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Analysis of E-commerce in Kuwait

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Published: Tue, 13 Feb 2018

Chapter one: Introduction

1.1 Introduction

This chapter provides general background information regarding online purchasing behavior with an insight into the advantages and disadvantages of e-commerce in general and then specifically in Kuwait. The history of online shopping and internet retailers is presented to better understand e-purchasing behavior alongside a description of general theories of consumer online purchaser behavior and online shopping in Kuwait. The problem definition, research questions and methodology and limitations of the study are then presented, concluding with an outline of the thesis structure.

With advances in technology, specifically in the field of electronics and telecommunications, direct business and commerce with new retail approaches have emerged in recent decades to transform the business world. Due to the increase in the number of internet users and developing network technology, new forms of trade have grown from these advances particularly in Electronic Commerce (EC) a term introduced by Kalakota and Whinston in 1997. Electronic commerce has become one of the primary characteristics of the internet era and a significant method of doing business. According to Jelassi and Enders (2005) EC includes e-trading of digital and physical goods all trading steps: online marketing, online ordering, e-payment and distribution. Kalakota and Whinston (1997) pointed out that EC has two forms: business-to-consumer (B2C) and business-to-business (B2B). According to Molla and Licker (2001) B2C retailers offer their products and services to their customers. In the last decade, Khalifa and Liu (2003) stated that ‘we have witnessed a substantial growth of internet based on services, both from traditional companies and pure internet business that are developing online services’.

Despite apparent growth there are no reliable statistics concerning E-commerce in Kuwait. However there are indications that the volume of e-commerce in Kuwait is growing slowly as discussed by Al-Sabah (2009) Kuwait Financial Forum, the Central Bank Governor stating “We expect growth but so far we have not found a proper to be estimated for 2010, it depends on so many variables”. In research shown in Economist Information in 2006 involving over 100 countries regarding availability of e-commerce, Kuwait came 50th. As the business world recognised the advantages of such socioeconomic changes, Kuwait began to take note of the advantages of electronic trading and commerce including the set up and development of measurements of electronic trading facilities and venues across the country (Al-Shati, 2009). As e-commerce is newly introduced in Kuwait, in order for Kuwaiti firms to reach world standards there needs to be research in different contexts of e-commerce such as online retailing to utilize opportunities and avoid risk. As observed by Lin (2003)

the key to success in e-commerce depends on knowing customers and studying a customer’s viewpoint. The internet has singlehandedly created a concept shift away from more traditional methods of shopping. Studies by Joines et al. (2003) indicate the number of internet users is constantly increasing which signifies online purchasing is also increasing. Oppenheim and Ward (2006) agreed with Joines et al. (2003) explaining rapid increase was due to the growth of use of broadband technology combined with a change in consumer behaviour. Hollensen (2004) added that the internet has developed into a “new” distribution channel and evolution of this channel and e-commerce. Constantinides (2004) pointed out that in the influence of the consumer the first step was to identify certain impact aspects when purchasing online regarded as dimensions.

Numerous and varied studies have been conducted worldwide to identify the advantages and disadvantages of e-shopping. Bridges and Florsheim (2008) argue that online shopping has advantages for both consumers and retailers. From a consumer’s point of view they found e-shopping allows a lower price, different alternatives of products/services, and customized products. Additionally they established retailers benefited from online shopping as it allowed them to reach a maximum number of customers, reduce communication costs and rapid transportation. However, e-shopping has also been criticized as online shopping may be considered non-trust worthy due to concerns of security of privacy (personal and financial information), lack of examination of the products, lack of human interaction and a concern the quality of the products will not reach customer expectation. From a retailer perspective the disadvantages of online shopping are providing high quality and creating special services can be very costly for the firm and may not be a good incentive to make consumers purchase (Kim and Forsythe (2009) and Lee et al. (2006).

Whether it is a traditional market or online market, Hollensen (2004) pointed out that the retailer should understand the online consumer purchasing behaviour and how individuals make decision and buying choices. Therefore, Kotler and Armstrong (2007) stated that the marketers have developed different theories that can explain why consumers interpret information provided by e-retailer in a certain way, and thereby understand certain behaviours. Several authors have set out different definitions of consumer behaviour. According to Dr. Perner “consumer behaviour is study of individuals, groups, or organizations and the processes they use select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society”. Hollensen (2004) and Constantinides (2004) agreed that consumer online purchasing behaviour is a process of various factors and influences experienced by a consumer before finally purchasing products online.

