The Impact of ERP Implementation on Business Strategy and Performance

This report delves into the multifaceted impact of Enterprise Resource Planning (ERP) systems on organizational capabilities and business strategy. It explores how ERP implementations, particularly when aligned with a prospector business strategy, can significantly enhance a firm's performance. The report highlights the role of ERP in cost control, product innovation, and adapting to market changes. It examines the core functionalities of ERP systems, including accounting, finance, sales, logistics, and human resources, while also addressing the importance of change management and organizational culture during implementation. The report presents case studies of successful ERP implementations, such as LG's HRMS and Montell Electrical Suppliers' SAP system, illustrating the benefits like improved efficiency, transparency, and decision-making. It also acknowledges potential challenges and weaknesses in ERP systems, such as integration complexities and database efficiency, emphasizing the need for careful planning, training, and expert advice. The analysis covers various aspects of ERP's impact, including financial, sales, purchasing, distribution, logistics, production, and human resources management, providing a comprehensive overview of how ERP systems transform organizational processes and drive business success. The report stresses the importance of aligning ERP with organizational needs and strategic objectives to achieve optimal outcomes.

Running head: ERP IMPACT 1
ERP Impact on An Organization
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Introduction
The purpose of the paper is to examine the implementation of ERP and its impact on
both organizational capabilities and business strategy which will enhance a firm’s
performance. It specifically focuses on the organizational capabilities and mediating effect on
business strategy. ERP implementations has a positive strategy when a firm employs a
positive prospector business strategy (Bintoro, Simatupang, Putro & Hermawan,2015).. A
prospector strategy in an organization enhances its ability to achieve organizational
capabilities and achieve a higher performance in terms of finances. The practical
implications of ERP implementation encourages support of enhancing a better business
strategy. ERP in organizations not only supports cost control but also supports creation of
new and better products.
The management of a company involves the constant adaptation to changes that generate new
environments and therefore it is necessary to provide technology that allows companies to
anticipate and adapt to the needs of customers. With the emergence of ERP's (Enterprice
Resource Planning) in the 90's this is possible since the ERP is a software tool that has helped
companies in the management of their processes. The ERP is a technology that focuses on the
internal processes of a company opposed to e-business which is focused on the external
relationship between companies; the ERP supports business strategies, e-business opens the
doors to new strategic opportunities.
Having a tool that connects all the areas of information of a company is a value that will
allow you to be successful in the current environment that organizations live in, but you must
take special care with the human factor since the change generated by the Implementation of
this type of technology in any company is very important because it changes the
organizational structure, affects the culture and mainly changes the individual role of the

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members. It is important to know what is and what is not an ERP and how a bad
implementation of such software will undoubtedly lead to failure (Nordin & Adegoke,
2015)..
Among its main features are the ability to model and automate most of the basic processes of
an organization, from the sales order, to the distribution of the product; The range of
functions covered by ERP are: accounting, finance, sales order management, logistics,
production and human resources (Tenhiälä & Helkiö,2015).. We must bear in mind that ERP
solutions have been specialized by industry segments, which implies that the logic to
optimize processes is based on specific operating models.
Material Resource Planning that allowed to reduce the levels of inventories and control the
production and distribution times appear. It is in the decade of the nineties when the concept
of ERP is known, based on the concepts mentioned above and on technological evolution
(Kharuddin,, Foong & Senik, 2015).. But now integrating other aspects of business such as
finance, engineering, human resources, projects, etc., which the moment had been operated
with isolated systems; ERPs have continued to evolve in such a way that currently the EERP
or extended ERP is recognized with the integration of other processes that had not previously
been considered or that did not exist as self-management, trade (Conteh & Akhtar, 2015).
Some factors to consider in order to implement an ERP:
The objective and vision of the business project must be clearly defined.
Have the right team to implement the project, as well as the person who will take on the role
of project leader (Huang & Handfield, 2015)..
Continuous training not only technological
Adaptation to existing programs (back-office and front-office integration),

