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The purpose of this study is to provide evidence on the impact of enterprise resource planning systems for multinational company
adopting them, with particular emphasis on its competitive edge as part of business processes .By studying its business process,
the focus of this study is to determine the level to which ERP systems have helped companies in achieving that, focusing
attention on amalgamation of work. This study has examined the underlying reasons why a particular multinational company
chooses to convert from unadventurous or conventional information systems (IS) to ERP systems. In this paper preliminary
interviews are used as a tool of primary data gathering. The results confirmed an increase in sales while decrease in cost and
time.
Keywords: Multinational corporations, Enterprise Resource Planning, Competitive Advantage, Conventional Information
System, Modules, Resource based theory, Customer order processing, Cost, Time, Sale
*
MS Leading to PhD Islamic International University Islamabad, E-mail: abidaellahi@gmail.com
higher effectiveness and efficiency in operations different economic, social and cultural aspects.
and consequently improved customer satisfaction Davison (2002) suggests that awareness of cultural
which leads to its competitive edge. In this study, a differences and preferences can certainly help to
case of multinational company operating in improve the assessment of ERP suitability and any
Pakistan, is discussed in order o understand the successive implementation, and that a one-size-fits-
underlying reasons for ERP systems success or the all approach is unlikely to be successful.
benefits accrued.
After introduction the preceding sections of Competitive Advantage
paper are prior research related to ERP and MNCs According to the Porter (1980) competitive
in section two, research methodology in section advantage is positional superiority based on
three, results and discussion are in section four, combination of differentiation, cost superiority or
while section five concludes. through operating in a protected niche. Meta.,
Fuerst & Barney (1995) delineate the concept of
LITERATURE REVIEW competitive advantage of firm by regarding it the
implementation of a value creating strategy which
ERP in Developing Countries is currently not being implemented by any
During the past 30 years the overall business competitor.
environment and the information technology The sources of competitive advantage have been
embedded within it have seen a lot of tremendous discussed in many contexts. One of them is resource
changes (Huber, 1991). Bretschneider (1997)argues based theory (RBT). RBT emphasizes the importance
that according to practical observation of of internal sources of an organization. According to
management no other technology affects day to day RBT the source of competitive advantage lies in
activities of managers than do recent advances in internal sources, unique competence and core
computer technology. capabilities of an organization (Barney, 1991;
Prahalad & Hamel, 1990). The linkage of RBT to
Over the last decade, companies have neglected
competitive advantage and sustainable competitive
legacy or traditional systems in order to adapt a new
advantage can be observed by two central
class of broad packaged application software which
perspectives. One is resource necessity paradigm and
is designed to integrate the core business activities
other is core competencies perspectives.
of an organization. These are called Enterprise
Resource Planning (ERP) systems, enterprise-wide Resource necessity view confirms that, firms
systems, or enterprise systems (Arik &Tony, 2002). will have a competitive advantage only if they have
valuable, rare non-sustainable, non imitable, non
Many researches have done on ERP replicable, heterogeneous and immobile resources
implementation issues and cases in the developed (Teece., Pisano & Shuen, 1997). Day & Winsely
countries (e.g Duplaga & Astani, 2003; Mabert., Soni (1988). in their studies discussed on two definite
& Venkataramanan, 2000) but unfortunately there sources entailed in creating a competitive
are not enough studies about the experiences of advantage one is superior skills and other is
developing countries especially in Asia. However superior resources. Hunt and Morgan (1995)
some researchers have examined the issues of ERP proposed the categories of potential resources.
implementation and national cultures in Asian These are financial, physical, legal, human,
countries (Liang., Xue., Boulton & Byrd, 2004; Soh., organizational, valuable and relational.
Kien & Tay-Yap, 2000). Among these researches
most of the studies discussed the drivers, Based on the above discussion it is concluded
implementation setbacks, factors effecting ERP that RBT provides a framework for understanding
successful implementation and the resulting the sources of competitive advantage.
benefits of ERP. It is important to note that new
technology issues are different in developing ERP and Competitive Advantage of MNCs
countries from those observed in developed According to Parrish (2006) the globally integrated
countries. The reason for this difference may be enterprise has appeared when companies have
popular AS/400 software packages that address the The system was unable to fully integrate all the
core system needs of industrial sector companies. customer relevant data. As a result of it, the
As the applications of BPCS is dependent on company was facing many problems. The main
the version released. ICI paints are using the BPCS problems faced were that transactions were not
4.0 5cd version offered by SSA. BPCS was first timely, mishandling of data because data was not
implemented in ICI paints in the year 1993. well organized, lack of accuracy of data, difficulties
However in 1993 some applications were adapted in report generation etc. One problem always leads
by the company. After the successful to another problem. Customer orders were received
implementation and working results of the software on manual forms. This acquired more time than
in 1998 it was decided to fully implement the BPCS automated system. After the implementation of
software. The applications of ERP are deployed on customer order processing module of BPCS the
client server basis. The operating system in ICI disadvantages or hurdles faced by conventional
paints running the BPCS is OS/400 R5v3. OS/400 system were overcome.
is the operating system IBM uses for their AS/400 Order processing and billing of BPCS is a highly
(now called iSeries) computers. The server functional module with many facilities. It is
platforms used in the company are DB/2 which is designed to allow entering the orders quickly and
a data base management system in which data is effectively with maximum flexibility in the
stored in the form of tables and the relationship minimum time. It has enabled the entry of orders
among the data is also stored in the form of tables. quickly and accurately and than process them
whatever the source may be e.g. phone, fax Internet
Order Processing Module of BPCS or palm devices.