Online consumer behaviour researchers have therefore examined the adoption of technology for e-purchasing in different aspects. There appears to be no constant model of online purchasing adoption and behaviour as it depends on the nature of adoption as influenced by characteristics or social issues; Theory of Diffusion of Innovation (DOI) Roger (1983). In order to investigate consumer online purchasing behaviour, Theory of Reasoned Action (TRA) and Theory of Planned Behaviour (TPB) are considered dominant theories to measure online purchase intention and attitude behaviour, with Decomposed Theory of Planned Behaviour (DTPB) (Taylor and Todd 1995) the extended TPB. On the other hand, one essential model for development technology usage perspective is the Theory of Technology Acceptance Model (TAM) Davis et al. (1989), which developed into the Online Shopping Acceptance Model (OSAM) (Zhou et al. (2007).

E-commerce researchers have measured different approaches for understanding online consumer behavior. Chen and Corkindale (2008) and Hernandez et al. (2009[a]) measured factors that influence consumer’s online purchasing behavior from the perspective of innovation adoption and accepting technology. Moreover, other authors examined trait attributes, situational factors, web site quality, and individual factors and influences on attitude and intention of consumer purchasing online (Monsuwe et al. (2004); Liao and Shi (2009); and Vazquez and Xu (2009)). Chen and Crokindale (2008) agreed attitude and intention have a strong relationship with acceptance of technology and the decision of purchasing online. In addition, innovation characteristics were considered significant factors that influence of technology adoption and purchasing behavior (Rogers, 1983).

Therefore in order to understand online purchasing behavior it is important to measure different factors that may influence e-shoppers and determine online shopping based on insight from technology adoption innovation diffusion literature. This study will therefore present the Liu Model (2004) using it to identify factors that influence Kuwaiti consumer purchasing online. It will also measure the relationship between characteristics of internet retailers/consumers and characteristics of innovation, allowing the research to examine the impacts of these characteristics on consumer decision making and then purchasing behavior.

1.2 Online purchasing

1.2.1 History of Online Shopping

In the 1990s online shopping emerged as a technological breakthrough and novelty in the business arena. Strengthening year on year in 1994 the first of its kind, an online bank was opened and Pizza Hut offered pizza ordering on their web page. Netscape then presented Secure Sockets Layer (SSL) to secure transactions, an essential feature of e-shopping. In 1995 Bezos launched Amazon.com, one of the most successful online businesses worldwide, followed by ‘e-bay’ an online auction site. By 1997 an estimated 41 million people were shopping online. With advances in technology in 1998, electronic postage stamps were introduced, whereby individuals could download and print stamps after paying a fee. In 1999, with the first online shop in the UK, The Virtual Mall was also launched, considered the first UK graphical internet shopping mall. The online shopping market developed rapidly from this point as the consumer gained in confidence and knowledge.

In 1991, Kuwait University connected all university campuses together with the internet using International Business Machine (IBM) then known as BITNET with the help of Ministry of Communication (MOC) university campuses together. This network was limited to e-mail and other minor services. The National Science Foundation (NSF) agreed to expand the internet services to Kuwait in 1992 (Hussain, 2003).

1.2.2 Kuwaiti Consumer Attitudes Towards Online Shopping

Online shopping is a relatively recent phenomenon that has gradually expanded worldwide reaching Kuwait. Compared to traditional stores, e-shopping is far from the target customer in efficacy and provides significant advantages in time saving and low costs. Although developing online shopping in Kuwait advances slowly, it is establishing a solid base as it incorporates a certain lifestyle, is a convenient option and its adventurous nature is attractive to Kuwaiti youths. With these factors increasingly dominant in daily routine, purchasing online has become a natural option in countries such as the USA and economic areas of the EU and the GCC ( Ma’arafy et al. 2007). Common products selling in Kuwait online are from the USA, the UAE and Asia. According to Forrester research (2008), “Global e-commerce spending in 2000 was 132 $ billion, and expected to spend more than 1 trillion by 2012”.

