The Implemention of Enterprise Resource Planning in China - Essay Example

1. INTRODUCTION: Enterprise Resource Planning (ERP) pertains to a holistic computer-based system which is used in order to manage internal and external resources such as assets, financial resources, materials and people (Shtub, 1999; O'Leary 2000; Hossain, Patrick and Rashid 2002). It is thus a software architecture which purpose is to facilitate the flow of information between all business functions inside the boundaries of the organisation and manage the connections to outside stakeholders. Moreover, it is built on a centralized database and normally utilises a common computing platform, thereby possessing the ability to consolidate all business operations into a uniform and enterprise wide system environment (Shields 2001). Furthermore, it enables the business management executives with a comprehensive overview of the complete business execution which in turn, is of paramount importance in their decision making processes (Hossain, Patrick and Rashid 2002). The following are the advantages that a certain organisation may experience due to their successful adoption of an ERP system, as enumerated by Monk and Wagner (2008, p. ___): 1. A perfectly integrated system chaining all the functional areas together. 2. The capability to streamline different organisational processes and workflows. 3. The ability to effortlessly communicate information across various departments. 4. Improved efficiency, performance and productivity levels. 5. Enhanced tracking and forecasting. 6. Improved customer service and satisfaction. This paper is set to analyse the case study written by David Avison and Julien Malaurent in 2007 (Impact of cultural differences: A case study of ERP introduction in China).The case study highlights the story of the problematic implementation of a ERP system in China. The aim of this paper to apply Information System (I.S) implementation approaches, Critical Success Factors(C.S.F) and Hofstede's Dimensions of National Culture (H.D.N.C) in order to derive a recommendation for implementing ERP system in a foreign country. 2. LITERATURE REVIEW The literature review is divided into 3 sections. The first section explains the four approaches proposed for implementing I.S. The second section explains the 6 C.S.F for implementing ERP systems as explained by Yingjie(2005).The third section explains the H.D.N.C. 2.1 APPROACHES PROPOSED FOR THE IMPLEMENTATION OF I.S The following are the four approaches for implementing an I.S . 2.1.1 Pilot approach: This is when an I.S is implemented at a particular geographical area or a particular branch of an organisation . Due to the fact the system is implemented with a small group of people, this method facilitates the identification of unforeseen disruption in the implementation of large scale I.S. 2.1.2 Parallel approach: This is when the legacy and the new system are operated simultaneously. The parallel approach is expensive to manage but facilitates in case of unforeseen disruptions or when the new system fails. In this case, the company are still able to achieve organisational objectives with the legacy system. (Efraim & Linda 2010). 2.1.3 Plunge approach: This is when an I.S is implemented in a Big Bang or urgent manner. This will entail closing the old system at a particular day and launching the new system the next day. Although this approach minimises costs (the transition cost and the operation cost) it is risky and could easily lead to system failure(Efraim & Linda 2010). 2.1.4 The Phased approach: This is when the new I.S is implemented in phases. The system component is brought on-line serially and operated and observed before moving on to implementation of the next phase ( Yingjie 2005). This approach can be applied to the plunge and parallel approach. 2.2 THE SIX CRITICAL SUCCESS FACTORS FOR THE IMPLEMENTATION OF ERP SYSTEMS According Yingjie(2005), the following are the 6 critical factors associated with the successful implementation of ERP systems. 2.2.1 Top Management In order for ERP system implementation to be successful, the shared vision of the organisation and role of the new system and structures should be communicated between managers and employees (Yingjie 2005). Top management has a significant role to play in ERP implementation. The roles of top management in IT implementation include encouraging the keen comprehension of the competencies and weaknesses of IT; setting realistic objectives for information technology systems; manifesting its support to IT initiatives; and ensuring that the IT strategy is understood by all stakeholders in the organisation (McKersie and Walton 1991). 2.2.2 Project Management: Project management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements. In order to manage a successful project or successfully accomplish the decision to implement an ERP system, there must be effective project management. There must be a balance and control of factors such as such as integration/plan, scope, time, cost, quality, human resource, communication, risk, and procurement (Yingjie 2005). 