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EFFECTS OF INFORMATION TECHNOLOGY SYSTEM ADOPTION ON THE

OPERATION PERFORMANCE OF SMALL AND MEDIUM SIZED ENTERPRISES.


A CASE STUDY OF MOMBASA CENTRAL BUSINESS DISTRICT.

AHMED MOHAMED KOMBO

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF BUSINESS


AND ECONOMICS IN THE SCHOOL FOR HUMAN RESOURCE DEVELOPMENT
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF
THE DEGREE OF BACHELOR OF BUSINESS INFORMATION TECHNOLOGY
JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

OCTOBER, 2014
DECLARATION

I hereby declare that the Research Project is my original work and has not been presented for
a degree in any other university.

Signature ________________
AHMED MOHAMED
HD232-C005-0833/2011

Date__________________

This project has been submitted for examination with my approval as University supervisor.

Signature __________________

MR. SAM KIANGANDA

Date______________

i
DEDICATION

I dedicate this research to my beloved parents MOHAMED KOMBO and NANA SALIM,
my brothers for their financial and moral support during this time of research.

I also dedicate this research to my friends for their social support, motivation and
understanding during the research period.

God bless you all.

ii
ACKNOWLEDGEMENT

My gratitude first goes to Almighty God who gave me the strength and courage in
undertaking this project. In special way, I take this chance to pass my appreciation to JKUAT
for giving me the opportunity to do this research with the help of my supervisor for the
advice he revealed in supervising this research. Am deeply indebted to JKUAT Mombasa
CBD and my supervisor Mr. SAM KIANGANDA for their tireless efforts since my early
academic year preparing me for this study. Without their input I would have not reached the
fruits of this study. Much more thanks to all my classmates, friends and all colleges mates
whom we have interacted in one way or the other through 2011-2014.

iii
ABSTRACT

This study examines the effects of Information Technology (IT) system on the operation
performance of SMEs situated in Mombasa Central Business District (CBD). Currently
SMEs in Mombasa CBD that have been using IT System on their business operations have
really gain a competitive advantage like proper capturing of data, proper storage of data, able
to retrieve stored information, proper communication and coordination and able to track their
potential customers e.t.c while on the other hand the SMEs that have not adopted the IT
system to operate businesses have an effect of poor recording, poor storing business data,
poor tracking of customers and poor retrieval of business data hence SMEs business
operation will result in harm through stagnation, negative growth, loss of customers and
failure to introduce new products leading to a potential closure of business. It have mentioned
some of the technologies that could be used by SMEs with respect to operation performance
and evaluates them objectively. IT Systems in general is a plus to most organizations whether
big or small, it assist in the smooth running and facilitation of business activities. Flexibility
is considered to be a major source of competitive advantage to SMEs. The use of IT Systems
is viewed as a way in which SMEs compete with each others. In this regards, the argument is
that the use of IT System will led the transaction cost to be lowered and therefore economies
of scale can be reduced. The researcher has used both primary and secondary data, because
of the nature of the research, a questionnaire have been used as a main data collection tool
and interview as collection tool. The primary data has been be collected by the use of
questionnaire with both open and closed ended questions which were be administered to the
respondent in the selected institutions. The project have adopt descriptive study design,
whereby it will describe the study by providing answers to the questions of Who, What,
Where and How? The analyzed data were presented in form of graph and charts and the result
were summarized and suggest its recommendation and conclusion.

iv
TABLE OF CONTENTS

Declaration .i

Dedication .ii

Acknowledgement ...iii

Abstract iv

Table of contents ...v

List of Figures.......ix

List of Tables......x

Definition of termsxi

Acronyms.xii

CHAPTER ONE: INTRODUCTION

1.1. Background of the

study..1
1.2. Statement of the problem

3
1.3. Research Objectives

4
1.3.1. Specific objectives .4
1.4. Research questions

..4
1.5. Significance of the study

.5
1.5.1. Local Companies5
1.5.2. Investors 6
1.6. Scope of the

study...6
1.7. Limitation of the study

CHAPTER TWO: LITERATURE REVIEW

2.1. Introduction

.7
2.2. Theoretical Review

.7
2.2.1. Resources Based Value Theory 7
2.2.2. Transaction cost Theory ....8

2.3. Conceptual Framework ..9

2.3.1. Accounting information systems 9

2.3.2. Customer relationship management system ..11

2.3.3. Supply Chain Management System ..12

2.3.4. Operations Performance 13

2.3.4.1 Management Integration .13

2.3.4.2 Cost Benefits... 14

2.3.4.3 Strategic Planning14

2.3.4.4 Financial Controls .14

2.3.4.5 Organizational Performance ... 15

2.4 Critique of the existing literature...15


2.6 Research gaps.16

2.5 Summary17

vi

CHAPTER THREE: RESEARCH METHODOLOGY

3.1. Introduction ..18

3.2. Research design ............18

3.3. Population and sampling ..18

3.4 Data collection instruments19


3.5 Data collection procedure...19
3.6. Instrument .20

3.7. Data processing and analysis 20

3.8. Data Professing and analysis 21

CHAPTER 4

RESEARCH FINDINGS AND DISCUSSION

4.1 Introduction..22
4.2. Response Rate..22
4.3. The Use of IT Systems..22
4.4: Study results on accounting information system23

4.5: Study results on customer relationship management system..26

4.6: Study results on Supply Chain Management System.30


CHAPTER 5

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS


5.1 Introduction 35
5.2 Summary .35
5.3 Conclusions36
5.4 Recommendations37
vii

REFERENCES 39

APPENDICES .42

APPENDIX I: Introduction Letter .42

APPENDIX II: Questionnaires ...43

APPENDIX III: Budget Schedule ..48

APPENDIX IV: Work Plan .49


Viii

LIST OF FIGURES

2.3. Conceptual Framework ..9

Figure 4.1 Percentage of SMEs that Use IT System...22

Figure 4.2: Study results on accounting information system...23

Figure 4.3 AIS distribute reports to decision makers in the organization.24

Figure 4.4 AIS maintain correctness and secured SMEs data .25

Figure 4.5 AIS provide adequate controls to safeguard the organization assets..26

Figure 4.6 Study results on customer relationship management system..27

Figure 4.7. CRM communicate and respond effectively to the customers..28

Figure 4.8. CRM communicate and respond effectively to the customers29

Figure 4.9 CRM manage sales, marketing and support the organization30

Figure 4.10 Study results on Supply Chain Management System..31


Figure 4.11. SCMS monitor product flows and collaboratively respond to potential delivery
Problems.31

Figure 4.12. Create reports that improve transportation lines, ordering amounts, and keeps
stock from running out, or running over..33

Figure 4.13. SCMS coordinate and integrate the flows of production within and among
companies to the end user.34

Ix

LIST OF TABLES

Table 4.1.General information of the respondents...23

Table 4.2.AIS collect, store and process accounting data that is used by decision makers.23

Table 4.3. AIS distribute reports to decision makers in the organization24

Table 4.4. AIS maintain correctness and secured SMEs data.....25

Table 4.5. AIS provide adequate controls to safeguard the organization assets..25

Table 4.6 CRMS use to track and organize its contacts with its current and prospective

customers..26
Table 4.7 CRM communicate and respond effectively to the customers.27

Table 4.8 CRM provide Marketing Automation to the customers...28

Table 4.9 CRM manage sales, marketing and support the organization.....29

Table 4.10 SCMS manage the flow of product and information throughout the supply chain
network.....30

Table 4.11 SCMS monitor product flows and collaboratively respond to potential delivery
Problems...31

Table 4.12 Create reports that improve transportation lines, ordering amounts, and keeps
stock from running out, or running over..32

Table 4.13 SCMS coordinate and integrate the flows of production within and among
companies to the end user....33

DEFINATION OF TERMS
Bull effect -The unexpected distortion of the supply chain caused by demand oscillations
that can have a negative effect on business performance, such as inventory disruptions,
quality control problems, diminished customer service, and increased costs of materials and
manpower. For example a successful sales promotion can reverberate up the supply chain to
disrupt inventory, production and supply ordering (Lee at al. (2007)).

