs in the Gulf countries.

2. Identifying and discussing the market benefits that small businesses and entrepreneurs in the GCC can achieve from the adoption of social media.

3. Identifying and discussing the social media tools and motivating factors that influence small businesses and entrepreneurs in the GCC to adopt social media.

Literature Review and GCC Overview

The gap in the literature regarding the extent to which entrepreneurs and small businesses in GCC states adopt social media gives rise to the following research questions:

1. How does the adoption of social media provide benefits to small businesses and entrepreneurs in the Gulf countries?

2. What are the motivating factors that lead small businesses and entrepreneurs in the GCC to adopt social media?

3. Are small businesses and entrepreneurs taking advantage of social media benefits to expand their market shares?

4. Are small businesses and entrepreneurs taking advantage of social media adoption to increase sales?

5. Are small businesses and entrepreneurs taking advantage of social media adoption to enhance communication with customers?

6. Are small businesses and entrepreneurs taking advantage of social media adoption to decrease costs?

The GCC is composed of six oil-rich countries: the United Arab Emirates, Saudi Arabia, Oman, Qatar, Kuwait, and Bahrain (Indrupati & Henari, 2012; GICWED, 2013). Similar to SMEs in advanced countries, many small businesses and entrepreneurs in the GCC have begun signifying their brands on top social media platforms including Facebook, Twitter, and Google+ (Al Jenaibi, 2013). Typically, Facebook is the most widely adopted social media platform in the Gulf region, with approximately 72% usage, followed by Twitter at 27% and YouTube at 1%. While the literature provides extensive research on the extent to which small businesses and entrepreneurs have adopted social media in western countries, there remains a paucity of academic research investigating the relationship between social media and small businesses specifically in the Gulf countries.

Peltier et al. (2012) investigate the relationships between SMEs and social media; however, their research focuses only on how SMEs in advanced countries adopt social media. Similarly, Razak et al. (2012) explore how SMEs use Facebook to generate market value, but their research is limited to SMEs in Asian and western countries. The limited research that investigates the relationship between small businesses in the Gulf countries and social media generates the research problem this study addresses. This paper fills the gap in the literature and provides empirical research on how small businesses and entrepreneurs foster social media in the Gulf countries.

The research provides several contributions. First, the study fills a gap in the literature, thereby enriching the knowledge of academic and business communities regarding the methods by which small businesses and entrepreneurs in the Gulf countries foster social media. While extensive research has been conducted on small business adoption of social media in advanced countries, many small businesses and entrepreneurs in the Gulf countries have not yet taken advantage of social media for their business objectives. The research findings therefore enhance understanding of how Gulf-region businesses can use social media to achieve cost advantages, increase marketing effectiveness, establish effective customer relationships, and expand their product offerings.

Benefits of Social Media for Gulf Region SMEs

The paradigm shift in technological advancement has not only transformed the way people access, store, and diffuse information — it has also given rise to new studies on the impact of social media on the development of new marketing strategies (Zarrella, 2009; Safko, 2010). However, social media as a tool for marketing strategies still needs to prove its credibility. Two opposing groups have emerged: those who believe that social media serves as an effective marketing strategy, and those who cling to traditional marketing methods. Dutta (2010) supports social media by arguing that YouTube is an effective marketing tool for SMEs that can assist them in promoting their businesses. In contrast, Dunn (2010) remains skeptical about the effectiveness of social media as a marketing tool, viewing it as a non-serious vehicle for organizational promotion.

Looking at the conceptual marketing theoretical framework, Romano and Ratnatunga (1995) classify marketing into three categories. First, organizational culture plays a central role in marketing techniques. Second, marketing techniques such as targeting, positioning, and segmentation serve as strategies for achieving competitive market advantages. Third, marketing tactics through the 4Ps marketing mix have a positive impact on marketing outcomes. Given this theoretical framework, a gap remains between SME marketing practice and marketing theoretical practice.

In the GCC countries, a small business is generally defined as an organization with between 5 and 50 employees. However, textile firms with up to 150 employees are considered small enterprises, since the textiles sector is generally labor-intensive (Ministry of Commerce & Industry, 2013). Small businesses and entrepreneurs are critical to the development and economic growth of the GCC states. Apart from providing employment opportunities for GCC residents, small businesses generate revenue for governments. In the GCC states, small businesses constitute more than 95% of active enterprises and serve as the main drivers of economic diversification and innovation.