2.2.3 Business Process Re-engineering (BPR): In order for a successful ERP implementation, organisations have to consider re-engineering its current business processes in order to be compatible with the ERP software (Yingjie 2005). Hammer and Champy (2001, p. ___) defines BPR as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed”. Acording to O’Leary (2000) there are two methods to implement reengineering and these are the clean slate method and technology-enabled BPR method. In the clean slate reengineering everything is designed from scratch (Yingjie 2005). The software which best supports the new system design is selected by identifying the organisation’s needs and requirements (Yingjie 2005). However, the clean slate is very expensive to operate. In the technology-enabled BPR not everything is designed from scratch. O’Leary (2000) refers to this methods as constrained reengineering. This means the reengineering process is constrained by the selected systems. Although it is cheaper to operate, it requires a lot of change and training within the organisation (Yingjie,2005). 2.2.4 The Suitability of Software and Hardware: In order to be successful in the implementation of ERP systems, the management must make a careful choice of an ERP package that best matches the legacy systems, e.g. the hardware platform, databases and operating systems (Yingjie 2005). 2.2.5 Education and Training: The lack of training and education of the key users of information system often result into resistance or failures of information systems. Therefore, a thorough training program is necessary to make the user comfortable with the system (Yingjie 2005). 2.2.6 User Involvement: The key users of the system must be involved in the development and implementation of the information system. This helps avoid user resistance and facilitate cooperation since the key users were part of the development and implementation processes (citation). 2.3 HOFSTEDE' DIMENSIONS OF NATIONAL CULTURES Hofstede (1991, 2001) created an empirical model in order to compare the cultural values of similar people (employees and managers) in different subsidiaries of the IBM Corporation in more than 64 countries. His main theory was that the minds of the people are continuously programmed throughout their entire life, starting with their childhood, going on during learning time, followed by working life and life within a society coping with governmental bodies. Norms and values and the belonging attitudes and behaviour are often clearly expressed in relationships such as parents-child, teacher-students, employer-employee and government-citizen. 2.3.1 Power Distance. Hofstede refers to Power Distance as the extent by which the less powerful members of organisations and institutions expect and accept the fact that power is distributed unequally (Hofstede 1991; Hofstede, 2001; McSweeny 2002; Hofstede 2005; Geert Hofstede-Itim 2009). Power distance is basically concerned with inequality or equality in a country. According to Hofstede (1991, 2001), the higher the power distance, the higher the level of inequality in a particular country and vice versa. Power distance determines the emotional distance between the subordinates and their bosses. In a country with high inequality (e.g. China), the subordinates tend to depend more on their bosses compared to countries that have recorded low power distance (e.g. U.K). 2.3.2 Uncertainty Avoidance: The dimension of uncertainty avoidance usually refers to the society's intolerance for uncertainty and ambiguity. It is generally concerned with man's search for truth (Hofstede 1991; Hofstede 2001; McSweeny 2002; Hofstede 2005; Geert Hofstede-Itim 2009). It was revealed that in countries with strong uncertainty avoidance, people are likely to shun ambiguous situations, thereby looking for a clear structure and for clear rules of behaviour in their organisations, institutions and relationships compared to those with weak uncertainty avoidance. 2.3.3 Individualism vs. Collectivism: Individualism vs. collectivism refers to the extent by which individuals are integrated into different groups (Hofstede 1991; Hofstede 2001; McSweeny 2002; Hofstede 2005; Steers & Nardon 2005; Geert Hofstede-Itim 2009). When societies are geared towards the individualist side, the binds that exist between individuals are generally loose. On the other hand, those societies that are collectivist in nature have people who are integrated into strong, cohesive groups that often include the members of their extended families to whom they render unquestionable loyalty to (Geert Hofstede-Itim, 2009). 2.3.4 Masculinity vs. Femininity: Masculinity vs. Femininity refers to the values governing the societies, are the people assertive and competitive (masculine) or are they modest and caring (feminine)? Aside from this, the fourth dimension also refers to the manner by which the roles of the two genders are distributed and how the above mentioned are being valued by the society (Hofstede 1991; Hofstede 2001; McSweeny 2002; Hofstede 2005; Geert Hofstede-Itim 2009). As regards the experience of the organisation, it was revealed that managers that belong to the cultures which are more masculine tend to focus on facts and figures rather than rely on intuition alone. 2.3.5 Long-Term Orientation VS Short-Term Orientation: According to Hofstede's analysis, this dimension focuses on the degree to which society accepts or refuses long-term commitment to traditional or innovation to tradition (Hofstede 1991; Hofstede 2001; McSweeny 2002; Hofstede 2005; Geert Hofstede-Itim 2009). The fifth dimension was included in order to reveal the differences in thinking between the East and the West. Societies with high level of long term orientation usually have respect for tradition compared to societies with short-term orientations. 