Product Paradox -product that seems contradictory or unbelievable, but may or may not
be true (Brynjolfsson & Hitt, 1996).

Process-Oriented -Process Orientation places a priority on "how" things are done. It is a


willingness to remain open and follow in new directions (Barua et al., 2005).

Resource Based Value - theory of the firm is used to influence what a firms
resources have on its performance. Its basis is on the need to link the performance of a firm to
resources and skills which are firm specific, rare, and difficult to imitate (Barney, 2011).

Transaction Cost Theory - The transaction cost theory analyses the relationship between
firms providing a service and the customer process thereby highlighting the impact of both
costs and benefits accruing to the firm Melville et al. (2004).

xi

ACRONYMS

ERP Enterprise Resource Planning


SCMS Supply Chain Management System

CRMS Customer Relationship Management System

IT Information technology

RBV Resource Based Value

SMEs Small and Medium-sized Enterprises

MRP II - Material Resource Planning

ICT - Information Communication and Technology

OM - Operation Management

xii

CHAPTER ONE

INTRODUCTION

1 Background of study
Small and Medium-Sized Enterprises (SMEs) play a major role in national economies and are
considered as machines for economic growth all over the world. They exploit opportunities
and sustain their competitiveness if they focus only on certain aspects of their functioning and
work in isolation. Therefore, majority of SMEs have simple systems and procedures, which
allows flexibility, immediate feedback, short decision-making chain, better understanding and
quicker response to customer needs than larger organizations (Singh, Garg and Deshmukh,
2008).

Due to globalization SMEs are forced with unfamiliar products and processes on a fairly
regular basis thus; they must develop programs or equipments for improving their skills and
competencies (Fuller- Love, 2006). In addition to that they can get competitive advantage by
developing internal and external capabilities (Lai-Yu, 2001).Consequently, the importance of
evaluating operation performance is obvious for business enterprises in general, and for
SMEs in particular (Yusof and Aspinwall, 2000). Because of at the present, SMEs are faced
with increased competitive pressure due to globalization as well as increased quality and
service requirements from their customers (Underdown and Talluri, 2002) thus, they must
increase their productivity and their competitiveness in order to survive and prosper, even if
they do not intend to become world class enterprises (St-Pierre and Delisle, 2006).

An increase in globalization has put MSEs under considerable pressure ( Matambalya& Wolf,
2004). Through the rapid spread of information and communication technology (ICT) and
ever decreasing costs of communication, markets in different parts of the world are becoming
more integrated. In recent years in Europe many SMEs has adopt IT Systems and integrate
them with open source enterprise resource planning (ERP) software for running their business
operations ERP companies, such as Compiere,Openbravo, and Open For Business, has
introduce ERP software with mature offers and with radically different business models than
those of proprietary ERP vendors, have emerged with hopes of changing the ERP software
industry.
SMEs are constrained by the bad state of the infrastructure that leads to relatively isolated
markets with limited demand that can best be served by Small scale localized production
(Matambalya& Wolf, 2004).Other factors that have contributed to a large number of SMEs in
Kenya are to do with the business environment which compared to that of developed
countries, is characterized by limited access to manufactured inputs, low quality of the
infrastructure, poor legal systems and crime prevention and high volarity of microeconomic
conditions and prices. These factors inhibit the existence of bigger enterprises (Tybout, 2003).

Flexibility is considered to be a major source of competitive advantage for SMEs compared


to larger enterprises. The use of IT System is thus viewed as a way in which SMEs
competitiveness can increase. The argument to this view is based on the fact that with the use
of IT System, transaction costs could be lowered and therefore economies of scale can be
reduced (Matambalya&Wolf, 2004). In spite of their importance to the Kenyan economy, one
principal weakness of SMEs in General is their weak productive capacity, which is
manifested by low domestic andInternational market coverage (Chodury, S and Wolf, S,
2003) Thus, the basic Question is whether the use of IT system can help SMEs to cope with
these new challenges.

Since the 1990s, many SMEs in East Africa have embraced ICT (Matambalya& Wolf, 2004).
It is with this fact in mind that Kumar (2008)Acknowledges that most businesses today are
carefully scrutinizing their IT managers to articulate the value of IT systems using concepts
that finance executives can relate to. Thus, although most organizations recognize that IT
systems are valuable, they also recognize that it can be difficult to justify the link between IT
System and the improvement of SMEs operation performance (Bharadwaj, 2004; Kumar,
2008).

The research is made in the examination of the role IT systems in SMEs. Key among these
studies are those by Harrison, Mykytyn&Riemenschneider (2006) andIgbaria, Zinatelli &
Cavaye, (2006), however, few of those have been made in relation to the role that IT System
plays in SMEs resident in developing countries. With this insight in mind,the focus now shifts
to the purpose of this research paper which sought to examine the role that IT system plays in
influencing the operation performance of SMEs in Kenya, narrowing down to the Mombasa
Central Business (CBD) area.

This paper sought to establish the relationship between IT Systems and SMEs operation
performance. In doing so the paper assessed whether or not IT Systems influences SMEs
operational performance. As Melville et al. (2005) point out; it is not the implementation and
existence of IT systems alone that translate to improved operation performance in a given
business, but rather it is through its use. It should therefore be seen as one of the tools that
spur the growth of a business.
2 Problem Statement

Firms view investment in information technology as a way to combat competition by


Improving productivity, profitability, and quality of operations performance (Devaraj&Kohli,
2003). Currently SMEs in Mombasa CBD that have been using IT System on their business
operations have really gain a competitive advantage like proper capturing of data, proper
storage of data, able to retrieve stored information, proper communication and coordination
and able to track their potential customers e.t.c while on the other hand the SMEs that have
not adopted the IT system to operate businesses have an effect of poor recording, poor storing
business data, poor tracking of customers and poor retrieval of business data hence SMEs
business operation will result in harm through stagnation, negative growth, loss of customers
and failure to introduce new products leading to a potential closure of business.

The increased spending on IT by most businesses has led to questions as to whether there is
any value for money in IT investment for a business as everyone seems to be pushed towards
IT use (Carr, 2009). The proliferation of IT has led to a number of businesses today carefully
scrutinizing their IT investment and questioning their value. Thus, although most
organizations recognize that IT systems are valuable, they also recognize that they can be
difficult to justify more so to the investor (Kumar, 2008).

SMEs are constrained by a number of factors that either serve to limit their potential growth
or that do serve to negate any gains that they make as business. It is therefore imperative that
wise choices be made with regard to the capital investments made by such a business there
are high costs involved in setting up IT infrastructure and subsequently high annual
maintenance costs that accompany this investment.

