Chapter 4: Analysis and Presentation of Results
The preceding chapter on research methodology highlighted the data collected through the interview method from entrepreneurs to understand their working capital management strategies. Using a qualitative research method, the focus of the study was to uncover and interpret the essence of the participants’ thinking regarding working capital in entrepreneurial firms. This chapter proceeds to the next stage of the research by presenting the results of the data collection process. It also analyses the data in order to understand the strategies used by technology business owners in acquiring and managing working capital in the MENA region. The chapter begins with a description of the profile of the interviewees, followed by an analysis of the different responses based on each of the questions posed in the interview sessions. The candidate read the transcripts several times to have a better and thorough understanding of the data for coding. Based on relevance, the findings of the study were equally substantiated using the literature reviewed in the second chapter. Research findings confirm results from the literature, while other findings extend knowledge in the field. Each time a point was mentioned about a particular theme, the point was highlighted in the same color for ease of comparison and evaluation. Third, similarities and differences in the responses were also identified to evaluate any inconsistencies about how the business manages working capital. The seven themes identified from the data collection were
Theme 1: Hybrid entrepreneurship
Theme 2: Financing from overseas
Theme 3: Collaborative relationship with suppliers and customers
Theme 4: Revamping the legal and banking structure
Theme 5: Using public relations as a tool
Theme 6: International angel investors, and
Theme 7: Effective working capital strategies.
Demographic characteristics
Question one of the interview protocol was about the respondent’s experience in the business sector, the type of business, services offered, and how the business was financed. Table 1 provides a summary of this information. The background information demonstrates that the interviewees work in varying entrepreneurial positions in technology-oriented companies but with varying sizes and interests.
Table 1
Interviewee profile
Interviewee Code Company Sector Business Type Age Gender Services Offered Source of Finance
C1 Communication International Telecom 55 Male Data services Personal savings
C2 Consultation Management consulting firm 67 Male Consultation services around management area Personal savings
C3 Technology Cybersecurity and technology integration 50 Male Internet security services Loans
C4 Healthcare, automotive, Jewelry and Real Estate E-commerce and E-business 32 Male Technology Business services Personal savings and Bank loans
C5 Technology Consultation services 53 Male Technology implementation for small and big business Personal financing
C6 Petroleum Oil and gas services 55 Male Technology advice on their introduction in the oil and gas industry Personal financing
C7 Technology Contracting services leveraging on technology 60 Female Linking customers on available opportunities using the available technology Personal Financing
C8 Farming Technology and farming services 48 Male Linking communities with technology for farming Personal Financing
Details of Analysis and Results
Theme 1: Hybrid Entrepreneurship
As part of the second section of the interview script, the respondents answered concerning the strategies that work best to acquire and manage working capital for a growing business. One of the recurring themes from the respondents is hybrid entrepreneurship. This is evidenced by the majority of employees in the different organizations working a full-time job, while at the same time engaging in building a business part-time. An analysis of the responses revealed that the majority of the respondents (9 out of 10) found it necessary to adopt some aspects of hybrid entrepreneurship as a practice of generating working capital for business growth. For instance, interviewee C1 noted, “I am currently running my company which is now about five and a half years old, and essentially, I started that after I left the corporate world, I used to work for.”
Also, respondent C2 observed that “it was March of 2001 I resigned because they were doing hilarious things that none of us understood at the time but not anticipating that it was going to go out of business or anything.” In this case, having an initial place of work provides the essential capital for venturing into private entrepreneurship. Additionally, respondent C4 had observed that his father started the company while he was working as a government employee. While taking into consideration prior research, it has been suggested that there is a need to gather a sufficient amount of resources or investment to enhance a business operation (Cohen and Hochberg, 2014; Kerzner, 2015). The hybrid entrepreneurship has equally been found to leverage on different networks that assist entrepreneurs in sourcing for resources, which they use as working capital for growing their business. C3 observed that he leverages from the existing opportunities in the USA, such as the four percent loan by using a network which he had gathered while working in the USA.
Similarly, respondent C5 noted to have leveraged on connections in a different company in the States, where he had worked to improve his capacity of sourcing for business resources. Interviewee C5 Posited that “at that time, I was working with another company in the States doing virtualization and environmental technology that was like a trend at that time. When I came to Dubai, I looked around to see the trends of all the latest technology trends in the world that I have basically adopted. The concept came about when I had the experience in the States that I was doing, for example, data center virtualization with datacenter, and I had the expertise, but I did not lack the image, but when you come to Dubai, you need to come with a name that nobody takes to you just as a small entrepreneur small business that they have a very difficult time starting.”
