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Effects of COVID-19 Pandemic on Small Businesses in Saudi Arabia


Subject Business Pages 4 Style APA



Covid-19 is a highly contagious virus resulting from a class of coronavirus 2 known as severe acute respiratory syndrome. It was first reported in December 2019 in the Chinese providence of Huwan, China and has since spread across the globe (CDC, 2020). The effects of the virus has been devastating, prompting governments to take measures to prevent its importation and exportation across countries. In particular, the government of Saudi Arabia acted in the best interest of its citizens by suspending national events such as the minor Umrah pilgrimage where foreign and national worshippers congregate for religions purposes (Ebrahim & Memish, 2020). Besides, the government introduced lockdown measures and partial curfews to slow down human activities, and curb the rapid spread of the virus.


Although the measures taken by the government helped reduce the spread of the virus, they had devastating impacts on small businesses, and the economy as a whole. For instance, the public health measures namely border and public quarantine, stay-at-home policies, and social distancing measures, as well as human control measures had diverse impacts on small businesses (Nurunnabi, 2020). Tembo (2020) explains that the effects were both direct and indirect. For example, the economic shutdown directly resulted to lost business opportunities. Indirectly, low circulation of cash and increased unemployment resulted into both low propensity to purchase and reduced disposable income among individuals and households. Nurunnabi, Alhawal and Hoque (2020) clarify that as much as some industries were negatively affected, some benefited from the increased demand for essential services. Guided by this understanding, this research project seeks to evaluate the effects of the global health pandemic on small businesses in Saudi Arabia. This research will inform business administrators on how best to strategize on the resurgence of the small businesses.

Aims and Objectives

  1. Primary Objective
  • Analyze the effects of Covid-19 on small businesses in Saudi Arabia
  1. Secondary Objectives
  • Analyze effect of the pandemic on various industries in Saudi Arabia
  • To establish the negative effects of Covid-19 pandemic on small businesses in Saudi Arabia
  • To analyze the positive effects of Covid-19 on small firms in Saudi Arabia

Proposal Outline

This proposal begins with an introduction section which rationalizes the necessity of this research. The second section is literature review. This part of the paper identifies economic models explaining the possible impact of pandemics on small businesses. Besides, it details secondary data on what other researchers have established as the effects of coronavirus on small businesses in Saudi and other countries.

Literature Review

Globally, the business environment has drastically shifted as a result of Covid-19. The pandemic has resulted into a decline in consumer confidence and consumption. As financial experts point at a looming global economic crisis, consumers and business owners are uncertain on their future cash flows (Alhawal, Nurunnabi & Al-Yousef, 2020). The insecurity has disrupted normal demand and supply curves. The measures by the government such as closing of borders, work-from home arrangements, curfews, cancellation of events, and directives issues to small businesses has reduced demand for services and products while equally increasing the cost of running businesses. Because of the pandemic, an estimated 7% of the small firms have permanently closed businesses (Algaissi et al. 2020). Others are struggling financially to pay recurrent expenses such as rent, salaries, and loans. As a result, there has been a mass layoff of workers, bankruptcies of businesses, and costly regulations which have reduced profit margins for businesses.

The lockdowns have negatively affected businesses dependent on foreign trade since they cannot import or export products. Similarly, small businesses dependent on national events and tourists have been forced to close down for lack of stock and customers. Generally, the strained financial climate implies that small businesses could continue suffering increased insolvencies, weakening financial positions, and continued financial distress. Most of the small businesses in Saudi Arabia and worldwide have sought government support through subsidies, non-financial and financial support, and tax relief. The plight of the small businesses globally is worsened by their dependence on debt financing. According to Tembo (2020), debts are unsustainable especially during economic crisis as a business is forced to prioritize debts at the expense of saving and investment to leverage and cushion the business from exogenous shocks.

Even though most industries have been affected negatively, the healthcare sectors and pharmaceuticals have been the biggest beneficiary from the Covid-19 pandemic. Apart from receiving large sums of cash from governments and stakeholders, the industry has benefited from the sale of its services given its status as essential service providers (Amankwah-Amoah, Khan, & Wood, 2020). In addition, utilities firms have benefited from the increased consumption of services during the stay-at home period. The telecommunication firms have equally benefited from increased use of information technologies especially the internet as many people order goods online while others work from home. Small businesses that managed to switch to online business models equally attracted higher revenues compared to those dependent on physical shops or the brick and mortar model.


The actual research will be conducted by introducing the research onion model by Saunders. This model details six procedures for conducting research. They include time horizon, sampling methods, research choices, strategies, approaches, and philosophies (Sahay, 2016). For this research qualitative data will be collected from secondary sources of data


Algaissi, A. A., Alharbi, N. K., Hassanain, M., & Hashem, A. M. (2020). Preparedness and Response to COVID-19 in Saudi Arabia: Building on MERS Experience. Journal of Infection and Public Health.

Alhawal, H., Nurunnabi, M., & Al-Yousef, N. (2020). The Impact of COVID-19 on SME in Saudi Arabia: A Large-Scale Survey. Retrieved from: https://www.psu.edu.sa/psu/articles/2020/06/25/survey-impact-of-covid-19-on-sme-in-saudi-arabia-white-paper-02_1593062630.pdf

Amankwah-Amoah, J., Khan, Z., & Wood, G. (2020). COVID-19 and business failures: The paradoxes of experience, scale, and scope for theory and practice. European Management Journal.

CDC. (2020). COVID-19 in Saudi Arabia. Retrieved from: https://wwwnc.cdc.gov/travel/notices/covid-4/coronavirus-saudi-arabia

Ebrahim, S. H., & Memish, Z. A. (2020). Saudi Arabia’s drastic measures to curb the COVID-19 outbreak: temporary suspension of the Umrah pilgrimage. Journal of Travel Medicine, 27(3), taaa029.

Nurunnabi, M. (2020). The preventive strategies of COVID-19 pandemic in Saudi Arabia. Journal of Microbiology, Immunology, and Infection.

Nurunnabi, M., Alhawal, H. M., & Hoque, Z. (2020). Impact of COVID-19: how CEOs respond to SMEs recovery planning in Saudi Arabia. White Paper, 3.

Ozili, P. K., & Arun, T. (2020). Spillover of COVID-19: impact on the Global Economy. Available at SSRN 3562570.

Sahay, A., (2016). Peeling Saunder’s Research Onion. Research Gate, Art, pp.1-5.

Tembo, D. (2020). The effects of the Covid-19 pandemic on small businesses and global value chains. Retrieved from: https://www.intracen.org/news/Op-ed-The-effects-of-the-Covid-19-pandemic-on-small-businesses-and–global-value-chains

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