In this regard, IT implementation forms a major factor of consideration in terms of investing


in IT Systems and the evaluation of any potential benefits that may be accrued from the use
of IT System and thus is a key factor for consideration (Carr, 2009; Kumar, 2008).This study
sought to investigate whether there was any value to be derived from use of IT System by
SMEs. As such the study sought to justify whether the use of IT System has any influence on
the operation performance of a SMEs. More so to the investor the question remains: does
investment in IT System lead to the improvement in SMEs performance? (Strassman, 2007)
Studies carried out on IT System use and organizational performances have focused on big
organizations. In Kenya, the few studies done on IT have not sought to highlight the role that
IT System use has on SMEs operational performance. This paper sought to fill this gap in the
IT realm of studies.

3 Research Objectives

The main objective of this study is to examine the effect of IT systems adoption on the
operation Performance of SMEs.

1.3.1 Specific objectives

i. To determine the effect of Accounting Information System on operations


performance.
ii. To find out the effect of Customer Relationship Management System on
operations performance.
iii. To determine the effect of Supply Chain Management System on operations
performance.
4 Research Questions

The research sought to answer the following questions:

i. To what extent does Accounting Information System affect operations


performance of SMEs?
ii. What are the effects of customer relationship management system on operations
performance of SMEs?
iii. Does adoption of Supply Chain Management System affect operations
performance of SMEs?

5 Significance of the study

The studies consider SMEs IT systems investments in different function areas and the utility
associated with each type of investment (parker and Castleman, 2007). Yet in Europe, SMES
(defined as firm with fewer than 250 employees and annual turnover of not more than 50
million) constitute the majority of businesses and as a proportion of all business, they account
for a large percentage off both employee and turnover (Beaver and prince, 2004; Meckel etal,
2004, Eurostat, 2008). These SMEs differ from large enterprise in various aspects including
beither workflow, decision making process, levels of hierarchy, resources and co-operate
culture. Therefore management knowledge, such as pertaining IT Systems investments, that
has developed in relation to large enterprises often is not applicable to SMEs (e.g. Dandridge,
1979, Deerosetal 2006,Radas and Boiz 2009).

The studies also examine the operational performance that SMEs derive from those
investments, especially in relation to their functional areas. The extant in the field tend to
consider the totality of IT investments in relation to SMEs operations performance (Silvius,
20006, Schubert and Williams, 2009).

Important oversight hinders our understanding of the specific pathways (i.e, functional areas)
through which IT Systems investments lead to changes in SMEs operation performance
with viable results, the study sought to benefit the following parties:

1 Local companies

This group comprises of the main target for this study. The results of the study would enable
SMEs to make provisions for implementation of IT Systems usage in operations, so as to
have improvements in their operations with regard to gaining value in their business
processes and improvements in strategy policies.

These improvements in operations would subsequently lead to enhanced demands by the


businesses in measures to analyze business performance and overall competitive advantage.

2 Investors

Investors are the providers of capital for any given business venture. They provide capital in
the form of equity and loan facilities with an aim to gain benefits. The benefits that they
derive are in the form of interest earned or other benefits from the sums of monies that they
have invested in the given SME. A key factor that investors look for is the performance of a
given SME. SMEs do adopt several strategies to improve their performance and one of the
strategies is the improvement of the key performance drivers of the company. This study
would thus provide an appropriate indicator to both the current investors and the future
investors in the case of an improvement on the business performance.

6 Scope of the Study

This research is to be carried out in Mombasa County of the Coast Province of Kenya.
Mombasa County has many SMEs but on this regard the targeted SMEs are Mombasa CBD.

The study sought to provide reference materials for other researchers to expound on the
Subject of IT Systems and operation performance especially in the limited scope with which
it has been analyzed in the third world countries like Kenya.

1.7. Limitation of the Study

SMEs are normally constrained by a number of factors that either serve to limit their potential
growth or that do serve to negate any gains that they make as business. It is therefore
imperative that wise choices be made with regard to the capital investments made by such a
business there are high costs involved in setting up IT Systems infrastructure and
subsequently high annual maintenance costs that accompany this investment. In this regard,
IT Systems implementation forms a major factor of consideration in terms of investing in it
and the evaluation of any potential benefits that may accrue from use of IT Systems is thus a
key factor for consideration (Carr, 2009; Kumar, 2008).

CHAPTER TWO

LITERATURE REVIEW
2.1 Introduction

This chapter carefully reviews and synthesizes selected literature relevant to the area of
research. In connection with this, quite a number of studies and surveys have been carried out
on the effects of IT system adoption.

2.2 Theoretical Review.

Further to an analysis of the role that IT System use has on SMEs operation
performance as well as the enumeration of the various factors that influence the adoption
of IT system used by various SMEs, it is imperative that the theories that form the basis for
the arguments presented herein as well as in the subsequent chapters be presented. The
main theory is the Resource based theory (Barney, 2011; Mata et al., 1995; Melville et
al., 2004) and a lesser used theory is the Transaction cost theory (Melville et al., 2004).

2.2.1 Resource Based Value Theory

The Resource based value (RBV) theory of the firm is used to influence what a
firmsresources have on its performance. Its basis is on the need to link the performance of a
firmto resources and skills which are firm specific, rare, and difficult to imitate (Barney,
2011).

The fundamental principle of the RBV is that a firms competitive advantage over other
firmsis based on the application of the bundle of valuable resources at the firms disposal. In
thisrespect RBV focuses on difficult to copy attributes of the firm those are fundamental
drivers ofperformance (Barney, 2011). Researchers do argue that since investments in IT are
easilyduplicated by competitors, investments per se do not provide any sustained
advantages,rather it is how firms leverage their investments to create unique IT resources and
skills that determine a firms overall effectiveness (Mata et al., 2005).

Melville et al. (2004) go further and offer a self-criticism to their recommended choice
oftheory, the Resource Based Theory, by stating that the RBV primarily makes
assumptionsthat resources are always being put into the best of uses although it does not
pinpoint or sayhow this is done.It is noted that the RBV theory recognizes the importance
of intangibles such as customer orientation and organizational knowledge or the technical
know-how. Thecomplementariness of these factors to IT is of importance in the eventual
examination of howIT impacts on firm performance. It is through a firms ability to combine
these factors withIT use that gives a firm an IT capability.

2.2.2 Transaction Cost Theory

Further to the observations by Melville et al. (2004) on the need to have other
supporting theories to support the RBV, another theoretical framework that can form a basis
to fortify the study is the Transaction cost theory. The transaction cost theory analyses the
relationship between firms providing a service and the customer process thereby highlighting
the impact of both costs and benefits accruing to the firm.

The transaction cost theory provides an understanding of the role that IT System plays in
reducing transaction costs to an organization since the ultimate goal of the firm is to realize
benefits far exceed the costs incurred in the given process.The use of conceptual framework
was first developed by Hansen &Wernefelt,(2009).The researcher thus proposes the
following representation in (Figure 2.1) as basis for discussion of independent and dependent
variables.

2.3 Conceptual Framework

Independent Variables Dependent Variable

Accounting Information
System

Customer Relationship
Operations Performance
Management System

Supply Chain Management System


Figure 1: conceptual Model

Figure 2.1: Conceptual Model

2.3.1 Accounting information system.

Implementation of accounting information system on SMEs have a success on the financial


performance through an ease of producing financial report by the end of the final year hence
ease the decision making by the managers. Cragg et al. (2003). The adoption and
implementation of accounting software like the accounting information system on SMEs is
every business owners goal. Accounting information system involves the use of software that
puts together financial, tax and payroll data. Since it can perform other bookkeeping
functions, it cans also collect and process transaction data Cragg et al. (2003).

