The Impact of Fuel Price on SMEs in Oman

Running head: MANAGEMENT
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Abstract
This research examined the impact of the fall of fuel prices on the SMEs in Oman. Oman had
been dependent on the oil and gas industry to boost their economy. However, the massive
increase in supply in the global market and fluctuation of oil prices had heavily affected the
SMEs. The SMEs are faced with significant challenges due to the removal of subsidy from
the government and increase in interest rates charged by financial institutions. Similarly, the
increase in inflation rates to 0.90 in 2012 increased the cost of resources and good which has
also affected the productivity of the companies. The analysis of the past literature had shown
that there is very little analysis specifically on Oman and majority of the researches have
taled challenges faced by SMEs in MENA region. The research methodology had used a
mono method where quantitative data has been collected through surveys to 100 employees’
working in SMEs. The result showed that financial institutions charged high interest rates for
their services. The frequency of loan approvals had decreased and there is stringency in
providing Moreover, the removal of subsidy from the government has affected the micro
organizations tremendously as they are not getting enough support to flourish. The small
scale organizations having very less employees does not have the capability of adapting to
their changes due to their limited capability of resources. The research had provided solutions
for addressing these challenges in the final chapter of the research paper.

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Table of Contents
1.0 Introduction..........................................................................................................................6
1.1 Background of the research..................................................................................................6
1.2 Research problem.................................................................................................................6
1.3 Research Purpose.................................................................................................................7
1.4 Research objectives..............................................................................................................7
1.5 Research Question................................................................................................................7
1.6 Research hypothesis.............................................................................................................7
1.7 Summary..............................................................................................................................7
2.0 Literature Review.................................................................................................................8
2.1 Introduction..........................................................................................................................8
2.2 Fuel prices volatility.............................................................................................................8
2.3 Organizational Performance.................................................................................................9
2.4 Literature Gap....................................................................................................................10
2.5 Summary............................................................................................................................10
3.0 Research Methodology.......................................................................................................12
3.1 introduction........................................................................................................................12
3.2 Research Philosophy..........................................................................................................12
3.3 Research Approach............................................................................................................12
3.4 Research Design.................................................................................................................13
3.5 Data collection and analysis...............................................................................................13
3.6 Sampling method...............................................................................................................13
3.7 Reliability and Validity......................................................................................................14
3.8 Ethical consideration..........................................................................................................14
3.9 Summary............................................................................................................................14
4.0 Findings and Analysis........................................................................................................15
4.1 Introduction........................................................................................................................15
4.2 Reliability analysis.............................................................................................................15
4.3 Quantitative analysis..........................................................................................................17
4.4 Correlation analysis............................................................................................................30
4.5 Regression analysis............................................................................................................30
4.6 Summary............................................................................................................................35
5.0 Conclusion and recommendation.......................................................................................36

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5.1 Conclusion..........................................................................................................................36
5.2 Recommendations..............................................................................................................36
References................................................................................................................................38
Appendices...............................................................................................................................40
Appendix 1...............................................................................................................................40
Appendix 2...............................................................................................................................45

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List of Tables
Table 1: Reliability Statistics...................................................................................................15
Table 2: Item Statistics.............................................................................................................16
Table 3: Item Total Statistics...................................................................................................16
Table 4: Age.............................................................................................................................17
Table 5: Gender........................................................................................................................18
Table 6: High interest rate........................................................................................................19
Table 6: Government service charges......................................................................................19
Table 7: Flexibility in providing loans.....................................................................................20
Table 8: Government is supporting SMEs...............................................................................21
Table 9: Timely payments........................................................................................................22
Table 10: Removing subsidy....................................................................................................23
Table 11: Increase in visa fees.................................................................................................24
Table 12: Factors affecting SMEs performances.....................................................................25
Table 13: Service quality.........................................................................................................27
Table 14: Flexibility of operations...........................................................................................27
Table 15: Cost of operations....................................................................................................28
Table 16: Most affected sector.................................................................................................29