Even among the few respondents who indicated that they did not use any referral network or their previous place of employment as a resource. It was clear to them that there would be a likelihood that through networking and relying on resources gathered in their previous employment, they can increase their revenues substantially. Interviewee C8, for instance, posited that “our problem is not proper products, or I don’t even think marketing or even marketing channels is the issue it’s getting the capital to build the products and manufacturing the products has been the issue, which would have been better if we used referrals.”
Theme 2: Financing from Overseas
The majority of the respondents have noted to source their finances from overseas. Overseas financing included merging with subsidiaries in other countries, friends and associates in different countries, and investors. Interviewee C1 noted, “I did try to talk to, and I did talk to quite a lot of western investors in Europe and America.” This is an indication that collaborating with international companies would be a significant source of financial resources in implementing their venture.” Similar findings were evident in the information provided by the respondents. The various sources of financing their operations exploited by the organizations are informed by the need to have a sufficient amount of cash flow or working capital as an essential element of a sustainable business.
Table 2
Summary of Interviewee Opinions and Strategies of Acquiring and Managing Working Capital to Grow Business
Interviewee Strategies for Acquiring and Managing Working Capital to Grow Business
C1 Using the resources gathered from their previous occupation and engaging foreign partners
C2 Partnership and support from government institutions
C3 Engaging partners in previous occupation and investors and plowing back profits from initial company operations
C4 Using the resources gathered from their previous occupation and engaging foreign partners
C5 Borrowing from banks, partners and friends to top-up personal finances
C6 Consolidating finances with the wife and sourcing finances from international conglomerates
C7 Attracting investors to be part of the business, supporting entrepreneurial activity
C8 Engaging partners and organizations interested in humanitarian responsibilities and plans
Theme 3: Collaborative Relationship with Suppliers and Customers
An entrepreneur engages a wide array of stakeholders in managing working capital. With this in mind, the interviewees were asked how they establish a working relationship with both their suppliers and customers. A common recurring theme from the respondents is that they normally get involved in revenue sharing with suppliers and customers.
Nevertheless, an analysis of the different findings demonstrated the existence of mixed views. The majority of the respondents (C1, C2, C4, C5, C6, C7, and C8) indicated that they made prioritization of their suppliers and customers for the working capital management. This means that the respondents agreed to the view that an entrepreneur must possess the capability of interacting actively with their suppliers and customers for sourcing resources. Interviewee C1, for instance, contended with the view by noting that “having more mature people in the businesses you appear to be much bigger than anyone that this is a much bigger company because these guys are there, we know their chemistry like many industries you get to know people.” To support this view, respondent C3 observed that for the customers “from us managing the personal relationship, so you have to have an account before you do it” while for the suppliers, the respondent noted that “the biggest help I got was from the suppliers because I am not buying products I am buying solutions, so suppliers were willing to provide their solutions to customize, provide the service, and then I pay them after I get paid.” Nevertheless, C4 noted on the existence of a win-win situation where the contractors have to pay back for the services offered by the suppliers with C5 noting the need to have a detailed association with the small and big names to ensure that they are successful in their engagements.
To develop and maintain a collaborative relationship with the suppliers and customers, it is evident from the respondents that companies must segment them, implement interaction models, and set rules of engagement. In the IT sector, success is dependent on the level of collaborative partnerships established between customers and suppliers. This is not always the case as often, issues emerge with customers and suppliers, leading to problems in operations to drive significant gain in resource productivity and, eventually, growth. It is this view that influenced Interviewee C6 to observe the dynamic characteristic of their suppliers and customers complicating their capability of maintaining a progressive win-win relationship hindering the attainment of successful working capital management. In particular, the respondent observed, “So what they did was they affiliated themselves with Boston University, and they brought the curriculum from Boston University to West Africa. And hence it was called the American University of Africa, particularly Equatorial Guinea being an oil and gas producing nation; they had more of an alignment with America.” This means that stakeholders from one region would not be in a position of serving a client or a stakeholder in a different region due to diversity in their understanding and knowledge they possessed.
A recurring theme, in this case, is the criticality and the desired level of availability of stakeholders irrespective of their roles of the capability of guiding an organization in attaining their short and long-term goals. Interviewee C7 who noted a plausible example, “I leverage other people, so I leverage people at meager contribution rates so that I can get to where I want to go.” This was equally supported by interviewee C8 who observed that “we are working with the people who are interested in funding us in terms of letting them decide the marketing channels in terms of how they want to do that and so that is”.The people in this context represent the suppliers and customers who are consistently engaged with sufficient resources being availed for, ensuring that they are successful in their role. The reviewed literature has supported these views by the respondents about the strategies implemented to establish a working relationship with both suppliers and customers for acquisition and working capital management. Tehseen and Ramayah (2015) study, for instance, observed that entrepreneurs should be competent for managing relationships with their customers and suppliers to gain a competitive advantage. Chen et al. (2015) equally maintained that it is essential to allocate resources that guide an entrepreneurial venture to interact with the suppliers and customers for successful integration of the relationship between entrepreneurial competencies and business success, which can be improved successfully.