Compared with the United States (70%) and France (60%), where the majority of small businesses have established an online presence, the situation is different in the Gulf region. More than 80% of small businesses in the Gulf region do not have a website, because over 90% of them do not understand the benefits their organizations could derive from the internet (Jones, 2013). The Emirates News Agency (2011) reports similar findings, noting that only 5% of small businesses in the Gulf region are taking advantage of social media platforms as a marketing tool.

The growth of the internet has changed the marketing philosophy in the contemporary business environment. Schaffer (2013) notes that the internet has dramatically changed the way businesses globally market their products. Ngugi, Johnsen, and Erdélyi (2010) likewise argue that interactive social networking and web technology have assisted organizations in promoting their brands. Through web technology, consumers now react more positively to product quality, brands, and market experience. The adoption of social media can therefore provide several benefits for small businesses in the Gulf countries, assisting them in promoting their brands to prospective consumers.

Small businesses can use social media to collect marketing experience from consumers, including preferences and behavioral data. The data collected can assist companies in developing products and services tailored to consumer preferences. Social media can also help small businesses reduce transactional costs. Unlike traditional marketing tools, social media platforms are cost-effective — platforms such as Facebook and LinkedIn allow organizations to publish their web pages free of charge. However, some small businesses are still unable to take advantage of social media because of a lack of skills in developing well-defined internet strategies. Limited resources and a lack of technical expertise in internet technology have also been setbacks to social media use. Some CEOs are often reluctant to use social media because of a lack of control over user comments. Consumers may post comments on social media about the quality of services an organization offers, which may tarnish the firm's reputation.

Despite these concerns, social media can serve as a double-edged sword offering significant organizational marketing advantages. Dutta (2010) believes that social media can assist firms with limited resources in fostering customer loyalty, advertising, and promoting products and services. Moreover, social media can help firms collect feedback about the quality of their products and services. It can also assist small businesses in getting closer to consumers, thereby grasping the consumer profile and differentiating their offerings. Britt (2011) argues that social media assists organizations in exploring new market opportunities, exchanging knowledge, and enhancing business image and reputation. In the present business environment, CEOs should connect to multiple social media platforms, since each serves a different purpose. Facebook is an effective tool for building a community of consumers, Twitter increases effective communication with people, and LinkedIn assists businesses in displaying their profiles to the broader business community. According to Bulearca and Bulearca (2010), social media is a powerful tool for small businesses to build consumer networks.

Indrupati and Henari (2012) add that if a small business intends to reach its customers, it should do so through social media. Compared with traditional media such as radio, television, and newspaper — which have limited coverage — small businesses can use social media to reach large numbers of customers across wide geographical areas at affordable costs. Despite these benefits, small businesses in the Gulf states have not yet fully taken advantage of social media. While more than 1.5 billion people have subscribed to Facebook globally, only 1.7 million users in the Gulf countries have subscribed to Facebook (Ramady, 2010; Indrupati & Henari, 2012).

Peltier et al. (2012) argue that it is not prudent for a business to ignore the benefits that social media offers, since the fundamental principle of social media is to create assets for business organizations. Social network theory reveals that an organization can access information, knowledge, resources, and financing through social capital networking. Through social networking paradigms, businesses are able to receive support through business contacts and to access resources not available internally, thereby achieving economic and business exchange. Anderson and Jack (2002) believe that social media assists businesses in improving their performance by helping them understand customer tastes and preferences. Some organizations use software to analyze people's communications and extract useful information for business advantage, thereby monitoring the tastes and preferences of people in a specific geographical location.

While entrepreneurs and small businesses in advanced countries have taken advantage of social media to enhance business performance, current usage of social media remains low in the Gulf countries (Schmengler & Kraus, 2010). One major factor contributing to low social media use among Gulf business organizations is the regulatory environment. Al Jenaibi (2013) argues that while increasing numbers of organizations are establishing presences on top social media platforms, governments in the region continue to censor access to popular social media websites. Women's privacy is a critical issue in the Arab world, and platforms such as Facebook and YouTube allow users to display pictures and videos that may conflict with local norms. In GCC countries, Sharia law forbids the exposure or viewing of certain types of videos or pictures.

In summary, the literature review reveals that there is still a gap between the level of social media adoption in advanced countries and the Gulf region. Small businesses and entrepreneurs in the Gulf region have not yet fully exploited social media to cut the cost of operations, enhance customer relations, improve communication, or achieve competitive market advantages.