In GCC capitals, the usage of online shopping behavior is different in the USA compared with and European and Asia Pacific cities. In Kuwait the online shopping concept is relatively in its early stages, however the adoption of online purchasing is expected to grow continually in coming years. With a high level of penetration in neighboring countries online such as Saudi Arabia and UAE, Kuwait will not be far from this diffusion of web shopping. Among the GCC, Kuwait lies 3rd with 10.7% in terms of e-commerce penetration, against 25.1% UAE and 14.3% in Saudi Arabia (Field, (2008)).

According to recent worldwide research, as shown in Table 1.1, Kuwait’s internet user growth has jumped from 5.8% of the population in 2000 to over 34% in 2008 and five times more users in the same time period and with further growth expected.

Table1.1: Growth Internet Users in Kuwait

Year

Users

population

% population

2000

150,000

2,424,422

5.8%

2003

567,000

2,530,012

22.4.%

2005

600,000

2,630,775

22.8%

2008

900,000

2,596,799

34.7%

2009 (estimated)

Above 900,000

2,692,526

33.4%

Source: world wide statistics.com

According to Al-Bahar (2009), Kuwait Consumer Adaptors online shopping distinguishes between local and international websites when purchasing online for many reasons. Kuwaiti consumer purchasing online and local websites are still in their infancy and under development. Thus, consumers are oriented to external websites they have established reputations, are trustworthy and provide an assurance of quality of their products. Express delivery firms such as Aramex and DHL compete to provide their services for delivery products in efficacy and effectiveness to encourage customers to e-purchase (Al-Abdullah, 2009).

However, according to Al-Awan, (2008) e-shopping in the Kuwait market is still in its development stage through lack of organization. In order to enlighten and educate consumers, huge effort needs to be made with responsibility on the retailer to reach their maximum number of potential customers in order to realize value. Recently online businesses have started to establish themselves as limited e-firms providing products and services for Kuwaiti customers.

1.3 Problem definition

  • E-commerce penetration:

With the adoption of Kuwaiti consumer online purchasing low, the penetration of e-commerce in Kuwait remains relatively slow with a lack of studies relating to Kuwaiti e-shopping adoption.

  • Consumer e-purchasing awareness:

Due to a lack of consumer awareness of online shopping it has not been used widely in Kuwait.

  • E-retailer strategies:

As online selling is different to offline selling, it is necessary to fully understand consumer behavior in order to set up business strategies for the long term. In addition the rapid development of technology related to the internet enhances the shopping experience and encourages potential customers to purchase online. It is therefore critical for e-retailers to identify what factors influence the consumer when e-shopping.

1.4 Research objectives

The overall objective of this research is to gain a deeper understanding of online purchasing behavior in Kuwait and factors affecting their buying decision process. This study is therefore focusing on the following objectives:

  • To investigate the key factors affecting online purchasing behavior of Kuwaiti consumers.
  • To explore the impact of the decision making process on Kuwaiti consumers purchasing behavior.
  • To determine the relationship between factors influencing purchasing behavior and the decision making process.

1.5 Research Questions

To fulfill the purpose of this research and reach the stated objectives related to consumer purchase online behavior the following research questions need to be addressed:

  • What are the main factors influencing Kuwaiti customers online purchasing?
  • How do these factors affect online purchasing behavior?
  • What is the impact of the decision making process on consumer online purchasing behavior?
  • What is the relationship between factors influencing behavior and the decision making process for e-shopping?

1.6 Research methodology

This study’s approach is deductive, because it measures factors that affect online shopping to explain Kuwaiti consumer online behavior taken from previous studies in different countries. It is mainly explanatory, developing a deeper understanding of the online purchasing behavior of Kuwaiti consumers while investigating varied opinions related to local e-commerce, alongside which factors affect their purchasing behavior. To a certain extent it is exploratory because of a lack of previous research in the online purchase behavior in Kuwait and Gulf region. The study is also mildly descriptive due to previous research of online market phenomena conducted in different countries and extended to Kuwait.