In regards to this the best part of having this software is that it can be used by stakeholders
and investors in making decisions.A study conducted by Shin (2001) discovered that IT
Systems investments encouraged every business to use it for the following reasons:

Efficiency. No business wants to waste valuable time in manually storing and filing data.
With such online accounting programs, scanners are able to automatically generate
accounting information.

Cost-efficient. Since such programs are accessed online, the use of computers is imperative.
But if you look at how much computers are sold for today, you can really say that having
such accounting online is affordable and inexpensive.

Automation. Should investors and business owners want to see the transactions and files for
a certain year, the data and figures are automatically imported, saving everyone time and
hassle. The data are already summarized and the information is also timely.

Easier Payments. Unbelievably, the accounting information system enables a business to


make payments made on accounts payable. With just a click of a button, payment of all bills
is automatically made. Checks are filled out by just selecting a date.
Easier Billing. As for accounts receivable, the system can handle records of such and the
clerk can have the option to choose when it is time to print the bills. Also, such bills and
invoices can be sent to clients via the email.

With the modernity of todays technology, it has become a trend for many business owners to
shift from manual to automation to ensure that the business does well and thrives well.
This argument is supported by Cragg et al. (2003) asserting that IT Systems implementation
which is align with business operations performance prove to have positive impact on the
firm. In addition, Davenport (1998) highlighted the importance of having a good fit between
firms requirement and technology capabilities.

The mismatch between what is needed by the SMEs and service offered by the new
technology will yield poor operations performance. Nevertheless, Hyvnen (2007) also
added that sophisticated IT Systems aligned with ineffective performance measure will yield
lower operations performance outcome. This raises the need for careful planning and strong
justification process to be undertaken before SMEs reaches the decision to implement an IT
system.

This issue is more profound within SMEs due to their limited resources and experience in IT
field (Mitchell, Reid, & Smith, 2000). Other authors (Bruque, 2007; Riemenschneider et.al,
2003) investigated factors that influence the adoption of IT Systems in SMEs. Both authors
generally agreed that SMEs adoption of IT Systems were mainly influenced by the perceived
benefits of implementing the systems and stems from the pressures received from
competitors, customers, and suppliers to ensure business continuity and survival in the
increasingly competitive environment.

2.3.2 Customer Relationship Management Systems.

Shin, N. (2001), concluded that an organizations can use CRMS to keep tracks and record
data of the loyal customers business updates and performance and also to improve
productivity is by removing data silos and integrating Customer Relationship Management
(CRM) with their Enterprise Resource Planning (ERP) solution. Many small-to-midsized
organizations use CRM and ERP solutions to automate and improve the management of their
operations.

CRM is a front-office system that centralizes all information about external marketing,
manages the sales pipeline, automates customer service, tracks information about customers,
as well as creates dashboards and reports on this data(Jancic and Zabkar (2002), Sheth et al.
(2000), Morgan and Hunt (1994).

ERP systems automate and manage back-office business activities, such as accounting,
purchasing, collections, human resources, payroll, manufacturing, distribution, and more.
Traditionally, it has been difficult to integrate CRM and ERP systems because of the vastly
Sage ERP different architectures and the lack of standards for exchanging data between the
systems. Older, point-to-point integration methods can be costly, complex, and risky(Katz
(2002), Suresh (2004)).

Based on this argument a company does integrate these systems, future CRM or ERP
upgrades can easily render the integration inoperable. As a result(Katz (2002), Suresh (2004))
suggested that, any companies operate CRM and ERP as standalone systems will be faced by:

Inability to track customer interactionsbecause information is stored in two systems, no


one single point of reference or single version of the truth exists for information about
customers interactions with the organization. This increases the likelihood of errors that can
be time consuming to correct; for example, when entering a customer order, the sales
representative using a standalone CRM system wont have access to customer credit
information and will be unaware of any credit holds.

No single point of customer informationemployees who want access to complete


information about the customers interactions with the company must turn to two entirely
different systemsthe CRM system and the ERP systemto answer customer questions
about, for example, order status or to access a customers credit history.

No centralized data warehousewhen different departments use different IT systems that


dont share a single, centralized data warehouse to store information, information must be
manually re-entered into each system, resulting in wasted time and potential rekeying errors.
CRM systems provide the infrastructure that facilitates long-term relationship building with
customers. Some examples of the functionality of CRM systems are sales force automation,
data warehousing, data mining, decision support and reporting tools (Mei-Yeh Fang and
Dr.Fengyi Lin (2006))CRM systems will also reduce duplication in data entry and
maintenance by providing a centralized firm-wide database of customer information.

This database will replace systems maintained by individual sales people, institutionalizes
customer relationships, and prevents the loss of organizational customer knowledge when
sales people leave the firm. Centralized customer data is also valuable to firm managing
multiple products. In many cases customers will overlap across different lines of business,
providing an opportunity for increasing revenues through cross-selling.

2.3.3 Supply Chain Management Systems

Harrison et al.(2006) concluded that SCM systems is better for operational and business
planning in that it can integrate different department together and work as one unit hence
speed up the decision making. The Material Resource Planning (MRP) and Enterprise
Resource Planning (ERP) systems of the nineties usually included only rough-cut capacity
planning logic, with basic finite capacity planning functionality limited to key work centers
(Volkmann et al. (2005)). SCM systems use finite-capacity planning algorithms that do not
require iterative adjustments to the master schedule (Raman and Singh (1998)), and real-time
planning capabilities allow SMEs to react quickly to supply and demand changes.
Coordinated planning and flow of materials and information among supply chain partners can
mitigate the bullwhip effect (Lee at al. (2002)).

There is a rich literature in OM on the benefits of better supply chain planning and
coordination (Cachon and Fisher (2000), Cheung and Lee (2002), Milner and Kouvelis
(2002)). Recent empirical research has demonstrated that reducing forecasting and planning
errors that result in supply chain disruptions avoids value destruction (Hendricks and Singhal
(2003)). Increased revenue, increased productivity, operational cost savings, lower inventory,
and reduced order-to-fulfillment cycle time aresome of the benefits from SCM system
implementations (Nucleus Research (2003)).
2.3.4. Operations Performance

Every business wants to get ahead of the competition and increasingly looks to innovative
ways of achieving effective solutions that cut costs but retain a smooth-running, efficient
organization. Many businesses, especially SMEs are turning to ERP to increase operational
efficiency by integrating organizational systems into a single program (Hitt & Brynjolfsson,
2006).

ERP is software that will integrate AIS, CRMS and SCMS and link departmental data and
information together with real time updates (Kaplan and Haenlin, 2010). Businesses can
choose the modules most relevant to their needs, and add more as they develop and expand
further. Thus ERP will integrate operational performance of SMEs hence operational
excellence will be achieved.

2.3.4.1 Management Integration


(Hendricks and Singhal (2003)) they argued that ERP enables its users to join up multiple
areas of the business into one program and allows managers to have access to an overall
database that covers client information, orders, invoices and figures. The users, who will
require high quality training on the system, can update changes and then implement them in
real time. Information is accurately stored and will not get lost across other applications or
spreadsheets.