According to the respondents, ICI paints in terms Order processing and billing includes multiple
of employees, products and services is a large sized customer and transaction inquiries thus enables
company. It has a direct interaction and deals with to access these within an order. The customer order
the customers on daily basis. For this purpose, the processing module effectively manages customer
company has to be sensitive towards its customers. sales orders like order entry and order
In order to retain the customers, the company needs maintenance. It supports the order management
to become fully active in dealings with the process with visibility into product availability,
customers. Customers of ICI paints are mostly order status, customer credit information, product
permanent customers and comprising of dealers. pricing etc. It also maintains the sales history of
The orders are placed by customers through customer.
different mediums like telephone, personal coming
etc. One of the departments of company is located Orders were collected by getting the
in Islamabad. It is a warehouse and not a information from dealers on manually filled order
manufacturing plant. All the products come from form all over the country. These forms were sent/
Lahore on daily basis. This section deals with the brought to sales offices. Post ship invoicing was
matters of sales of paints in range of approximately carried out. Order fulfillment and backorders were
six hundred and eighty kilometer area. The main tracked manually. After BPCS orders were collected
areas are of Rawalpindi division, Hazara division on forms from dealers. Then orders are processed
and many other small areas of NWFP excluding DI in customer order processing module.
khan. In 2005 the sales force of ICI paints became
In ICI paints Islamabad inventory sales automated with palm devices. After this advent,
receiving system (ISRS) software was used for orders are now collected on electronic forms using
twelve years. When an organization acquires a palm devices from dealers. Debtors and stock
computer system, accounting is normally the first position is also available in these devices. Daily,
business application that is computerized. In the sales officers synchronize these devices with the
past most businesses had to develop their own computer. In this way order’s information is
accounting software. In ICI paint ISRS was also in transferred into BPCS and then invoices are
house developed system. generated from BPCS.
Table 1
Cost, Sales & Time of Operation Figure
Operations of Before After After automated
customer order ERP ERP sales force
processing implemen- implemen- with palm
module tation tation devices (2006)
year year
(1997) (1998)
Cost of operations 7 Million 5.1 Million 5 Million
Sales 8.9 Million 13.3 Million 34.5 Million
Figure 5: Screen Shot of Order Processing Module Time of order 2-3 days Twenty Twenty
delivery four four hours
In the above figure the screenshot of customer hours (as requested
order inquiry in customer order processing module by customer
is displayed including the history of previous orders Source: ICI Paints Headquarter Pakistan
of particular dealer. The order amount, when it was
The table 1 shows the figures of total sales, cost benefits occurred while leading to the competitive
and time of the company. The sales figures of ICI advantage in this case of the company can be
Islamabad were in few lac (two to three) per year discussed in terms of resource based theory.
before ERP implementation. However after its The above model clearly indicates the potential
implementation the sales increased up to seven to benefits experienced by the company operating in
eight lac per year. In 2006 first time the sales raised Pakistan. According to the model ERP provides
up to one million. Orders are delivered within value, rareness, non imitable and organized
twenty four hours within the city (Islamabad range) resources by providing sharing benefits, adding
and it can take up to seventy two hours outside the value by reducing cost, understanding clients,
range. external focus, development of integration and
The data in the above table indicates that the business capabilities, replacing outdated
benefits of ERP are obvious in terms of reduction information system thus reducing the cost, and by
in time and cost of operations while increase in sales providing customization by modifying
order. The only reason for this is that orders are functionalities of modules in compliance to its
entered in less time in computer and then further business. It is obvious that these can lead to the
processing of sales order like verification of stock, competitive advantage of a firm.
credit limit etc. can be done in less time just in a
click. Orders can be fully processed in less time. CONCLUSION
They are delivered within twenty fours hours. The assertion of this study is that an ERP system
Similarly cost is reduced in sense of reduction of grants the potential for augmented knowledge
manual record keeping (stationery), and errors capabilities for business and the resulted
reduction in the manual record keeping etc. All of knowledge capabilities such as generation,
the data indicates that utilization of enterprise combination-recombination and exploitation of
resource planning software can make business knowledge which can provide a source of
processing more efficient and effective thus leading competitive advantage especially for multinational
to competitive advantage of a company. The companies.
During the carrying out of this research it is
observed that ERP provides applications for
financials, supply chain, distribution and
requirements planning for multiple projects carried
out by a company. Similarly it also facilitates
intelligent resource planning as a solution of
problems of rapidly increasing and changing
constraints such as materials availability, market
speed, and business costs per location. Similarly an
ERP system also allows decision makers to become
an intelligent and responsive organization in the
global marketplace.
The study also shows that ERP is not just a
computer project; it’s a major business decision
challenge. Choosing a poor technology can lead to
a series of problems, but choosing a system that
does not truly match the needs of the business can
create even more serious difficulties, even if it is
based on the latest and greatest technology.
But from all these points it is concluded that
Figure 6: ERP in MNC Working in Developing Country: acquisition of this software is expensive but once it
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