Industry Competitiveness

To thrive in a market, organisations seek competitive advantage through superior products and services, cost controls and competitive pricing, and especially innovation (Wagner & Hollenbeck 2010). There are a range of e-commerce solutions that can meet these criteria. Molla and Licker (2005) note that ‘organizations that perceive market forces as ready for e-commerce are likely to adopt e-commerce or embark on more sophisticated e-commerce implementation from fear of competitive disadvantage or perceived e-commerce benefit’ (p. 90).

The Saudi travel market is moving slowly towards a greater use of ICT in business. However the rate of adoption is not consistent across the travel industry. Some firms create online businesses for niche markets, and others are content with ICT to support their shopfront businesses. This is due to the fragmented nature of the tourism and travel industry in Saudi Arabia, from small traditional providers to the large accommodation, airline and travel agent corporations. Thus ICT implementation, its type and penetration in the firm, is subject to the level of ICT awareness and in some cases to the competency of the manager. If the manager does not understand the nature of the technology, or is unable to evaluate the available technology to meet the firm’s needs, this will lead to disconnect between need and procurement, and fuel doubts about successful implementation. To explain the firm’s avoidance of online trading, P4 relies on the reticence of the industry to adopt innovation:

131 “Not only are the travel firms slow in adopting e-commerce and providing online services, but this is also true for the Saudi social and business environment. We have only had the internet in our schools and homes over the last few years. Even the banks and newspapers have had the internet for not much more than a decade. But when a couple of banks offered online services, the others struggled to catch up. This is the state of the Saudi market. We watch each other, see what technology is successful for our competitors, then we follow suit. Investing in technology is risky, given the amount of finance involved and the lack of good technology service firms, so we wait until something works well. In this case, our main competitor does not have online service on his website. Every time I check online, I find that message “coming soon” - but if he has online services today I will have the same tomorrow” [P4].

A similar comment was made by participant P7. He said:

“When I see a competitor offer online bookings for events and conferences, my top priority will be offering services online” [P7].

These comments are indicative of the industry members’ reluctance to be the first to offer a service for fear of failure, so they are wait for others to make the first move.. They are perhaps not convinced that this marketing mode is accepted by their clients, or feel that they may lose sales if clients are confused, or suspicious of the online offers. They appear unaffected by the vast array of information and offers already offered online and the fact that their smaller local markets are insufficient to sustain growth.

Participants were well aware of the effects of change in their decisions to adopt new technology. Two participants gave examples of competitive advantage that could affect their responses to e-commerce adoption. P3 acknowledged the influence of change in an industry. He noted:

“This is human nature. Yes, if my competitor was successful with an initiative, I would definitely follow. But I need to make sure that when I invest one riyal in e- commerce, I get back ten. . . I can give you an example on the impact of competition. In the nineties, Mercedes Benz and BMW dominated the global luxury car business. Then the Japanese introduced the Lexus with higher standards and cheaper prices. What happened? The two brands improved their standards to retain their positions in the market” [P3].

Participant P1 gave another example, this time technology. Before privatisation of the Saudi telecommunications sector, services were minimal. Now with three telecommunication providers, services are of higher quality and relatively less expensive. This occurs in all industries and tourism is no exception. He said:

132 “There’s no doubt the local industry is competitive, but no one takes the lead in introducing change as happened in telecommunications. They just follow each other. So when one goes online, we all will” [P1].

These two examples show that participants were well aware of the effects of competition in the country; however, this was not sufficient to motivate the tourism industry. Whilst competition was acknowledged as a factor in their e-commerce decision making, participants offered other important factors such as technology availability, skilled human resources, and market research regarding online competition. The participants were also well aware of the use of online sales in the wider tourism industry. However, they used the Saudi standards of infrastructure and technological skills as factors concerning adoption. P11 said:

“Adoption of online services by our competitors would motivate us to adopt e- commerce, but other matters must be considered for my decision to go online. Budget, contracts, human resources, technology and good market research are examples” [P11].

A similar comment was made by participant P4:

“We know what’s going on in the market, not only with the local competitors, but also globally. Those global tourism companies offer online booking, and we need to respond, but first we must build internal business capacity. We need to create the back office infrastructure, accounting and booking systems, and then we can compete with anyone” [P4].

However, these observations were not universally shared as primary factors. Competitive innovation requires justification and P6, a licensed Hajj provider for Saudi

nationals, said that a competitor is not considered to have an innovative advantage unless a real threat to the business is detected. He said:

“In the case of e-commerce, my competitors could use online booking to offer a more convenient marketing channel to their customers. I won’t immediately respond, but will wait and see what happens. If I feel that this is working for them, I will then plan for change” [P6].

P10, the airline industry representative admitted that competitive advantage from the local industry forced the firm to introduce online booking services. P10 said:

“Because of new competitors in the local market who are taking market share, my organisation established an Electronic Commerce Department a year ago. This department’s duties include strategic planning for e-commerce, infrastructure, and operating online customer services” [P10].

133 The majority of participants accepted that e-commerce can provide competitive advantage, and would adopt online services once it was established in their industry and when they were convinced it was financially acceptable. Participants commented on competitive advantage some seventeen times during the eleven interviews, and this reflected their attention to market conditions.