2.3.4.2 Cost Benefits


with the medical industry constantly examining ways to cut costs but maintain efficiency,
ERP can bring significant cost benefits to the sector. Using ERP means that managers can
make considerable reductions in costs relating to inventory and administrative mistakes. With
information available to be exchanged across all levels, communication between all
departments is made much easier (Bruque, 2007; Riemenschneider et.al, 2003). As each
department is able to access a central database, the cost associated with multiple data centers
is diminished, with both time and money saved, Operating costs can also be reduced using an
ERP solution. The program works to merge all aspects of the business into one central
system, allowing businesses to improve their processes and cut down on waste or
unprofitable areas. By increasing organizational efficiency, ERP not only helps decrease
operating costs but can also reduce control and inventory costs as well as costs incurred in
help desk support and marketing.
2.3.4.3 Strategic Planning
ERP can help managers as a strategic planning resource, allowing them to pinpoint their
target market and define exactly what their aims and objectives are (Katz (2002), Suresh
(2004)). In terms of day-to-day activities, the software gives quick and easy access for
managers to the information required for better decision-making.

2.3.4.4 Financial Controls


With finance at the heart of every organization, managers need to keep a close watch on how
the financial department is operating. ERP give management comprehensive visibility into
the departments performance, so the functioning of accounts can be viewed with full
integration of business analytics (Mitchell, Reid, & Smith, 2000). By keeping on top of the
financial situation there are opportunities to boost organizational profitability and to improve
financial controls and risk management.

2.3.4.5 Organizational Performance


The creation of a single system allows management to drill down to see how efficient and
productive individual employees are, using precise, accurate data from each department Shin,
N. (2001). As a result, organizational performance together with staff efficiency can be
increased.

2.4 Critique of the existing literature


In spite of the notion that IT System is fundamental to an SMEs survival and growth, scholars
still struggle to identify the underlying mechanisms linking IT System to SMEs performance.
Brynjolfsson & Hitt (1996) state that despite evidence on payoffs from IT System, the
controversy over the business value of computer systems is still prevalent. This view is
shared by Stresemann (1997) who argued that there was no discernible relationship between
IT Systems and any measure of SMEs profitability as measured by return on investment,
return on equity and economic value added.

Although the above prior studies have identified links between IT Systems and SMEs
performance, there was also considerable skepticism to the benefits of IT Systems and
consistent with what is known as productivity paradox (Brynjolfsson & Hitt, 1996). The
productivity paradox is a concept that explains the lack of good quantitative measures
that explained the output and value created by IT Systems. This in turn makes the task of
justifying investments in IT Systems particularly difficult.
Cooper, Watson, Wixon& Goodhue, (2000) and Dewan& Kraemer, (2000) argue that the
measure of IT Systems value to SMEs performance should not be evaluated in isolation
and that it depends to a large extent on a variety of factors including: the type of IT
Systems, management practices and organizational structure, as well as the competitive and
macro environment.

Mata et al. (2005) argue that investment in IT Systems alone does not confer any added value
to SMEs; in this regard SMEs will leverage their investment in IT Systems to create
unique IT Systems resources and skills that determined a SMEs overall effectiveness and
efficiency. This point was supported by Brynjolfsson & Hitt (1996) who pointed out that
though IT Systems may impact on SMEs performance through improvement of productivity,
these productivity benefits need not translate into SMEs profitability.

Kumar (2004) on the other hand, stresses on the need to consider IT Systems in terms of
usage and not on investment alone since value derived from IT Systems depends on usage
and not on investment alone. He stressed that the value of IT Systems is influenced by the
extent to which it is used and thus conceptualizes IT Systems infrastructure value as a
function of a number of transactions, as well asthe value of each transaction.

Melville et al. (2004) pointed out that with regard to performance, IT Systems can be
analyzed through evaluating a SMEs efficiency. Efficiency being representative of internal
perspective and analyzing metrics such as cost reduction and productivity enhancement.
Therefore, efficiency entails improvements in internal operations.

According to Bharadwaj (2000) and Br ynjolfsson & Hitt (1996), the problem of these past
findings not offering clear insights into links between IT Systems and SMEs
performance can be questioned on the basis of the methodologies used such as; the use of
inappropriate measures of IT Systems intensity, a failure to control for other factors that drive
SMEs profits as well as problems related to sample selection and sample size.

Improvements on these limitations have been to some extent incorporated into theoretical
models in studies that have tended to look for more direct links between IT Systems
and SMEs operations performance. Some of these studies have adopted a process-
oriented view seeking to examine the effects of IT Systems on intermediate business
processes (Barua et al., 2005). One of the theoretical frameworks that seek to improve on the
aforementioned limitations is the resource based view (RBV) of the firm that links
performance of organizations to resources and skills that are firm specific, rare and difficult
to imitate (Barney, 2011).

2.6 Research gaps


Investment in IT Systems is a way to combat competition by improving productivity,
profitability, and quality of operations which lead to improve operations performance
(Devaraj & Kohli, 2003). This thinking is based on the fact that a failure to make changes to
their operations may results in harm to SMEs through stagnation, negative growth, loss of
customers and failure to introduce new products leading to a potential closure of the business.

2.5 Summary
The results of the theories allow us to shed some light on the relationship between IT Systems
and operation performance measures at SMEs. First, SMEs profitability can be measured to
respond positively to the use of IT Systems. This result is intuitive and consistent with
previous studies.

It indicates that adequate Accounting Information System can play an empirical role in
explaining the financial performance of SMEs. Second, the results also indicate the
importance of customer long-term relationship form the use of Customer Relationship
Management System will create loyal customers and hence increase market value.

Third, the results suggest that the applied Supply Chain Management System to SMEs will
understand the improvements in the current supply chain which will help to reduce costs of
goods sold, days in inventory and overall hidden operational expenses is one thing.

CHAPTER THREE

RESEARCH METHODOLOGY
3.1 Introduction
This chapter covers methodologies of the research. The chapter will include the
type of research design and the justification for choosing it, targeted population,
Sample and sampling technique, sample frame, procedure for data collection and
the data analysis technique.

3.2 Research design

A research design is a plan and structure of investigating in order to obtain answers to

research questions (Kothari, 2009). In order to examine the effect of IT System on the growth

of SMEs, descriptive research design will be used. Mombasa area is divided into five regions

which include: the Central Business District (CBD), Eastern, Northern, Western and

Southern regions. The target population for this study is SMEs within Mombasa Central

Business District. Firms in the population will be selected based on their respective Location

from the database of National Social Security Fund register, (NSSF 2009), of businesses. The

reason for the choice of the NSSF register was because it had conveniently classified the

registered businesses into micro, small, medium and large enterprises.

3.3 Population

According to Burns and Grove (1993:779), a population is defined as all elements

(individuals, objects and events) that meet the sample criteria for inclusion in a study. This

study population consists of SMEs in Mombasa Central Business District. The target

population for this study is SMEs within Mombasa Central Business District. A list 274

SMEs was sourced from National Social Security Fund register, (NSSF 2009) and used as the

sampling frame. The reasons for sampling in this study include lower costs, greater speed of

data collection and availability of population elements.


3.4 Sampling frame

The sampling frame is the list from which the potential respondents are drawn.

Table 1: sampling frame

Ward No of SMES Percentage Size

Mji wa Kale 84 10% 8

Tononoka 41 10% 4

Majengo 63 10% 6

Tudor 54 10% 5

Ganjoni / Shimanzi 36 10% 4

Total 27

3.5 Sample and sampling technique

A sample is a smaller (but hopefully representative) collection of units from a population

used to determine truths about that population (Field, 2005). A probability sampling scheme

is one in which every unit in the population has a chance (greater than zero) of being selected

in the sample, and this probability can be accurately determined. Simple random sampling is

applicable when population is small, homogeneous & readily available Harrison et al.(2006)

a sample of 10% representation from each cluster and simple random sampling will be

employed. SMEs in the population will be selected based on their respective Location from

National Social Security Fund register, (NSSF 2009) was provided as in the database.