3. CASE STUDY ANALYSIS The company studied was a leading player in the energy business internationally which is based in France. It is established in more than forty countries with approximately 70,000 employees worldwide. In 2002, the company has decided to adopt a common ERP system which started to rollout in Europe, and eventually was already adopted to the United States and Mexico. The company agreed a joint venture with the biggest electricity in the People's Republic of China and by 2004 it had established five sales offices in China (Beijing, Shangai, Guangzhou, Wuhan and Hong Kong). Therefore, the need to rollout the standard ERP system for its Chinese branches became paramount. The aim of the project was to implement modules of SAP R/3 4.5 with the main SAP server situated in France (Avison & Malaurent 2007). There were two teams involved in the implementation. The French team is composed of five staff memebers; on the other hand, the Chinese team is made up of three external consultants from a leader in global IT services company in China (Avison & Malaurent 2007). 3.1 The Implementation Strategies: The managers employed some good implementation strategies. Firstly, the pilot approach was adopted. The pilot site was the Shanghai branch, which focused on the manufacturing of protection and relay equipment and it served 270 customers, with 50 suppliers and 360 contracts per annum. (Avison & Malaurent 2007). According to Anderson (1985) conducting the pilot study to examine the impact of change will avoid unseen complications. Secondly, the plunge approach was avoided. The information system was not implemented in a Big Bang manner. The project duration was 3 years. The project duration for the initial phase of the project in China was 1 year. (Avison & Malaurent 2007) The project manager worked on the project for 3 months before the initialization phase and he completed his mission 3 months after go-live. (Avison & Malaurent 2007). Although, the plunge approach minimizes costs, it could easily lead to a system failure. Lastly, the parallel approach was adopted. The legacy system was not turned off. This strategy allowed the company to achieve its organisational objectives in the presence of system failure. 3.2 The Problems: Inspite of the latter strategies, there were many problems encountered. Consequently, the first attempt to extend the ERP system to Chinese subsidiaries was a failure. These failures did not relate to aspects of technology but to ‘cultural differences’ (Avison & Malaurent 2007). 3.2.1.The Template: The global ERP system was implemented in the Chinese pilot site by using a worldwide template which was designed by internal I.S teams from the headquarters in France. The problem is that the ERP worldwide template was implemented in English without it been translated into Chinese. This created problems for the key users such as local suppliers, customers and administrators who required their documents in the Chinese language. According to Yingjie (2005), in order to successfully accomplish the decision to implement an ERP system, the effective project management comes into play to plan, coordinate and control such an intricate project. This means the managers or the top management ought to have taken time to survey the local cultural aspects in China before setting up the global template. The lack of feasibility report and adequate project management on the local culture before the implementation became obvious when the technical support suggested that the current version of the ERP system would not support Chinese characters. This was because the version of SAP used did not support Unicode system, which enables English and Chinese characters to be displayed on the same workstation (Avison & Malaurent 2007). This information was only realised when the I.S was launched. In addition, the extent to which the software and hardware could were apt has also been considered. This will allow them to match the legacy system with the new I.S . As a result, the template would have been designed in Chinese. Top management should consider BPR to redefine and design work flows to fit the new I.S . Technology-enabled re-engineering would be appropriate because it's less costly compared to the clean slate re- re-engineering. Secondly, the main purpose will be to integrate a Unicode system which will enable English and Chinese characters. However, BPR present some risks such as employee resistance to change, inadequate attention to employee concerns, inadequate and inappropriate staffing, inadequate developer and user tools, mismatch of strategies used and goals , lack of oversight and failure in leadership commitment as proposed by Sutcliffe (1999). 3.2.2 Assumptions There were assumption that laws and regulations were standard, whereas there were local laws and regulations and those that related to accounting and bidding processes (Avison & Malaurent 2007). This issue would have be avoided with effective project management. Top management ought to be aware of structural and economic systems before implementing any I.S. in a foreign country. 3.2.3 Language Difficulties: The official language was English. Some Europeans on the project has English as a second or third language with accents that are difficult for the Chinese people to understand most especially taking into consideration the fact that they themselves are not good speakers of English. Only 1 out of the 3 Chinese consultants had worked for Western companies in China and spoke English fluently (Avison & Malaurent 2007). Therefore, the objectives of the project were lost in translation. Top management should have built the team of consultants and managers according to their background and knowledge of the targeted countries. The education and training of staffs in relation to the Chinese culture would have been useful for the successful implementation of the ERP system. Training is expensive but in order to achieve significant results, it is necessary. In addition, the training and education of the end-users is also essential in eradicating user resistance. 