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Financial Challenges Faced by Startup Organizations in the UAE Due to COVID-19 Research Paper

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Updated: Jun 21st, 2022

Executive Summary

Background

The research focuses on how startup organizations in UAE are experiencing financial challenges due to the COVID-19 pandemic. Countries have introduced restrictions to curb the spread of the virus. Consequently, people who travel to the UAE are forced to purchase some of their products in their countries. Moreover, many organizations are experiencing losses in their business and have decreased the number of goods they purchase. Therefore, these issues have led to financial challenges in startup organizations in the UAE.

Methodology

A qualitative research method was used to ensure that adequate information is acquired from the participants. Questionnaires and interviews were the data collection techniques practiced to enable the researcher to obtain raw data. The study involved a sample of ten managers from different startup companies in the UAE. The participants were also from businesses in various sectors to ensure that the investigator acquired adequate information regarding how different sectors have been affected by the pandemic.

Key Findings

  • The startup companies are experiencing financial difficulties due to decreased sales that have been steered by the pandemic.
  • Many customers have lost their jobs and are experiencing financial problems forcing them to avoid purchasing some luxury goods.
  • Measures implemented to curb the spread of the virus have limited many people from visiting UAE, which attracts tourists, and has led to decreased profits in startup companies in UAE.

Key Recommendations

  • Companies can utilize new procedures such as online sales and social marketing to increase their output and limit financial difficulties.
  • Startup companies can acquire funds from other organizations such as banks to ensure that they improve their production.
  • Managers should guarantee that their businesses can ship their products to other countries due to travel restrictions that many states have implemented.

Introduction

Background

Many startup companies have recorded a decline in their profits. Big and small firms have been impacted by the pandemic, whereby some companies have been forced to limit their production due to decreased number of customers. Loss of jobs has also been encountered in many countries and has impacted the performance of organizations (Turak, 2020). United Arab Emirates (UAE) is one of the nations that have experienced changes in different industries due to COVID-19. Startup organizations have also faced financial challenges in the UAE due to a reduced number of customers. This research will focus on how these companies have experienced problems and how they can cope with these difficulties.

Objectives

Researchers are encouraged to focus on the aims of their study to ensure that they meet the aims. In this case, the objectives of this research are to:

  • Learn the financial challenges being faced by startup organizations in UAE;
  • Learn how the companies can cope with the financial challenges;
  • Develop plans that can be utilized by the organizations to become more productive.

Literature Review

Many organizations in the modern world are facing financial challenges due to various aspects such as poor management and competition. However, COVID-19 has become one of the major factors that have led to financial problems in startup companies (Chakraborty & Maity, 2020). Additionally, businesses in various countries have been closed due to the pandemic. One of the countries that have recorded changes in firms in the UAE.

The country has numerous corporations since investors are attracted by the nation. However, COVID-19 has affected business operations, leading to decreased profits. Managers in the country have argued that companies are recording a decrease in sales due to the restrictions that countries have implemented to curb the virus’ spread (Turak, 2020). People from different regions travel to the UAE to purchase various products. Nonetheless, traveling has been limited, leading to a decline in the profits of organizations (Al Mansoori et al., 2021). Moreover, some of the companies in the hospitality industry have been affected by the pandemic since tourism has also been impacted by COVID-19 (Al Mansoori et al., 2021). UAE attracts many tourists globally due to its development. However, this has been affected by the virus and a decline in a number of visitors is being experienced in the country.

UAE has many companies in the textile industry which attract many foreigners. Furthermore, the industry is the second largest in the country after the oil sector. UAE incorporates a wide variety of textiles such as knitted garments, non-woven and woven materials, whereby many people travel to the country to purchase these products (Steedman & Wilson, 2020). Startup organizations are being forced to implement new ways of increasing their sales, such as encouraging their customers to visit their websites and purchase products online.

Many customers are attracted by organizations that have established brands. Thus, startup companies experience competition from big firms that have been in the market for many years. Therefore, financial difficulties in many startup companies involve competition from other corporations. The pandemic has led to increased costs of shipping and many new businesses do not have adequate funds to export their products (Chakraborty & Maity, 2020). Thus, big organizations using their competitive advantage to sell their products and ship them from UAE to other countries.

Many new companies in UAE are experiencing financial challenges since they have been forced to decrease the number of employees, leading to low production. Some companies have also closed down due to bankruptcy that has been steered by the pandemic (Chakraborty & Maity, 2020). For example, the hospitality sector has been affected by COVID-19 and many new firms in the sector have been forced to stop their operations after experiencing losses and financial problems (Aburumman, 2020). Therefore, the pandemic has largely impacted many startup businesses in various industries in the UAE.

Methodology

Research Questions

Research questions are used by researchers to guide them when examining a particular issue. Moreover, the results of the survey should be used to answer the questions.

The research questions to be answered by this research are:

  1. What are the main issues that have led to financial challenges of the startup organizations in the UAE?
  2. What can be done to limit these challenges?

Research Design

A qualitative method was used to answer the research questions. The following table shows the technique applied in each question:

Table 1: Methods used to answer research questions

Research Question Method Used to Answer Question
1. What are the main issues that have led to financial challenges of the startup organizations in the UAE?
2. What can be done to limit the financial challenges?
Qualitative method

Qualitative method

Instruments

Interviews used were used for the qualitative method, whereby data was obtained from the participants. Moreover, the approaches have been used before by many investigators, showing that they are significant in surveys.

Sample

Sampling bias is one of the issues that many investigators practice, leading to the research’s invalid results. In this case, random sampling was exercised to ensure that bias is curbed. The sample involved ten managers from different startup organizations in UAE. The sample was convenient since the participants had adequate information regarding the challenges faced in their companies. The managers were picked randomly from various firms in different industries.