Table 3
Strategies Implemented in establishing a working relationship with suppliers and customers to acquire and manage working capital to grow business in MENA.
Interviewee Strategies for Implementing Working Relationship with Suppliers and Customers
C1 Favorable remuneration to suppliers provided they abide to set regulations, special relationships between the customers and stakeholders
C2 Ensuring that available revenues are actively shared with the suppliers and customers
C3 Active engagement of both the suppliers and customers to understand their needs during financing level
C4 Having elaborate policies between the suppliers and customers to ensure their engagement ina productive environment
C5 Suppliers unique to the organization with customer engagement dependent on their effectiveness
C6 Equal revenue sharing to customers and suppliers
C7 A win-win engagement between suppliers and customers
C8 Timely engagement and remuneration for strategic venture
Theme 4: Revamping the Legal and Banking Structure
Different aspects characterize the successful implementation of strategies aimed at acquiring and managing working capital in MENA. The aspects emanate from the consistently evolving market conditions, information asymmetry, and types of capital, relationships, and the role played by the overall entrepreneurial ecosystem. In this case, a set of questions was used in investigating the respondents on the key barriers. From the analysis, it is evident that the recurring themes included the need to revamp the legal structure and the banking structure. Interviewee C1 pointed out that “there are no bankruptcy laws, so do you find that, for example, to be a barrier or do you find that to be even from the angel investor perspective were okay I want to give you more.” The views were echoed by interviewee C2 who noted that “Dubai government either that or get out and so I was like guys come on, and they don’t want the small and medium-sized companies they say they do, but they don’t.” Also, interviewee C3 and C7 observed that the legal issues often contribute to bureaucracy and fear for financial security for an established business using borrowed finances at the point of break-even. Interviewee C8 who noted, “It’s not so much that we can’t find people to fund this, but they are motivated by greed, so they want 70% of the business or 65% of the business” pointed an interesting situation about the financial barriers. It is these barriers that could be influencing business lending platforms such as Kiva and PayPal Inc., as demonstrated by Ahmed et al., (2016), to eliminate the barriers linked with traditional financing for SMEs. This view was equally echoed by interviewee C1 who provided an example of a friend lending cryptocurrencies and noted that despite the finances being readily available, the documentation is enormous hence acting as a significant hindrance to setting up the company with a delay of up to five years.
The respondents who pointed out the existence of legal barriers as the most prevalent issue (C6 and C7) noted on challenges of being licensed to operate in a specific region and high taxation by individual governments. Interview C6 within this context postulated that “So DMCC yeah we had a DMCC license the main objective of the free zone was for fiscal reasons tax-free right I mean why we would start a business in Spain where we have to pay tax. So, what we did was all the invoicing was done through Dubai.” While also noting that the legal issues characterized by the license of operation and taxation had the most significant implication on cash management. Interviewee C7 observed that in Canada for every finance raised as working capital, almost a similar amount is taxed.
Additionally, the respondent also pointed out the existence of numerous governance issues impacting the extent to which the business is set up. The underlying reason is that in the MENA region, the governments tend to appreciate more the roles played by large corporations and investors to their economy as opposed to SMEs, which are equally instrumental to the success of such economies. The lack of sustainable policies and legal structure for supporting new entrepreneurs in terms of their venture, business environment, unfair competition from large corporations, as well as business institutions, which are heavily financed, ensure this rationale. These findings are supported by Moss et al., (2015), observing that enterprises that are a signal for competitiveness, risk-taking, and independence would leverage from a higher likelihood of receiving funding. This is as opposed to the small businesses that signal courage, empathy, warmth, as well as being more conscientious would less likely receive any funding.
MENA region can be grouped as highly volatile. In this case, managing an entrepreneurial business in an environment characterized by high volatility necessitates the need for having sufficient cash flows and funding. Nevertheless, from the analysis, it is a fact that the funding is not always available, particularly to the new entrepreneurs engaged in establishing new business platforms. Apart from the banking and legal barriers, specific issues highlighted by the respondents lead to limited financing to the entrepreneurs include lack of willingness from potential investors, high costs of business development and marketing, inappropriate revenue sharing with stakeholders and abiding to the traditional business models despite a business being anchored on technology. While giving an example, Respondent C4 noted that “If a bank comes and tells you your dad took 2,000 dirham facilities from us you need to pay it now I am like sue me it’s cheaper for me.” To avoid such pitfalls, respondents C6 postulated on the need of abiding by strong business ethics, having a sustainable relationship with the investors to attract them to invest in their organization and transitioning from the traditional models to the contemporary models of operations.