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List of Graphs
Graph 1: Age............................................................................................................................17
Graph 2: Gender.......................................................................................................................18
Graph 3: High interest rate.......................................................................................................19
Graph 4: Government service charges.....................................................................................20
Graph 5: Flexibility in providing loans....................................................................................21
Graph 6: Government is supporting SMEs..............................................................................22
Graph 7: Timely payments.......................................................................................................23
Graph 8: Removing subsidy.....................................................................................................24
Graph 9: Increase in visa fees..................................................................................................25
Graph 10: Factors affecting SMEs performances....................................................................26
Graph 11: Service quality.........................................................................................................27
Graph 12: Flexibility of operations..........................................................................................28
Graph 13: Cost of operations...................................................................................................29
Graph 14: Most affected sector................................................................................................30

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Topic: The Impact of fuel price on SMEs in Oman
1.0 INTRODUCTION
This research aims to examine the impact fuel prices on the small and medium scale
enterprises in Oman. The fluctuation of oil prices have deep impact on the economy of any
country. The small and medium enterprises are responsible for the growth and development
an economy (Bouazza, Ardjouman and Abada 2015). This means that these factors affect the
economy and is expected to have significant influence on each other. Therefore, this research
has aimed to address this perspective to shed light on the challenges facing the small and
medium scale organizations (SMEs) in dealing with the change in fuel prices.
1.1 BACKGROUND OF THE RESEARCH
Small scale and medium scale organization contribute to the 90% corporate sector in
Oman and has a reasonable contribution to the GDP of Oman (DW 2019). However, this
contribution is quite less when compared to SMEs in developed countries such as in United
States (Zafar and Mustafa 2017). SMEs are essential for the development of the economy as
it facilitates in generating employment opportunities, increase in wealth and competition of
the country. It also enables new entrepreneurs to shape their ideas into realities. Small and
medium scale organizations have been facing various challenges but the falling oil prices
have been one of the major concerns for the firms (Bouazza, Ardjouman and Abada 2015). In
the year of 2015, the oil prices decreased significantly where the GCC countries were
impacted by the sharp fall in the oil prices (Boughanmi and Khan 2018). The boom in US
shale oil production, Libya’s increased in production and the increase in production of OPEC
raised the global output of oil significantly. The GCC countries were heavily affected by the
fall in the oil prices where countries like Oman were forced to remove subsidy from oil which
resulted in the change in the small and medium scale enterprises (World Bank 2018).
1.2 RESEARCH PROBLEM
The decrease in fuel prices in Oman resulted in the increases in charges imposed by
the government in various services. The companies have to renew their commercial register
which is one type of a company register every 5 years and increased the charges on inclusion
of new activities in the commercial register (DW 2019). The financial institutions and banks
increased the interest rates on services such as funds provided to the small scale organizations
and there has been reduction in the financial facility. SMEs are affected as financial

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institutions are important fund sources to companies (Zafar and Mustafa 2017). Moreover,
higher priority has been given on government project as they are more secured and various
companies handling government project are receiving delayed payments. This has increased
the challenges facing the SME’s in Oman and the research has aimed to examine these
factors to identify the impact on the performance of the small and medium scale
organizations.
1.3 RESEARCH PURPOSE
The purpose of the research is highlighting the significant challenges and issues faced
by the SMEs in Oman. This research depicts these challenges and provides solutions to these
issues. This facilitates in providing significant knowledge to the budding entrepreneurs and
prepares them for the challenges to expect while starting a small scale business. The research
has provided solutions necessary for the sustainability of the organizations.
1.4 RESEARCH OBJECTIVES
The objective of the given research are as follows:
 To measure the impact of fall in oil prices on the performance of SME in Oman
 To identify the sectors that are highly impacted due to fluctuation and decrease in oil
prices
 To recommend preventive measures for managing the sustainability of small and
medium scale organizations
1.5 RESEARCH QUESTION
 How does the fall in oil prices impact the performances of SME in Oman?
 Which are the sectors impacted highly due to the fall in oil prices?
1.6 RESEARCH HYPOTHESIS
H0: There is no significant impact of oil prices on the performances of SME in Oman
H1: There is significant impact of oil prices on the performances of SME in Oman
1.7 SUMMARY
This chapter has highlighted the key issues and problems faced by the SMEs in Oman
along with the reasons for the decrease in oil prices in the country. The research problem has
been explained in detail to provide the context to which the research is being performed. The