Mombasa Central Business District is made up of Five Ward which made up the clusters

Ganjoni, Majengo, Tononoka, Tudor and Mji wa Kale. Each Ward was considered as a

cluster. After the elements have been selected, the specific respondents will be identified

using simple random probability sampling technique.


3.6 Instruments.
3.6.1 Questionnaires

Gay (1996) explains that descriptive data are usually collected using questionnai

re. Others like Simons (1998), Cohen and Manion (1998) have also identified questionnaires

and interviews as crucial instruments of data collection in descriptive research. This

study adopts both the open ended and closed type of questionnaires, the questionnaires will

be administered by me and I will interview the respondents and record their responses.

3.6.2 Interviews

Key informant interviews will cover those who deal with SMEs in the areas of

policy, planning, marketing, pricing and general management will also be

conducted. These willbe used to provide additional information to that

g a t h e r e d t h r o u g h questionnaire and also to get views on policies and regulations

governing SMEs operations, and how they react to ever changing operations.

3.7 Data collection procedure.

Relevant authorization from The University of Jomo Kenyatta University of Agriculture and

Technology will be sought. Data from these respondents will be analyzed and results

interpreted for correctness of the research instruments. Appropriate modification will be then

done on the instruments. This will be then be followed by data collection. This will be done

by administering the guided interviews procedure to SMEs around Mombasa Central Business

District.
A structured questionnaire will be administered to 27 Managers of the SMEs. The

questionnaire will comprise of both closed questions to enhance uniformity and

open-ended questions to ensure that maximum data is collected. The questionnaires

will be administered on a drop and pick-later basis. The researcher will go through

the questionnaire with the respondent and left it with them to fill. The respondent will

then submit the completed questionnaire to me at an agreed time.

3.8 Data Processing and analysis

After establishing that the entire questionnaire from every respondent has been dully

completed, the data on the questionnaire will be coded, classified and summarized for

analysis. The researcher will use Statistical Package for Social Sciences (SPSS) for the

Windows platform to analyze data, where measures of descriptive analysis (Mean and

standard deviation) are undertaken in impartial analysis involving regression and correlation

in establishing the degree of relationship between the variables.


EFFECT OF INFORMATION TECHNOLOGY SYSTEM ADOPTION ON THE
OPERATION PERFORMANCE OF SMALL AND MEDIUM SIZED ENTERPRISES.

CHAPTER 4

RESEARCH FINDINGS AND DISCUSSION


4.1 Introduction

The questionnaires were tested for reliability to establish the consistency of the instrument.

4.2. Response Rate

There were 274 out of a sample of 27 enterprises selected, 27 returned their questionnaires,

giving a response rate of 10%.

4.3. The Use of IT Systems

Figure 4.1 shows the study findings, which indicate that 78% of respondents do not use IT

Systems in their businesses operation while 22% of respondents use IT Systems. This

question was important in differentiating the users from the non-users of IT Systems so as to

thereafter be able to focus on the users in achieving the set objectives of the study.
0.81

3.2

Fig 4.1 Percentage of SMEs that Use IT System

Table 4.1.1General information of the respondents

Sex of respondents Frequency Percentage


Male 14 58
Female 10 42
TOTAL 24 100.00
Source: Author (2014)

The importance of the table ranging from table 4.1.1 is a summary based on the gender of the
respondents for the research. It shows that 58% and 42% is the percentage for both male and
female respondents respectively. This means that there are more male involved in this
research compared to female.

4.2: Study results on accounting information system

Table 4.2.1: AIS collect, store and process accounting data that is used by decision
makers.

Respondence view Frequency Percentage


Strongly Agree 8 33.33
Agree 5 20.83
Neutral 5 20.83
Disagree 4 16.67
Strongly Disagree 2 8.33
TOTAL 24 100
Source: Author (2014)
whether AIS collect and process data that is used for decision making

8.33
Strongly Agree
16.67 33.33
Agree
Neutral
20.83 Disagree
20.83 Strongly Disagree

The frequencies of clients view on the AIS which is used by the decision makers to improve
their operation process as shown in table 4.2.1. Out of the 24 respondents, 33.33% strongly
agree the fact, 20.83% agree on that aspect, 20.83 were neutral on the fact, 16.67% Disagree
on the aspect while 8.33% representing those who strongly disagree.

4.2.2 AIS distribute reports to decision makers in the organization

Respondence view Frequency Percentage


Strongly Agree 12 50
Agree 6 25
Neutral 2 8.33
Disagree 3 12.5
Strongly Disagree 1 4.17
TOTAL 24 100
AIS distribute reports to decision makers in the organization

8.33
12.5 Strongly Agree
Agree
8.33 50
Neutral
Disagree
25
Strongly Disagree

The frequencies of clients view on the AIS to distribute reports to decision makers in
the organization are as shown in table 4.2.2. Out of the 24 respondents, 50% strongly
agree the fact, 25% agree on that aspect, 8.33% were neutral on the fact, 12.5% Disagree on
the aspect while 4.17% representing those who strongly disagree.

4.2.3 AIS maintain correctness and secured SMEs data

Respondence view Frequency Percentage


Strongly Agree 14 58.33
Agree 4 16.67
Neutral 1 4.17
Disagree 3 12.5
Strongly Disagree 2 8.33
TOTAL 24 100
AIS maintain correctness and secure SMEs data

8.33
12.5 Strongly Agree
Agree
4.17
58.33 Neutral
16.67 Disagree
Strongly Disagree

The frequencies of clients view on the AIS maintain correctness and secured SMEs data

are as shown in table 4.2.3. Out of the 24 respondents, 58.33% strongly agree the fact,

16.67% agree on that aspect, 4.17% were neutral on the fact, 12.5% Disagree on the aspect

while 8.33% representing those who strongly disagree.

4.2.4 AIS provide adequate controls to safeguard the organization assets.

Respondence view Frequency Percentage


Strongly Agree 16 66.67
Agree 7 29.17
Neutral 0 0
Disagree 0 0
Strongly Disagree 1 4.17
TOTAL 24 100
AIS provide adequate controls to safeguard the organization assets

4.17
Strongly Agree
29.17 Agree
Neutral
66.67 Disagree
Strongly Disagree

The frequencies of clients view on the AIS provide adequate controls to safeguard the

organization assets are as shown in table 4.2.4. Out of the 24 respondents, 66.67%

strongly agree the fact, 29.17% agree on that aspect, 0% were neutral on the fact, 0%

Disagree on the aspect while 4.17% representing those who strongly disagree.

4.3: Study results on customer relationship management system

Table 4.3.1 CRMS use to track and organize its contacts with its current and

prospective customers.

Respondence view Frequency Percentage


Strongly Agree 13 54.17
Agree 9 37.5
Neutral 1 4.17
Disagree 1 4.17
Strongly Disagree 0 0
TOTAL 24 100
CRMS use to track and organize its contacts with its curre nt and prospe ctive custome rs.