Moreover, this research is quantitative in nature using primary data for the survey questionnaire as the main tool of data collection in order to discuss online Kuwaiti consumer purchase behavior. The questionnaire was randomly distributed either in person or through email. The total sample size 500 was distributed in Kuwaiti firms, ministries, universities and public places with 360 respondents. The data collected from the questionnaire is then used to identify relationships and connections between these variables to achieve the study’s objectives.

1.7 Limitations

In the course of this research a number of limitations were identified as follows:

  • As the research examines consumer online shopping behavior without specifying the type of product exchanged whether tangible or intangible, it is limited in its scope.
  • This study is limited to selection factors covering aspects of Kuwaiti consumer online purchase behavior disregarding other variables of satisfaction, trust, social aspects and situational factors.
  • As with all research using survey data the sample may not be fully representative of the actual behavior in the population, as it is impossible to directly compare our data with data collected on the State of Kuwait level on online purchasing behavior due to time factors.
  • Investigation focuses on online consumer behavior mainly from the customer’s perspective rather than the retailer’s perspective.
  • This study evaluates only the online adoption purchasing behavior without evaluation of service quality offered by distinct websites.
  • With a lack of previous research in this topic in Kuwait and the Gulf region, there is little, if any, comparative literature review or use as a framework.

1.8 Thesis structure

In the first chapter; an overview of the research area is given, introducing e-commerce in general, then in Kuwait. This is followed by a presentation of the country relevance, the problem definition, the research objectives and questions, the research methodology and the limitations of the study. Chapter Two provides a comprehensive review of relevant literature concerning the research to draw an understanding of dominant theories that explain online consumer behavior, followed by factors that influence consumer online purchase with an integrated consumer making decision process. Chapter Three covers the research design and methodology exploring the methodology of the strategy of collecting data and analysis of the survey questionnaire to achieve the objectives. In Chapter Four, data analysis presents the empirical data collected with analysis and a survey discussion of the results. Finally in Chapter Five conclusions drawn from the overall study are summarized with recommendations made for future research in the subject area.

Chapter Two: Literature Review

2.1 Introduction

In this chapter an overview and examination of theories of adoption and online technology acceptance behavior from a global perspective is presented, with a comprehensive review of relevant studies conducted on consumer behavior purchasing online with the decision making process.

Interactivity is considered a primary principle for the World Wide Web (WWW) with Lee et al. (2006) arguing that “interactivity is the extent to which users can participate in modifying the form and content of a mediated environment in real time”. The WWW allows unprecedented access to information and markets which has impacted societies globally with people able to search for information and/or purchase product/service online. Factors influencing consumer online purchasing behavior have been explored between 2004/09. Ha and Stoel (2004), Lee et al. (2006) and Hernandez et al. (2009) [b] analyzed the online behavior from the perspective of innovation adoption and accepting technology by identifying the consumer acceptance of innovativeness and frequency of shopping online. Lin and Wang (2008) focused on the decision making process arguing that consumers depend on their experience with repeat shopping. Broekhuizen and Huizingh (2009) agreed adding experience will lead to a strong relationship between different variables (such as saving time/effort, enjoyment and price attractiveness) and intention to purchase. The research of Monsuwe et al. (2004) and Liao and Shi (2009) explored situational factors, trait attributes, individual factors and website quality and impact on attitude and intention of consumer purchasing online.

This review will therefore cover wide-ranging theories considering the features and benefits of numerous models proposed by such authors studying online consumer behavior.

2.2 Technology readiness and Self-Services Technologies

While customer innovation adoption behavior and diffusion of innovations have been investigated for decades, recent interest has turned toward Self-Service Technologies (SST’s). SST’s involves new service access provided via new channels to meet customer demand in an effective and efficient way. Many technological innovations face resistance from customers, due to a lack of experience and uncertainty. Therefore research involves varied measurements such as: innovation characteristics, service quality, individual differences, ease of use and usefulness. Liljander et al. (2006) agreed personal traits suggest influence on customer adoption of SSTs. A study by Parasurman (2000), presented the attitudinal measurement “Technology Readiness (TR), peoples propensity to embrace and use new technologies for accomplishing goals in home life and at work” stating TR is considered a factor influencing SST’s. The same author explained an individual’s positive or negative feeling toward technology is dominant identifying TR consists of multi-measurements of: Insecurity, Discomfort, Innovativeness and Optimism. The latter, Optimism refers to the positive view of technology and beliefs of control that enable users to increase convenience, efficiency and flexibility, while, Innovativeness is people’s tendency to open up to technology. Discomfort is an individual’s perceived lack of control of technology and has a strong negative influence on SST’s. Insecurity refers to lack of trust in technology and its ability to work effectively. Notably, optimism and innovativeness are considered highly TR individual contributors, with discomfort and flexibility considered to have high level inhibitor attributes decreasing TR. Liljander et al. (2006) proved in their research a positive effect of TR on customer’s attitude towards using SST’s and their website evaluation, finding technology linked with convenience, freedom and control as vital when building positive attitudes towards using SST’s.