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Make a well-defined Work Plan
Have expert advice and benchmark companies that already have this type of tools already
integrated.
Case study
LG is a case of a successful ERP implementation: LG implementation of HRMS
A multinational with 114 subsidiaries, operating in 40 countries and has 82000 employees
and counting, it needed to harmonize its HR functions. The challenges were enormous
(Blount, Abedin, Vatanasakdakul & Erfani,2016).. Challenges that it faced included; the
underutilization of resources, inefficient decision making mechanisms , high maintenance of
labor costs, lack of transparency controls and a lot of manual systems. It needed to boost up
its operations and ERP was the route it decided to take ( Kramer, 2018).. However there were
more challenges that came along in the implementation processes, they included;
 Multiplicity of systems and lack of resource optimum utilization
 Employees disengagement and limited outlook
 Limited local resources
 Lack of transparency and global automation needs
 Decision making challenges that had significant impact in business
The company’s familiarity with the Oracle systems and technology led to an easier solution.
It hired the IT company oracle to build a centralized single system which integrated available
Oracle HR modules for its use in its global outlets. It aimed at replacing system dependency
in a specific location. The IT Company had to use an ERP that could host large data, easy
migration of HR data, more scalability, centralized access and control.

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As it implemented the ERP system, there were benefits accruing which included;
 Minimal maintenance due to a centrally managed system
 Transparency in hiring and appraisal of all employees
 Introduction of E-Learning application
 Improved efficiency in HR functions
 Informed decisions due to availability of HR reports
 Objectivity in reporting and setting goals
 Cost saving measures
 Increased productivity and efficiency among employees.
 Sharing of globally accepted best practices across various centers.
The implementation process took over five years(2002-2006) in organized planed phases
with a clear set of objectives. The ERP system mitigated the challenges posed by vastly
spread global centers in its HRM.
With the new oracle E business suit, the company required a thoughtful, great and successful
implementation of the business operation and required it to be effective. The implementation
of this type of technology required an organizational change and had to take into account the
type of culture of the company (Iqbal, Nadeem & Zaheer, 2015)..
The ERP (Enterprise Resource Planning) systems are not a new concept, until the fifties the
companies concentrated all their efforts exclusively on controlling the cost of their
inventories for which some tools were developed such as EOQ Economic Order of Quantities
(Economic Order of Quantities.
Much has been said of what the ERP can do, however there are small gaps in the design that
have come to light, not to discredit this type of tools but to mention the areas that can be

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strengthened and corrected. Some of these weaknesses that we can mention are the
complexity of the process to integrate information contained in systems external to the ERP
or in the operationalization of LG company.
However, the efficiency of operation of the systems is considerably affected if the history of
the transactions is maintained in the databases. It is necessary to see the advantages and
disadvantages of the different software packages that best suit the needs of the company, the
characteristics of the company, the money, the resources it has, among others must be
considered. The organizational culture will be a key factor for the success of the
implementation, to know how to involve the personnel of the company and there is no
resistance to change that undoubtedly will change the organization. Among the success
factors of the same can be mentioned the improvement of the processes, involvement of the
staff, training, culture, acceptance and appropriate selection, but the key is in the commitment
and dedication that an investment of this type deserves, which can lead the company to the
operation and financial efficiency or bankruptcy of the company.
Case study 2
Montell electrical suppliers is a company that deals with supply of electrical appliances
across the Southern part of Australia. The company has grown in leaps and bounds for the
last three years. The company has consequently increased the number of staff due to the
increase in works. The company management implemented a new ERP system known as
SAP and the changes that this system has made are quite evident. As the management points
out, the efficiency brought in by SAP system has changed the how the company’s operations
are undertaken. The following are the areas in which the SAP has improved the company;
Throughout the project, a study has been made of the various areas that converge in the
management of the integration project of an ERP system:

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1. The company object of the integration that to a great extent give life and progress to the
integration project based on a tangible and viable business case according to the business and
strategic needs of the same (Capraro & Riehle,2017). The project presents the mission, vision
and objectives of the organization under study describing its strategic plan in the short and
medium term, thus identifying the need to implement the ERP system.
2. The functional analysis of the areas of the organization has allowed us to identify the areas
involved in the integral implementation of an ERP system. For it, Emphasis is placed on
knowing and documenting the needs of the organization by areas to elaborate the
requirements or technical specifications of the system integral (Erturk & Arora, 2017).
3. The feasibility analysis and the preparation of the business case for the implementation of
the ERP system, analyzing its key components and the necessary information for its
development. The project presents the development of the business case and its viability
technique to make the executive report of the proposal for its implementation (Gandhi &
Sarukesi, 2015).
4. The implementation of the system is rigorously elaborating the methodology for its design,
and the most relevant factors when establishing the parameters of the system based onto the
requirements and needs of the different functional areas and users of the same. It also
describes the plan of step to production and control of integrity cross-functional of the system
(Kramer, 2018).
5. Putting the SAP system into production, where we highlight the key success factors and
the possible risks that can hinder the integration of time, quality, and cost. HE has developed
a summary with a summary in the form of best practices, together with risk and action
analysis plan that enables mitigation (Harwood, 2017).

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6. Change management by carefully evaluating the impact of the system on the processes of
operation of the company, paying special attention to the impact as one of the main factors of
success in systems integration integrated ERP information in organizations (Zamre & Ismail,
2015).. We have identified factors of risk and action plans to facilitate the integration of the
system with users, accelerating its penetration and success.
Impact on the organizational processes
ERP systems are modular, each functional area of the organization corresponds to a module
of the management system so that although they are independent, they share information
from each other through a centralized database, this feature allows the customization and
adaptability as well as the ease of integration (Lee, Shiue & Chen,2016). It is usual that each
module uses a specific software for its functionality.
• Financial Management: accounting, financial statements, banks, accounting records,
tax report, etc. It is easier to carry out these tasks after the integration of SAP into the
organization.
• Sales Management: orders, orders by customer, orders by reference, billing,
Price list, accounts receivable, etc. The company can receive reports on the orders sales and
orders for planning purposes.
• Purchasing Management: accounts payable, purchase orders, suppliers list,
suppliers by reference, prices, etc. One of the impacts of SAP ERP in the organization is that
it allows easier management of purchasing and therefore the company can be able to control
prices and stock levels (Gandhi & Sarukesi, 2015)..

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• Other impacts of SAP implementation in the organization are in the Distribution and
Logistics Management: it enhances traceability, shipment tracking, management of
warehouse, etc.
• Production management and planning: product traceability, registration of lots, cost
control, knowledge of deviations, etc.
• Human Resources Management: personnel data, salaries, expenses of displacements,
productivity, commissions, etc.
SAP R / 3 is the solution that covers the ERP solution of SAP in the 90s and that as we have
explained today has become a much wider solution that covers CRM applications and even
vertical solutions.
As we know, the SAP R / three solution offers modules that interconnect and operate in time
to offer an integral solution to the transversal processes that make up the chain of creation of
business value. Currently, in the era of standardization and globalization. The integration of
different SAP solutions can be carried out with solutions from third-party providers which
broadens the possibilities of the information system by offering benefits derived from
standardization.
Differential factors of the ERP System SAP R / 3 Standard solutions widely used nowadays,
fact that facilitates standardization of Systems Information and implementation of best
practices of the industry.The scalable and modular solution that makes it possible to carry out
a flexible and sustainable implementation in the middle and long-term.
Competitive price of a highly reliable product, with a moderate cost in updates and operations
of maintenance or customization, a fact that makes possible "Total Cost Ownership"
reasonable for a company of medium size as "Broadband Communications". Implementation