4.17 4.17
Strongly Agree
Agree
37.5 54.17 Neutral
Disagree
Strongly Disagree

The frequencies of clients view on the CRMS use to track and organize its contacts

with its current and prospective customers are as shown in table 4.3.1. Out of the 24

respondents, 54.17% strongly agree the fact, 37.5% agree on that aspect, 4.17% were neutral

on the fact, 4.17% Disagree on the aspect while 0% representing those who strongly disagree.

Table 4.3.2 CRM communicate and respond effectively to the customers

Respondence view Frequency Percentage


Strongly Agree 11 45.83
Agree 10 41.67
Neutral 2 8.33
Disagree 1 4.17
Strongly Disagree 0 0
TOTAL 24 100
CRM communicate and re sponsde ffe ctive ly to the custome rs

8.33 4.17 Strongly Agree

45.83 Agree
Neutral
41.67 Disagree
Strongly Disagree

The frequencies of clients view on the CRM communicate and respond effectively to

the customers are as shown in table 4.3.2. Out of the 24 respondents, 45.83% strongly

agree the fact, 41.67% agree on that aspect, 8.33% were neutral on the fact, 8.17% Disagree

on the aspect while 0% representing those who strongly disagree.

Table 4.3.3 CRM provide Marketing Automation to the customers

Respondence view Frequency Percentage


Strongly Agree 16 66.67
Agree 5 20.83
Neutral 0 0
Disagree 2 8.33
Strongly Disagree 1 4.17
TOTAL 24 100
CRM provide Marke ting Automation to the custome rs

8.33 4.17 Strongly Agree

20.83 Agree
Neutral
66.67 Disagree
Strongly Disagree

The frequencies of clients view on the CRM provide Marketing Automation to the

customers are as shown in table 4.3.3. Out of the 24 respondents, 66.67% strongly agree

the fact, 20.83% agree on that aspect, 0% were neutral on the fact, 8.33% Disagree on the

aspect while 4.17% representing those who strongly disagree.

Table 4.3.4 CRM manage sales, marketing and support the organization

Respondence view Frequency Percentage


Strongly Agree 17 70.83
Agree 2 8.33
Neutral 1 4.17
Disagree 2 8.33
Strongly Disagree 1 4.17
TOTAL 24 100
CRM manage sales, marke ting and support the organization

8.33 4.17 Strongly Agree


4.17
8.33 Agree
Neutral
70.83 Disagree
Strongly Disagree

The frequencies of clients view on the CRM manage sales, marketing and support the

organization is as shown in table 4.3.4. Out of the 24 respondents, 70.83% strongly agree

the fact, 8.33% agree on that aspect, 4.17% were neutral on the fact, 8.33% Disagree on the

aspect while 4.17% representing those who strongly disagree.

4.4: Study results on Supply Chain Management System

Table 4.4.1 SCMS manage the flow of product and information throughout the
supply chain network.

Respondence view Frequency Percentage


Strongly Agree 13 54.17
Agree 6 25
Neutral 3 12.5
Disagree 2 8.33
Strongly Disagree 0 0
TOTAL 24 100
SCMS manage the flow of product and information throughout the supply chain ne twork.

8.33
12.5 Strongly Agree
Agree
54.17 Neutral
25 Disagree
Strongly Disagree

The frequencies of clients view on the SCMS manage the flow of product and

information throughout the supply chain network is as shown in table 4.4.1. Out of

the 24 respondents, 54.17% strongly agree the fact, 25% agree on that aspect, 12.5% were

neutral on the fact, 8.33% Disagree on the aspect while 0% representing those who strongly

disagree.

Table 4.4.2 SCMS monitor product flows and collaboratively respond to potential
delivery Problems.
Respondence view Frequency Percentage
Strongly Agree 15 70.83
Agree 4 16.67
Neutral 2 8.33
Disagree 2 8.33
Strongly Disagree 1 4.17
TOTAL 24 100
SCMS monitor product flows and collaborative ly re spond to pote ntial de live ry Proble ms.

8.33 4.17
Strongly Agree
8.33
Agree
16.67 Neutral
70.83 Disagree
Strongly Disagree

The frequencies of clients view on the SCMS manage the flow of product and

information throughout the supply chain network is as shown in table 4.4.2. Out of

the 24 respondents, 70.83% strongly agree the fact, 16.67% agree on that aspect, 8.33% were

neutral on the fact, 8.33% Disagree on the aspect while 4.17% representing those who

strongly disagree.

Table 4.4.3 Create reports that improve transportation lines, ordering amounts, and
keeps stock from running out, or running over.
Respondence view Frequency Percentage
Strongly Agree 9 37.5
Agree 13 52.17
Neutral 0 0
Disagree 2 8.33
Strongly Disagree 0 0
TOTAL 24 100
Create reports that improve transportation lines, ordering amounts, and keeps stock from running out, or running over.

8.33
Strongly Agree
37.5 Agree
Neutral
52.17 Disagree
Strongly Disagree

The frequencies of clients view on the SCMS Create reports that improve

transportation lines, ordering amounts, and keeps stock from running out, or

running over is as shown in table 4.4.3. Out of the 24 respondents, 37.5% strongly agree

the fact, 52.17% agree on that aspect, 0% were neutral on the fact, 8.33% Disagree on the

aspect while 0% representing those who strongly disagree.

Table 4.4.4 SCMS coordinate and integrate the flows of production within and among
companies to the end user

Respondence view Frequency Percentage


Strongly Agree 11 45.83
Agree 8 33.33
Neutral 2 8.33
Disagree 2 8.33
Strongly Disagree 1 4.17
TOTAL 24 100
SCMS coordinate and integrate the flows of production within and among companies to the end use r.

8.33
8.33 Strongly Agree
Agree
45.83
Neutral
33.33 Disagree
Strongly Disagree

The frequencies of clients view on the SCMS coordinate and integrate the flows of

production within and among companies to the end user are as shown in table 4.4.4.

Out of the 24 respondents, 45.83% strongly agree the fact, 33.33% agree on that aspect,

8.33% were neutral on the fact, 8.33% Disagree on the aspect while 4.17% representing those

who strongly disagree.


CHAPTER 5

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS


5.1 Introduction

Chapter presents summary, conclusions and recommendations for the whole research. It

recommend on the emerging results from the research done which revealed there are many

business owners who see the value of using IT Systems that enhance their operation

performance. The recommendation policy has also been covered in this chapter which seeks

to explain in detail the perception of the respondents questioned and their view on IT Systems

for SMEs. Statistics was used to back the recommendations given.


5.2 Summary

A summary of the project results is shown in this chapter, with an overview of projects for

further research that address some of the open problems in the field. The context of using IT

Systems for SMEs owners. A detailed analysis of IT Systems that enhance operation

performance among SMEs in Mombasa CBD via a comparison between those who either Use

IT Systems and those who have not yet adopt the use of IT Systems.

The focus shifted to explain the concept of IT Systems through AIS, CRM and SCMS as used

to enhance operation performance of SMEs and it explained how SMEs can embrace

competitive advantage to gain advantage over their competitors.

The main area of focus was to identify the extent to which SMEs attain operation

performance by the use of IT Systems and how SMEs dont use IT Systems for their business

can equally benefit but not as such. The final consideration was to learn the extent to which

SMEs use IT Systems as a strategy to attain operation performance.

As communities evolve and the power of use of IT Systems is steadily increases, businesses

must consider getting involved. Those who refrain from doing soor simply delay

advancing onto the IT Systems sceneare likely to encounter problems.