Data Collection

Interviews and questionnaires were used to guarantee that the researcher has valid information that can answer the research questions. The information was also collected face to face and English language was used as all managers were comfortable with English language. Only the researcher collected data to ensure that all information was utilized and limited loss of data.

Data Analysis

Using the appropriate software to analyze data is vital as it enables individuals to acquire effective results for their investigation. In this case, data entry was performed, whereby all data was recorded in the computer. HubSpot software was used for the analysis since it is one of the best software used for qualitative data analysis. Moreover, HubSpot provides detailed analytics for surveys and customer reviews. Thus, data was analyzed, whereby the challenges that the participants presented were studied to determine the main issues impacting the startup companies.

Limitations

The limitation of study is that the sample size was too small. Therefore, not much information was collected from the ten managers. Moreover, having many participants in a survey is vital since various people have different experiences and can provide adequate information that can be used by a researcher. Although the researcher acquired credible information from the sample, using more participants would be of great significance since more data would be obtained and analyzed to have reliable results.

Results

The participants revealed that some of the firms are acquiring funds from creditors to enhance their performance. Another major issue is that many customers have lost their jobs and are focusing on purchasing necessities (Steedman & Wilson, 2020). The startup organizations are also facing competition from big firms, leading to their increased financial challenges. Therefore, the survey has been of great significance since it has answered the question about the significant issues that have led to monetary challenges in many startup organizations in the UAE.

The question about practices that can be done to limit the financial challenges was also answered using the information provided. In this case, participants revealed that developing new marketing strategies can help the companies increase their sales and acquire more funds. Online sales have also been termed as one of the approaches that many companies have introduced during the COVID-19 pandemic due to social distancing and movement measures (Chakraborty & Maity, 2020). Thus, these factors can be considered when answering the question about ways the startup organizations can increase their sales and limit financial challenges. Table 2 shows challenges faced by startup organizations their causes and solutions. Appendix 1 shows how a decline in business operations have been experienced in the UAE due to the pandemic.

Table 1: Challenges faced by Startup Organizations and their Causes and Solutions

Challenge Cause Solution
Decreased sales COVID-19 movement measures Online sales
Lack of adequate funds A decline in the number of customers Obtain money from creditors
Competition from big companies A decline in demand of products Advance marketing strategies

Discussion

The results revealed that many startup organizations in the UAE are experiencing financial difficulties due to decreased sales. Moreover, many participants argued that loss of jobs have been experienced due to the pandemic, limiting people from spending their money in purchasing luxuries. The survey has also revealed that many businesses are acquiring money from creditors to enable them conduct various business practices. For instance, many companies owe their suppliers. Thus, such companies can obtain funds from other corporations such as banks and other big corporations.

The causes of the financial challenges cannot be controlled since the pandemic is still being experienced. However, solutions to the challenges such as marketing and online sales can be exercised by startup organizations. The implications of the results include improved performance in the organizations. In this case, managers can utilize the information and develop strategies that can help their firms to increase their output. Additionally, the research has a significant impact since startup companies can use it to acquire information regarding ways that can be implemented to acquire more funds.

The problem in the study involved the number of participants. Thus, information acquired was minimal, and this might have impacted the results. Surveyors use data provided by the participants to make their conclusions. Thus, the research would have been more effective if more participants were used to obtain information regarding their startup organizations. Nonetheless, the information provided was essential since it was valid and can be used by many companies to improve their performance.

Recommendations

One of the ways the research can be improved is by using more participants from different startup organizations. The presence of oil in the country has also attracted many investors. Thus, increasing the number of participants can help investigators to acquire more information that can be used to improve startup organizations’ performance. Incorporating big firms’ managers is also recommended to enable surveyors to obtain more information regarding the practices firms have implemented to limit financial difficulties that COVID-19 has steered. Therefore, these procedures should be implemented by the researchers to ensure that their surveys have significant impact on the startup organizations.

References

Aburumman, A. A. (2020). COVID-19 impact and survival strategy in business tourism market: The example of the UAE MICE industry. Humanities Social Sciences Communications, 7(141), 1-11. Web.

Al Mansoori, H. M., Alsaud, A. B., & Yas, H. (2021). The impact of Covid 19 on increasing the cost of labor and project price in the United Arab Emirates. International Journal of Pharmaceutical Research, 13(1), 1-8. Web.

Chakraborty, I., & Maity, P. (2020). COVID-19 outbreak: Migration, effects on society, global environment and prevention. Science of the Total Environment, 728(138882). Web.

Steedman, C. M, & Wilson, P. T. (2020). COVID-19 business issues in the UAE. Squire Patton Boggs. Web.

Turak, N. (2020). 70% of Dubai companies expect to go out of business within six months due to coronavirus pandemic, survey says. CNBC. Web.

Appendix 1

Business trends in UAE due to COVID-19
Chart 1: Business trends in UAE due to COVID-19
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"Financial Challenges Faced by Startup Organizations in the UAE Due to COVID-19." IvyPanda, 21 June 2022, ivypanda.com/essays/financial-challenges-faced-by-startup-organizations-in-the-uae-due-to-covid-19/.

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IvyPanda. "Financial Challenges Faced by Startup Organizations in the UAE Due to COVID-19." June 21, 2022. https://ivypanda.com/essays/financial-challenges-faced-by-startup-organizations-in-the-uae-due-to-covid-19/.

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IvyPanda. 2022. "Financial Challenges Faced by Startup Organizations in the UAE Due to COVID-19." June 21, 2022. https://ivypanda.com/essays/financial-challenges-faced-by-startup-organizations-in-the-uae-due-to-covid-19/.

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IvyPanda. (2022) 'Financial Challenges Faced by Startup Organizations in the UAE Due to COVID-19'. 21 June.

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