Kuwait's Economic Growth and Small Entrepreneurs

The document discusses the challenges faced by small entrepreneurs in Kuwait due to rapid technological advancements and complex legal regulations. It highlights the difficulties they face in coping with these changes and proposes that the government should provide incentives and support for small entrepreneurs to help them adapt to the latest technologies.

Running head: BUSINESS LEVEL STRATEGIES
Business level strategies
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Impact of internet and digital technologies on five competitive forces
Kuwait is one of the leading economies in the Middle Eastern regions. They are rapidly
developing in terms of the economy and with the inflow of the foreign direct investments; they
are becoming more accustomed with the globalization. One of the major changes they are
witnessing in the recent time with the development of the economy is the growing popularity of
internet and digital technologies (Andre Cavalcante 2013). These factors are having various
impacts on the competitive environment of Kuwait. The following sections will discuss about the
five competitive forces impacted by internet and digital technologies.
Threat of new entry
Initiation of the internet and other online digital medium has opened huge sources of
business opportunities in every sector. Thus, the threat of entry got increased with the initiation
of internet and digital technologies (Gupta, Goktan and Gunay 2014). This is due to the reason
that in past, business organizations has to deal with only the traditional competitors, but in the
current scenario they also have to deal with the virtual competitors or digital mediums. Thus, the
competitors got increased.
In the case of Kuwait, the impact of internet and digital technologies is more due to the
reason that Kuwait is having high market penetration of these technologies. According to the
reports, more than 70 percent of the total population of Kuwait is having access to the internet.
Thus, the market area is also more for the online and digital mediums. This along with the
increased less cost and capital involved in doing business through online mediums are
amplifying the threats of new entrants in the market (Drnevich and Croson 2013). Another key

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impact of internet and digital technologies in increasing the threat of new entrants is the
reduction in the traditional barriers in starting new businesses.
Figure: 1
Trend showing growing internet penetration in Kuwait
Source: (Kaposi 2018)
Threat of substitutes
The next competitive force is the threat of substitutes. This denotes the availability of the
substitute products in the market for any particular product. The more will be availability of the
substitute products, the more will be the intensity of the competition in the market. One of the
major impacts of the internet and digital technologies in Kuwait is increasing the intensity of the
threat of substitutes (Schwenger, Straub and Borzillo 2014). This is due to the reason that with
the help of the online mediums, more options are coming to the customers. Moreover, with the

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help of the internet and digital technologies, switching cost for the customers also got reduced,
which further increased the threat of substitutes in the market.
For instance, before the boom of the internet in Kuwait, shopping in traditional and
offline means was the only option for the customers. Thus, the intensity of the substitute
products was also low. However, in the current time, online shopping is attracting huge
customers. According to the recent survey, trend of online shopping is growing rapidly in
Kuwait. Thus, the traditional and offline retailers are facing the threat of online substitutes and
thus, the threat of substitute got increased with the initiation of internet and digital technologies.
Figure: 2
Online shopping trend in Kuwait
Source: (MasterCard Social Newsroom 2018)

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Bargaining power of the customers
Bargaining power of the customers refers to the extent to which buyers are having the
upper hand in bargaining with the sellers in the market. With the initiation of the online
technologies and internet, customers are now having number of options to gather information
regarding any products. One of the major contributions of the internet and digital technologies in
increasing the bargaining power of the customers is the growing penetration of social media
networks in Kuwait (Lee, Mun and Park 2015). Social media platforms are one of the major
scopes of gaining diverse knowledge about anything. Thus, in the current time, customers are
having more knowledge about the availability of the products in the market and their details.
Customers are now having the option to choose their product by gathering information more
effectively through online.
Kuwait is having one of the largest market penetrations in the entire Middle Eastern
regions. They are just behind UAE in terms of penetration of Facebook. Thus, with the help of
these social media platforms, customers are gaining the upper hand in bargaining with the sellers
with having all the market knowledge in hand.