3.2.4 Limited Employee Involvement: There was limited employee involvement as a result of poor communications. Local employees did not feel involved in the project. They had the feeling that only top management (which means European expatriates in the main) were concerned by this project (Avison & Malaurent 2007). The Chinese team consisted of three external consultants instead of employees. Apparently, this is also because of the fact that not enough time was spent with the locals in order to get the support of the entire staff. Top management should have encouraged more participation from their Chinese subordinates in the development and implementation of the project. By participating in the ERP implementation, the user can understand the new system sooner and give feedback from his or her ow n point of view (Yingjie 2005). Although Avison & Malaurent (2007) suggested that the problems are related to cultural issues, it can be argued that these problems are related to aspects of information system implementation bearing in mind the potential resolution. However , I agree that the next set of problems which will be analysed by using Hofstede's cultural dimension purely relates to cultural differences. 3.3.5 Hofstede's Dimension's of National Culture The following shows the result of the hypothesis based on Canada, China, Taiwan, Thailand and United states. Source: Huang (2007) In China, there is high power distance, low individualism, low uncertainty avoidance, high masculinity and high long-term orientation. Consequently, the Chinese are the collectivists, and their traditional culture relates to Confucian values (Huang 2007). Confucian values, which prize hierarchy affect the norm and interpersonal behaviour in the Chinese organisations (Huang, 2007). They have large gaps in compensation, authority, and respect (Hofstede 1991/1997). Consequently, the French team must avoid anything that will lead to embarrassment; recognise the authority of leaders; be able to consult top management for answers; hode feelings and emotions to to allow for smooth interpersonal relations; respect traditions and present change gradually; manifest respect for age and wisdom; acknowledge that gender roles may be different; not impose rules and structure without need; decrease emotional response by being composed and reflecting in situations before speaking; exhibiting respect for tradition (Hofstede 1991, 1997). However, the staff in France did not hesitate in exposing the weaknesses of the local Chinese managers in front of their own subordinates instead of avoiding anything that will result into losing face. Furthermore, the staff from Europe had expected problems to be raised not recognising the fact that the Chinese staff have passive attitudes and reacted to the failure with patience. With knowledge of Hofstede's cultural dimensions, the French team would have been prepared to go to top management for answers. As a result, the external consultant was frank and wholehearted instead of suppressing his feelings and emotions to work in harmony. It is possible that China's cultural dimensions may perhaps have had an effect on the 6 critical success factors proposed by Yingjie (2005). Firstly, due to the unquestionable loyalty of the Chinese staffs give to their superiors, they might have failed to communicate relevant information to the top management which would have facilitated the development of appropriate information system. For example, top management did not know the suppliers, customer and key users required their documents in Chinese. The top management were not aware of the difference in accounting structure. The lack of this kind of information leads to lack of effective project management, lack of conversations on the suitability of software and hardware, and ignorance on available options on business process re-engineering. In addition, the combination of the strong levels of tradition and hierarchies in the organisation might have lead to a 'quiet' resistance. Although Hofstede's (1991) dimensions of national culture have been proven to be correct in most cases, it is not a law written in stone. Several researchers have criticized and identified some of its limitations. The most obvious and popular drawback is that questionnaires have their own limitations and surveys are not the only method of measuring cultural differences. McSweeney (2002) is a relevant author on this subject. 4. CONCLUSION: The system of ERP or Enterprise Resource Planning is of paramount importance to every organisation in its attempt to manage their internal and external resources through the use of modern technology. Considering the fact that the success of these ERP systems depends greatly on the manner or factors by which they are adopted by the organisations, it is important to note that its failure is often performance related. Therefore, it is a necessity for multinational companies to use appropriate implementation strategies, consider the critical success factors and always take national culture into consideration in order to successfully implement ERP system in a foreign country. Read More