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and integration feasible in a while reasonably short when we refer to a project of systems
implementation. Facilitates the reengineering of transversal processes optimizing productive
operations and management of services of the organization (Slabbert, Seymour &
Schuler,2016).. SAP offers specialized technical support for the monitoring and resolution of
incidents, including the professional improvement and customization services.
SAP R / 3 is the base application of the wide range of SAP solutions currently available. The
modules that makeup SAP R / 3 and specifically and its different business solutions are the
core of the different SAP solutions for companies available today in the market.
Business Recommendation
Obviously, the larger the enterprise, the more complex its organizational structure, the more
functional components of the accounting and management system it will need and the higher
the role of the human factor - hence, the risk factors are greater, and their consequences are
more serious. Also, for large companies, consultants state, the problem of differences in the
interests of owners and hired management
For example, enterprises from stable, conservative industries (in particular, extractive
industries) are less sensitive to the consequences of risk factors manifested in the
implementation of ERP-systems - such companies can easily carry out the project for three to
five years and do not suffer much from this. In dynamic, highly competitive industries (in
particular, in the food industry), the timing and volume of automated functions are of great
importance. The dependence of risk factors on the type of business processes (Babaei,
Gholami & Altafi, 2015).. The success of the project on the introduction of an integrated
accounting and management system depends on the results of automation of individual
production and economic processes, and these processes give rise to unequal risks (Shen,
Chen & Wang, 2016).. As the results of the survey of consultants showed, the most common

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source of complications in the implementation of accounting and management systems is
production planning and transport logistics. Also, the risk factors associated with these
processes cause the most serious damage to the project and are neutralized the worst (Ranjan,
Jha & Pal, 2016).
The reasons for the variation in the estimates were well explained by one of the consultants:
the most challenging thing is that we have not learned yet (Ali & Miller, 2017).. In other
words, the processes, the experience of automation of which the consultant has not yet
accumulated, seem to him riskier than those already well developed.
There is no doubt that SAP is a platform for management on which companies can plan,
organize and manage. Today's resources and think about the future growth of your business.
By saying "platform" the reference is to a common, integration environment absolute
between the different business processes of the company, which goes beyond the
geographical, linguistic or particular ways of doing things; a real union between all the
members of the business that focus their efforts in a common interest, to optimize, monetize
and make more efficient the company, maximizing the results for it while reducing costs,
through better and greater use of business resources (Sliusar, et al,2018).
The company includes it in the scope of SAP Business All-inOne, it requires more elaborate
solutions and has the potential to pay for it. All-in-One is not only a very complex tool but
also a complete one, can make the ideal solution for both the medians and the big companies
more demanding (Al-Dhaafri, Al-Swid & Yusoff, 2016).. They offer integrated and complete
management of the business with packages based on knowledge and best practices in the
sector. The "Advanced" is more oriented to the SAP Business One solution, usually have
production and export needs, your level of business has a orientates more national and
international incipient.

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Conclusion
With the emergence of technological tools such as ERPs that allow the integration of
information, the companies benefit in the administration of their processes. It must take into
account not only the technological factor but also the type of organization, its direction, its
mission, its vision, culture, the general characteristics of the company, since knowing these
factors can be determined with greater accuracy what You really want to comply with the
implementation of the system. It is important to point out that the correct implementation of
an ERP involves radical increases in productivity as well as the possibility of having better
information in decision making. The implementation of an ERP is a decision that the
company takes not only to obtain small results but results that really transcend the growth of
the company. An ERP is not a fad more than the current economy but a technological need
that day by day is being presented in many companies and that is why the need to know the
scope and limitations of software of this type.
Finally, we can generalize the term ERP to business software, commenting that it is the
software applications that allow a company to automate its operations and its main features
are that all functions are related to each other. With the information presented here you can
be more informed of what is an ERP and the scope of this, you can go deeper into the issue
and investigate the requirements to implement an ERP in an organization, companies that are
dedicated to the development of these tools as those mentioned above, as well as costs,
among others; in order to make possible a successful implementation that leads to generate
value to the company.