5.3 Conclusions

The study established that most SMEs in Mombasa CBD had not fully understood and

internalized the potential of IT Systems for their businesses. Those who use IT Systems do

not optimally utilize IT Systems as they use only selected few tools due to limitations

emanating from technical capabilities and infrastructure. This means that businesses in

Mombasa CBD have not benefited adequately from technology and specifically IT Systems.
This is an opportunity that could enhance SMEs growth and gain a competitive edge against

large organizations that traditionally have resources and have been in business for a longer

time. The study had sought to establish how IT Systems affects the operation performance of

SMEs. It revealed that IT Systems has broken down geographical barriers and heralded new

ways of doing business to those who are flexible and keen to adapt to changes in technology

and business environment.

This translates into new methods of reaching customers like the use of CRMS and also target

customers and creates their niche in the new frontiers to build their market share and

consequently increase their sales. This can only be done by flexibility and a positive attitude

towards learning how best IT Systems can be used to facilitate operation performance. The

study also sought to find out if IT Systems had affected how innovative SMEs were and it

found out that most SMEs in Mombasa CBD had not been able to use IT Systems to be

innovative in their product offerings or operations yet IT Systems networks can enable

generation and sharing of insights as well as ideas on new innovative ways of doing business

in an effort to serve customers better. The SMEs have an opportunity to develop new

products and services that suit customers needs based on their feedback in IT Systems and

also communicate these developments to customers. This translates into cost saving and

financial growth for SMEs which they desperately need as they are characterized by lack of

adequate resources.

Determining the effect of various types of IT Systems availed by SMEs was another objective

of the study. The study revealed that various types of IT Systems as one of the most flexible

elements of marketing mix could be affected by IT Systems but in a small significance. This

is through gathering of information on the appropriate details that could be added to products

and services to enhance their value for money. The study also established that various types
of IT Systems does not necessarily translate into high cost of maintaining them but must

provide profits to businesses.

The effect of IT Systems on the operation performance of SMEs was looked into. AIS,

CRMS and SCMS. CRM brings a magnitude of opportunities for businesses to communicate

with customers as well as build databases that are necessary for future growth in terms of

accessing new markets that will translate to increased sales. SCMS helps to integrate various

departments and make it as one solid to work together and AIS assist in recording the

financial reports and post the to the relevant field for account and its also generates financial

reports

5.4 Recommendations

This study recommends that the Mombasa county government should find a means to

advance the SMES owners by providing open source ERP resources for them that will enable
SMEs adopt the necessary technology to advance this sector that makes a substantial

contribution to the GDP of Kenya annually. SMEs should seek to learn and adopt IT Systems

that provide an opportunity to improve operation performance of the business through

increased sales and profits. The SMEs therefore have no option but to ensure that their

employees are computer literate and can engage customers in IT Systems platforms for the

benefit of the business.

Investors should focus on helping SMEs tap the potential that comes with IT Systems through

training and provision of business solutions that bridge the existing gap where many SMEs

are not using IT Systems as a result of various limitations. The investors can further help in

the adoption of IT Systems by offering funding and technological solutions.

The marketing practitioners and entrepreneurs, for this study recommends a keen evaluation

of business needs and environment in choosing the IT Systems to adopt.


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APPENDICES

APPENDIX I: LETTER OF INRODUCTION

Ahmed Mohamed kombo

Jomo Kenyatta University of Agriculture and Technology

School of Human Resource Department

P.O.Box 81310-80100

MOMBASA.

Dear Sir/Madam,

RE: PERMISSION TO CARRY RESEARCH-INTERVIEW/QUESTIONNAIRE

I, the undersigned, am an undergraduate student in the school of human resource and


development, Jomo Kenyatta University of Agriculture and Technology pursuing degree
course in Bachelor of Business Information Technology As part of our full course, I am
required to carry out research. In this regard, I have chosen your institution for my study to
explore

Effects of IT System adoption on the operation performance of SMEs.The information


gathered will be used exclusively for the purposes of academic study and shall be kept in
confidence. If requested by your institution, I shall avail a complete copy of study results.

Thanking you in advance for your kind support.

Yours sincerely
Ahmed Mohamed kombo +254703640927

APPENDIX II: QUESTIONNAIRE

DearRespondent,
I am pursuing Degree in Bachelor of Business Information Technology, JKUAT, Mombasa
and I am conducting an academic research on whether the IT adoption has affect the
operation performance of SMEs. I very humbly request you to spend your precious five
minutes in filling the questionnaire. Your contribution in this regard will be highly
appreciated and will be acknowledged at the time of submission of thesis.

SECTION (A) BIODATA

Instructions: Kindly complete the following questionnaire using the instructions providedfor
each set of question. Tick appropriately.

Confidentiality: The responses you provide will be strictly confidential. No reference willbe
made to any individual(s) or organization in the report of the study.

1. Job Title:


2. Type of business ownership(Tick where appropriate)

a) Partnership b) Private Limited company

c) Sole proprietor d) Others (specify) ___________________

3. Which sector does your company operate in? (Tick where appropriate)

a.)Manufacturing

b.)Trade

c.)Service

d.)Other (Please specify) __________________________________

4. How many years has your organization been in operation? (Tick as appropriate)

a) 1-3 years b) 4-7 years

c) 8-10 years d) Over 10 years

5. How often are you offering Training to the employees?

a) 1-3 years

b) 4-7 years

c)Other (Please specify) __________________________________


SECTION B: ACCOUNTING INFORMATION SYSTEM
For e Each of the statements below please enters a tick in the box which most represents your own view.

Strongly Agree Neither agree Disagree Strongly


Agree nor disagree Disagree

STATEMENT
AIS collect, store and
processing of financial and
accounting data that is used
by decision makers.
AIS distribute reports to
decision makers in the
organization
AIS maintain correctness
and secured SMEs data
AIS provide adequate

controls to safeguard the

organization assets.
SECTION C: CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM

Strongly Agree Neither agree Disagree Strongly


Agree nor disagree Disagree

STATEMENT

CRMS use to track and


organize its contacts with its
current and prospective
customers.

CRM communicate and

respond effectively to the

customers

CRM provide

Marketing Automation to

the customers

CRM manage sales,

marketing and support the

organization
SECTION D: SUPPLY CHAIN MANAGEMENT SYSTEM
Strongly Agree Neither agree Disagree Strongly
Agree nor disagree Disagree

STATEMENT

SCMS manage the flow of


product and information
throughout the supply chain
network.

SCMS monitor product


flows and collaboratively
respond to potential delivery
Problems.
SCMS Create reports that
improve transportation lines,
ordering amounts, and keeps
stock from running out, or
running over.

SCMS coordinate and


integrate the flows of
production within and
among companies to the end
user.

THANK YOU FOR YOUR TIME AND COOPERATION

APPENDIX III: BUDGET SCHEDULE

ITEM AMOUNT(KSHs)

Stationary 3,000.00

Flash Disk 2050.00

Photocopy 5000.00

Binding 7300.00
Internet Services 5000.00

Printing and questionnaires draft and final copies 8,000.00

Contingencies 5,000.00

Transport 5,000.00

TOTAL 40,350.00
APPENDIX IV: WORK PLAN

ACTIVITIES MONTHS

JUNE-JULY JULY JULY JULY-AUGAST

2014 2014 2014 2014

Pilot Study

Correcting& Restructuring

Questionnaire And Interview


Guide

Data Collection

Data Analysis

Report Writing And


Completion