Table 4
Key Barriers to Implementing Strategies for Acquiring and Managing Working Capital in MENA
Interviewee Key Barriers to Implementing Strategies for Acquiring and Managing Working Capital in the MENA Region
C1 Tax regulations and banking finance complexities
C2 License a major challenge to access and legal constraints
C3 Bureaucracy, security for fear of people think, lack of flexibility on bank financing and cultural issues
C4 Regulations by the Health Authorities regulation, lack of reliability for the financial institutions in access to finances
C5 Financing issues regulations
C6 Banking complexities and bureaucracy in the registration of an entrepreneur
C7 Frustrations in working with different government entities tasked with regulation roles
C8 Lack of readily available financing, unsupportive government regulations
Theme 5: Using Public Relations as a Tool
In light of the identified challenges in the previous question, the respondents were further interviewed on the strategies they tend to put in place for overcoming challenges faced in the acquisition of working capital for their business. The challenges place the entrepreneurs in an inferior position, which could lead to increased interest expenses as well as bankruptcy and credit risk. From the analysis, the emerging themes regarding the best strategy of overcoming the challenges included using public relations as a tool which is identified by the respondents as starting big and acting big as well as having a well-known brand to support their business.
For the respondents who noted on the need to use public relations through starting big and acting big, it is evident that their strategy has guided them in attaining a competitive advantage over their large enterprise’s competitors. In one of the examples, interviewee C2 noted that to mitigate the challenges, “You show up with the best product at the best price in the right quantity at the right time and place, and they’ll buy from you.” As part of acting big through public relations, respondent C3 noted that “relationships are significant like you said the bank manager and understanding the region and understanding how to negotiate with.” In particular, the respondent observed that through such a practice, it is possible for such an entrepreneur to receive funding within a short duration of request irrespective of the prevailing financial barriers and legal constraints. To demonstrate the extent to which the respondents were ready to put any effort to act big, interviewee C5 noted that “Because of being small I cannot handle … I can only handle a certain number of projects. I don’t extend myself too much.”The findings were equally supported by C4 and C8, who, despite being controversial, recommended using another person’s identity to receive funding from prominent lending companies. The findings from the respondents are in line with Afrifa and Padachi (2016) study that had noted that the conservative strategy and the aggressive strategy are always in contrary outlooks about the impacts of working capital and the levels on company profitability. According to Aktaset al. (2015), such strategies can equally be grouped as working management strategies that enhance business efficiency and success in the long run.
Theme 6: International Angel Investors
Additionally, the use of angel investors was identified by the entrepreneurs as having a positive implication in mitigating the barriers. The effectiveness of the angel investors is informed by the fact that they are international and, as such, are merely affected by the local legal issues and banking restrictions as they can outsource from their countries. Also, the angel investors have a potential of investing online through equity crowdfunding or organizing themselves into networks for pooling their investment capital. This is evident from interviewee C1 who observed, “I was fortunate enough to find some angel investors, and since that time we haven’t got any external funding.” In supporting the capability of the angel investors to pool together their resources through a network, respondent C7 underscored that “I mean there are people within my network that would fund me, but you know it’s unrealistic the amount of equity that they would want you to know its silly money.” The view was also supported by respondent C3, C4, and C5, who observed the need to have multiple relationships with international investors who would aid them in sourcing essential credit for their operations.
Table 5
Strategies of Overcoming Challenges when Acquiring Working Capital for the Business in MENA
Interviewee Strategies of Overcoming challenges when acquiring working capital for business in MENA
C1 The network of operations, excellent relationship with suppliers and transparent information to customers on available stakeholders and addressing the issue of supply and demand
C2 Following the best practice by the American companies, knowledge and expertise management
C3 Adopting a global best practice in operations for control and minimization of financial resources, sustainable network of relationships
C4 Relationships with all the stakeholders
C5 Using customers as the best marketing tool of their products and services, management of their knowledge
C6 A strategic plan that zeroes in on their strengths, weaknesses, opportunities and threats
C7 Successful relationships between all stakeholders and development of knowledge and expertise
C8 Involving a network of stakeholders from different countries and sustainable relationships
Theme 7: Effective Working Capital Strategies
The lastsegment of the interview involved an evaluation of the most effective working capital strategies that are fundamental for technology business owners interested in growing their business in MENA. Based on the responses, the main themes identified included using knowledge and expertise in business development, breaking the network barrier, networking the American way, and using customers to sell services. Interviewee C3 and C4 comprehensively highlighted the aspect of using knowledge and expertise in business development. According to the experience of C2, the relevance of the knowledge and expertise is “today what is some of the fundamental strategies that you have to take as a business owner whether it’s again building relationships working with your supplier through the exercise of knowledge and experience.”
