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Influence of an ERP system on the value chain process of multinational enterprises (mnes)

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par Bosombo Folo Ralph
University of Johannesburg - Master in business administration (MBA) 2007

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The influence of an ERP system on the value chain process of
multinational enterprises (MNEs)


Folo Ralph - Bosombo


Submitted in partial fulfilment of the requirements for the degree

in the
at the

Study Leader: Mr H.B. Klopper

December 2006


The study set out to assess the influence of enterprise resource planning (ERP) system software on the value chain process of multinational enterprises (MNEs). This was achieved through the literature review that addressed the relation between the value chain approach as a strategic tool and ERP system theory. The ERP system is positioned as a total solution for the MNE, and it contains the best business practices that are derived from the various generic business functions of the value chain architecture and configuration. A set of research hypotheses was developed, which were tested in accordance with the research methodology and the design issues for the qualitative study. The different chapters evolved along with a case study of an ERP system, namely Axapta software. For the quantitative study, preliminary interviews were conducted to select the MNEs that use SAP software. Thereafter a self-administered survey was applied relating to the strategy and the value chain integration through the ERP system to the MNE's ERP system users. The research results in the qualitative study show that for ERP software to integrate the MNE's functional activities and processes in the value chain system globally and effectively, it has to position itself as a value chain system with e-business mechanisms. In addition it has to suit the global ERP characteristics as an information interchange, sharing and service. It has to be a flexible and comprehensive, modular, open, integrated and multifunctional system, with an option to customisation in selecting modules that best suit the MNE's management to craft its business's activities. The above was proved through the analyses of Axapta software attributes by means of a technical strategic planning tool, namely the value chain approaches, and the strategic supply chain factors for ERP software evaluation. Axapta software met the requirements of a general and global ERP system model and it is indeed a value chain system. The following statement can be cited as the most important findings of the qualitative study: For the MNE to derive value from ERP system integration and utilisation, the strategic information technology (IT) plan has to be formulated and followed in order to measure the beneficial cost and efficiency of implementing the ERP system, and to assess the suitability of ERP software during the selection process in accordance with the MNE's objectives that will facilitate the success of ERP implementation usage. ERP software adopted for the MNE has to include the international architecture and configuration types that align with the MNE's strategy and Internet application. This must include all the necessary value chain functional modules relating to the ERP system as an integrating tool that will influence the MNE to align its strategy to gain


competitive advantage. Consequently, such an ERP system will allow the MNE to strengthen and integrate all its applications and activities in the value chain system. As a result the different organisational suppliers and partners must be linked with the MNE's value chain system to enhance the operational sites' users to operate efficiently, more reliably and in co-ordination with the MNE. The necessary information and data must be available across the entire organisation's system from the trading partners to the customers so that they can be satisfied on with the necessary urgency. In the statistical analysis conducted from the self-administered survey, the major finding is the positive view of the employers and employees of the customisation of ERP, i.e. SAP software, which helps MNEs to craft the software according to their objectives and with the use of a strategic IT plan.

In conclusion the study highlighted the inseparability of ERP system theory from the value chain approaches. Therefore, the study came to position ERP system theoretically as an evaluative tool and technically as a value chain system that becomes an evaluative tool for ERP software activities assessment. Moreover the study pointed out the importance of the use of a strategic IT plan within the MNE. However, the main contribution and value of this study is obviously to assist any MNE in the process of migrating business systems. The methodical approach facilitates the selection and the evaluation of ERP software requirements within an organisation, which can meet its growth targets and objectives. Thus, the strategic supply chain factors for ERP software evaluation and the application of the value chain approaches discussed in this study will contribute to the acquisition of fit and compatible ERP software. The choice of the right ERP software will definitely allow MNEs to derive the benefits of the ERP system across its entire value chain sites (nationally and internationally). It can be concluded from this study that any organisation wanting to invest in ERP system implementation must apply the methodical approach formulated in this study by the researcher. It is recommended that the assessment of an ERP system's modular and functional activities, together with the organisation's value chain activities, be given priority before the acquisition and adoption of the ERP system.



I declare that this short dissertation is my own, unaided work. It is being submitted in partial fulfilment of the requirements for the degree of Master in Business Administration (MBA) in the Faculty of Management at the University of the Johannesburg. It has not been submitted for any degree or examination in any other University.

Signed at on this day 2006




I would like to extend my special thanks to the following people and organisations for their encouragement and support during the completion of this study:

· My supervisor, HB Klopper, for his professional assistance and advice during the entire process.

· To the Statkon staff, especially Riette and Adam for their assistance and advice on the development of the questionnaire and the statistical process of the research data.

· To Glenda Buncombe for her assistance in language editing of this dissertation.

· To my wife Lowa Bibi and my girls: Lokando Folo-Rachel, Yenga Folo-Princilla and Shupamba Folo-Angel, colleagues and friends.

· To all MNE personnel (CIOs, managers and end-users) who participated in the preliminary study and the self-administered survey.

· To my parents in the Democratic Republic of Congo (D.R.C). La vision de Kisangani -l' esprit invisible de la destinee Congolo-Zairoise. And Folo brothers in South Africa, for all their love and support during this period.

My gratitude to God through my ancestors for all his blessings and inspiration.

Folo Ralph - Bosombo


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