2.3 Original theories of consumer online behavior

Having reviewed numerous forms of literature no singular constant model has been identified for innovation diffusion and adoption. Innovation technology depends on the nature of adoption influenced by social theory or characteristics of innovation such as the Technology Acceptance Model (TAM) devised by Davis et al. (1989).Therefore diffusion theory and other factors have been widely used to guide consumer behavior research.

Theory of Reasoned Action (TRA) and Theory of Planned Behavior (TPB) are dominant theories examining consumers online purchase intention and behavior. TAM is considered an initial model for technology usage development, as it is customized to understand the adoption of computer-based technology in the workplace and is used in many studies. Conversely other researchers criticized TAM, because it explores simply the technology side. TRA has evolved from TAM, determining individual attitude toward and behavioral intention to use this new technology. TPB is considered another update from TRA. Theory of Planned Behavior identifies the behavioral intention of purchase online influence with its attitude to technology. Rogers (1983) created a Diffusion of Innovation Theory (DOI) that illustrates adoption of innovation dominant over time in social systems. This theory depends on critical elements, the time of adoption and characteristics of innovation.

2.3.1 Technology acceptance model

By using Theory of Reasoned Action as a theoretical base Davis et al. (1989) created a Technology Acceptance Model. TAM is identified a viable paradigm for examining consumer adoption for the new technology and information technology. The genuine TAM determined the actual use of technology, attitude toward using this technology connected with beliefs to define behavioral intention to use new technology as explained by Liu (2004) and illustrated in 2.1. TAM focused on beliefs about the usefulness and ease of use to be a main role in technology adoption behavior. Perceived Usefulness (PU) refers to the degree of potential individual perception that use of new technology will enhance improving performance Davis et al. (1989). Perceived Ease of Use (PEOU) is identified as an individual perception of using technology not requiring extra effort. Perceived Enjoyment was added later by Davis et al. (1992) and considered “essential motivation in adoption of new technology, the extent to which the activity of using computer is perceived to be enjoyable in its own right, apart from any performance consequences that may be anticipated”. In TAM, behavioral intention to new technology usage was determined by a person’s attitude toward using this technology. In addition TAM evolved with an updated version proposed in 2000 by Venkatesh and Davis called TAM2. This new model was influenced by subjective norms, image and output quality.

Having examined PU, PEOU and enjoyment in different shopping experiences, Lee et al. (2006) and Bridges and Florsheim (2008) found that seeking hedonic benefit depends on perceived enjoyment through online experience. Hedonic elements may encourage internet use, but not necessarily online buying. Furthermore, an individual consumer may be oriented to seek experiential value through enjoyable browsing or shopping online or for their own fun experience. Seeking utilitarian benefits also relies on perceived ease of use and satisfactory outcomes, in addition to influencing the purchase directly. Utilitarian orientation defined by Bellenger and Korgaonker (1980), Babin et al. (1994) and To et al. (2007) observes orientation or motivation seeking instrumental value to minimize time and effort shopping and cost saving or seeking convenience. Acquired benefit depends on whether the mission of shopping is completed or not. The e-retailer’s focus providing utilitarian benefits more than hedonic benefits will increase or be completed efficiently during the process of online buying and future intention.