Interviewee C4 added that “as far as a strategy of managing the cash flow, that is one of the strategies and I don’t employ all the resources on the project that’s one thing but the projects where I have to manage knowledge and expertise development for successful development.”Additionally, interviewee C6 underscored that “you know what one of the key skills for an entrepreneur is listening to the ability to sit and listen to your client’s problems.” This means that there must be sufficient knowledge to be able to succeed as an entrepreneur. The findings are supported by Lilien (2016), who demonstrated that consumers have their personal lives. As such understanding, the products and services will be essential for them by exploiting the expertise of B2B.
Regarding breaking the network barrier, interviewee C8 generated one of the most comprehensive responses. The recommendations from the respondent included establishing a strategic plan, relationship building, and demonstrating that an individual is not a greedy person. This was further supported by respondent C4, C5, and C6. Respondent C6, for instance, observed that “the best way for us to start is to pick the territories where we have relationships because you know any business that is starting from scratch, you need that relationship to the kind of kickstart.” Interviewee C4, on the other hand, introduced a concept of the relationships being an intangible asset. In this case, the respondent noted that “As an asset intangible asset, relationships and your connections with the industry, your connections with other businesses are vital.” In an event such a relationship is established, the respondents noted that an organization ends up using their customers reliably in selling their services. This must, however, be integrated with networking the American way. The respondents indicated that networking the American way is instrumental as they are always successful in cost management. This is supported by Reijonen et al. (2015) review on the B2B companies and B2C companies working in emerging countries.
Summary of Results
This chapter sought to analyze qualitative data about the strategies that technology business owners use to acquire and manage working capital to grow their business in MENA. The analysis reveals several critical findings. First, it indicates that different strategies work best in the acquisition and management of working capital to grow business. In this case, the organizations tend to use hybrid entrepreneurship where they use other projects in funding their cash flow issues. The findings revealed that through interaction with other stakeholders, it has been possible to gather resources that are critical for organizational success. Second, the study finds that in terms of the strategies implemented to establish a working relationship with suppliers and customers, revenue sharing, and creating a network of relationship has been identified as the most effective strategy. Third, for the challenges in capital management, the majority highlighted the legal and banking structures. This means that the banking system and set legal structures are unfavorable to entrepreneurs.
Nevertheless, the challenges can be mitigated by leveraging public relations and using a foreign entity mainly for angel investing. Lastly, on the capital strategies, it has been identified that networks of relationships must be implemented to create a harmonious interaction, leveraging on customer needs and their involvement in the process, and successful knowledge development. The conclusions from these findings are discussed in-depth in the chapter that follows.
Table 6
Summary of Themes
S/N Themes Summary Research questions that were answered
1 Hybrid Entrepreneurship Hybrid entrepreneurship is the strategy that works best in the quest to acquire and manage working capital for a growing business. What strategies worked best to acquire and manage working capital to grow business?
2 Financing from Overseas Majority of entrepreneurs source their fund overseas including by merging with subsidiaries in other countries, friends and associates in different countries, and investors What strategies do technology business owners use to acquire and manage working capital to grow businesses in MENA?
3 Collaborative Relationship with Suppliers and Customers The majority of entrepreneurs collaborate with their suppliers and customers in revenue sharing. What were the strategies implemented to establish a working relationship with both suppliers and customers to acquire and manage working capital to grow business in MENA?
4 Revamping the Legal and Banking Structure The need to revamp the legal structure and the banking structure is the main barrier to the acquisition of working capital for their business. What were the key barriers to implementing strategies for acquiring and managing working capital in MENA?
5 Using Public Relations as a Tool The best for overcoming challenges faced in the acquisition of working capital for their business is the use of public relations as a tool for supporting the business What was the strategy to overcome challenges when acquiring working capital for business in MENA?
6 International Angel Investors The use of international angel investors is also effective in mitigating the various barriers confronting business operations What was the strategy to overcome challenges when acquiring working capital for business in MENA?
7 Effective Working Capital Strategies The most effective working capital strategies include the use of knowledge and expertise in business development, breaking the network barrier, networking the American way, and using customers to sell services. What are working capital strategies that are fundamental for technology business owners who want to grow their business in MENA?