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Figure: 3
Facebook penetration in Kuwait
Source: (UAEinteract.asp)
Bargaining power of the suppliers
Bargaining power of the suppliers refers to the influence of the suppliers in determining
the business operation and pricing strategy of the organizations. In the traditional case, majority
of the suppliers were having the upper hand and positive bargaining power in Kuwait. This is
mainly due to the reason that Kuwait is having limited source of resources for the business
organizations (Moatti et al. 2015). Thus, organizations are more dependent on the suppliers.
However, with the initiation of the internet and digital technologies, business organizations are
being able to connect with the global vendors more effectively. Thus, their dependence on the
domestic suppliers is reducing and this in turn is reducing the bargaining power of the suppliers.
In addition, with the help of the internet and online mediums, business organizations are also

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leveraging the benefits of having diverse information about the suppliers before dealing with
them.
Industry rivalry
Initiation of the internet and digital technologies is helping the business organizations to
have more marketing opportunities through the online mediums. With the help of the online
mediums, Kuwaiti organizations are promoting their offerings in the international market. Thus,
their business opportunities are increasing (He, Zha and Li 2013). On the other hand, initiation of
the internet also enables the business organizations to initiate digital platforms to have marketing
effectiveness over their competitors. With the availability of the low cost and widely accessible
digital platforms, the marketing strategies of the Kuwaiti organizations are now more holistic and
complete. They are having more options to compete with their competitors and thus the industry
rivalry is increasing in the Kuwait business environment. Having fewer barriers in the online
mediums is also increasing the using of the digital mediums in competing in the market.
Four threats of entry to new entrants in small scale entrepreneurship
Risk of investment
Entering in the small scale entrepreneurship involves a certain amount of capital
investments. However, in the case of the Kuwait, there is a certain level of risk involved in the
investment (Bolton, Chen and Wang 2013). This is due to the reason that majority of the
economy of Kuwait depends on the export of oil, which is non-renewable source. Thus,
reduction in the export of oil will have negative implications on the whole economy and the
business sectors will get negatively impacted. Thus, the return on the investments may not be
positive. It is recommended that government of Kuwait should initiate different business

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opportunities in order to increase the diversity of the business sector. This will reduce the
dependency on the oil sector.
Risk of terrorism
Kuwait is located in the Middle Eastern region, which is one of the most badly affected
by the terrorism. In addition, negative diplomatic relationship between the countries in the
Middle Eastern region is also causing disturbances in the domestic affairs of Kuwait. Thus, the
more will be the internal risk and the risk of terrorism, the more will be the business risk. In
addition, there will be higher probability that small entrepreneurs will hesitate to enter in the
business with having negative business environment. Emergence of the terrorist groups such as
ISIS is posing huge threat for the domestic environment and it is also causing instability in the
domestic business environment. It is also to be noted that risk of terrorism for the small
entrepreneurs is more due to the reason that they are having access to less amount of funding and
capital. It will be difficult for them compared to the large scale industries to recover the money in
case of any instable environment (Mythen, Walklate and Khan 2013). It is the responsibility of
the government to secure the domestic environment of the country. Providing reliable security
measures will ensure the small entrepreneurs.
Rapid advancement of the technology
In the recent time, Kuwait is going through extreme transformation in their economy.
Government of Kuwait is attracting more investments in order to develop domestic economy. It
is in turn increasing the rate of foreign direct investments in the country. However, with the
increase in the investment in the country, more foreign and updated technologies are being
getting accessible in Kuwait. In this case, it is becoming difficult for the small entrepreneurs to

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cope up with the rapid advancement of the technology due to the involvement of more capital
and investments. This is also restricting the small entrepreneurs in entering in the business sector
of Kuwait. Government should provide incentives and supports for the small entrepreneurs to
cope up with the latest technologies.
Legal and regulatory difficulties
Kuwait is having stringent and complex legal rules and regulations and it sometime
becomes difficult for the small entrepreneurs to adhere and follow these regulations. They also
do not have the necessary equipment to comply with the regulations (Gamborg, Anker and
Sandoo 2014). Thus, government should ease the regulations and startup should be promoted.

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