2.3.2 online shopping acceptance model

Zhou et al. (2007) proposed an extension model of TAM called “Online Shopping Acceptance Model” (OSAM). This model considers a general view of online purchasing acceptance from the consumer’s perspective. These authors also pointed out that in spite of TAM Davis et al. (1989) being broadly used to examine online purchasing environment, it does not analyze specific online shopping characteristics. Therefore OSAM integrated consumer factors in traditional markets and theories may be added to TAM factors to re-examine the issue in the context of online shopping as showed in 2.2. Moreover, OSAM have been developed to predict and explore consumer acceptance e-purchasing by incorporating the beliefs, intention, and attitude behavior relationship into the perspective of perceived usefulness which was replaced by perceived outcomes to cover potential benefits and e-shopping risks. Shopping orientation and motivation have been added from traditional market factors considered antecedents of online purchasing intention and online experience as factors that construct during navigation of e-shopping sites. Also, satisfaction as mediators between behavior and intention has been added. OSAM considers a strong predictor of continue intention to purchasing more than perceived usefulness. Furthermore, this model includes consumer demographics and normative beliefs with their influence on e-purchasing intention. Exploring the development of TAM by introducing OSAM will enhance our understanding of different factors that affect consumer behavior intention.

2.3.3 Theory of reasoned action

Fishbein and Ajzen (1975) formulated a “Theory of Reasoned Action” (TRA), which illustrates behaviors expressed by individual intention to perform a behavior from psychological social factors and aims to examine measurements of that behavior. Based on Marshall et al. (2009) and Lee and Park (2009), they pointed out correlations between beliefs, subjective norms and attitude affects on formation of behavioral individual intention. This intention is influenced by subjective norms referring to the individual’s perception with outside influences to perform (or not) a specific behavior to purchase as illustrated in 2.3. While attitude refers to an individual attitude behavior, negative or positive, toward adoption of innovation and brand overall which creates their beliefs about the consequences of adopting and the brand’s attributes (Jobber, 2004). Beliefs are defined by the person’s subjective probability that performing a particular behavior will produce specific results. Four types of belief attitude towards to e-shopping were identified by Vijayasarathy (2002); shopping experience, product perception, customer services and customer risk. This model therefore suggests that external stimuli influence attitudes by modifying the structure of the person’s beliefs (Ajzan and Fishbein, 1980 and Ajzen, 1991).

Further, TRA provides a strong theoretical basis for studying motivation related decision-making. Using this theory is expected to enhance our understanding toward attitudes and behavioral intention of online shoppers.

2.3.4 Theory of planned behavior

The Theory of Planned Behavior (TPB) can be appraised as an extension of TRA according to Ajzen (1985) used to predict buying behavior based on Bagozzi and Kimmel (1995) and De Cannière et al. (2009). A central element of this theory is the individual intention to perform a given behavior as shown in 2.4. Ajzen (1991) identified intention as ‘how individuals are willing to try and how much effort they are planning to exert, in order to perform the behavior’. The same author and Chen and Corkindale (2008) state this theory includes an additional element which is an individual perceived behavioral control (PBC). Compeau and Higgins (1995) cited by Dennis et al. (2009) defined it as a judgment of one’s ability to use a computer. PBC is compatible with Bandura’s (1977, 1982) concept of “perceived self-efficacy which is concerned with judgments of how well an individual can execute courses of action required to deal with prospective situations”. In PBC attitude and subjective norms factors can predict intention and behavior.

According to TPB, PBC together with intention can be used directly to predict behavioral achievement. This model proposes the intention impact and mediates among these factors: 1) intentions are the immediate antecedent of behavior, 2) fully mediate on impact of attitude towards behavior and 3) intentions partially mediate the impact of perceived behavioral control (Ajzen, 1985, 1991; Fishbein and Ajzen, 1975) as illustrated in 2.4. Furthermore, Ajzen stated that the relative importance of predictors in the TPB would be different among behaviors and situations. On the other hand, TPB components can be used according to De Cannière et al. (2009) to form the experience after purchasing.

2.3.5 Decomposed Theory of planned behavior

In 1995, Taylor and Todd demonstrated that better comprehension of the relationship between beliefs and antecedent of intention need to be combined as attitudinal beliefs as DTPB as shown in 2.5. They argued that DTPB is a strong model, more advanced and purer than the TRA and the TPB model. It was identified that, due to diffusion innovation theory, attitudinal beliefs contained three characteristics of an innovation that affect the adopt


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