Chapter I

INTRODUCTION
Today, information technology plays a vital role in every aspect of humans
lives. It leads to high level of corporate competition and growth seems equal to
innovation. It is the brain of modern economy and the brain of corporate
organization,

information

technology is all

about

storing,

manipulating,

distributing and processing information using computer-based tools. Business

sector is one of the beneficiaries of modern technology, it allows organizations to
work efficiently and maximize productivity, thus make computer and information
systems very essential in running business operations.
Technology now became a necessity for every business establishment
and corporate world is leaning more and more toward it, making it almost
impossible to separate the two from each other. Innovation breed business, and
since technology paves the way for it, it can be gathered here that business
needs technology to be sustained. The role of technology in business caused
tremendous growth in trade and commerce. It provides a faster, more
convenient, and more efficient way of preforming business transactions.
One of the high end contributions of the advance technology is the birth of
Enterprise Resource Planning or ERP. And since businesses faced new
challenges in increasing competition, market expansion and meeting and
exceeding consumer expectation the ERP systems have been developed to
provide a total business solution. It is business software solution that seeks to
streamline and integrate operations, processes and information that flows within
1

the enterprise. ERP is software suited for business application such as,
accounting, supply chain management, human resources (HR), and sales and so
on. Once an ERP system is implemented, each department or business unit in a
company will use the same database, share the same data that immediately
improve the communication among different department or business units that
will enhance the business operations, operate the enterprise in effective and
efficient manner. ERP system improves productivity, which is the main reason
why many large scale enterprises are keen to study and adopt this kind of
system in running and managing their business operations. Likewise, it became
an organizational tool for various enterprises since it has enabled the business to
integrate varied organizational systems and provide a flawless operation and
production.
ERP system is the evolution of Manufacturing Requirements Planning
(MRP) II. From business perspective, ERP has expanded from coordination of
manufacturing processes to the integration of enterprise-wide backend
processes. From technological aspect, it has evolved from legacy implementation
to more flexible tiered client-server architecture. Below is the evolution of this
system from 1960s to 1990s (Rashid. et.al, 2003)

Figure 1
Evolution of Enterprise Resource Planning (ERP) System
In Philippines, the use of Enterprise Resource Planning (ERP) system was
governed by Republic Act No. 8792 or also known as Electronic Commerce Act
of 2000. In Section 2, Declaration of the Policy, vividly states:
The State recognizes the vital role of information and communications
technology (ICT) in nation-building; the need to create an information-friendly
environment which supports and ensures the availability, diversity and
affordability of ICT products and services; the primary responsibility of the private
sector in contributing investments and services in telecommunications and
information technology; the need to develop, with appropriate training
programs and institutional policy changes, human resources for the information
technology age, a labor force skilled in the use of ICT and a population capable
of operating and utilizing electronic appliances and computers

There are over 150 vendors of Enterprise Resource Planning (ERP)

system, and one of the well-known providers is the Systems, Applications and
Products or best known as SAP. As of 2010, SAP has more than 140,000
installations worldwide, over 25 industry-specific business solutions and more
than 75,000 customers in 120 countries. Thus in current market of ERP system,
the SAP make as one the best known and most widely used ERP solution. SAP
system comprises of a number of fully integrated modules, which covers virtually
every aspect of the business management. All these separate parts of ERP
systems must work together to accomplish companies business operation.
Systems, Applications and Products (SAP), started in 1972 by five
former IBM employees in Mannheim, Germany. They are Dietmar Hopp, Klaus
Tschira, Hans-Werner Hector, Hasso Plattner, and Claus Wellenreuther. The
original name for SAP was German: Systeme, Anwendungen, Produkte, meaning
"Systems Applications and Products." The original idea was to provide customers
with the ability to interact with a common corporate database for a
comprehensive range of applications. Gradually, the applications have been
assembled and today many corporations, including IBM and Microsoft, are using
SAP products to run their own businesses. This applications is currently built
around their latest R/3 system, provide the capability to manage financial, asset,
and cost accounting, production operations and materials, personnel, plants, and
archived document.
In recent data, there are more than twenty (20) modules in SAP system,
but this study will focus on Financial Accounting and the Controlling Modules
4

(FICO). The Finance (FI) Module is designed to record financial transactions in a

manner consistent with external reporting. Controlling (CO) module in SAP
system is to provide organizations with a method of slicing and dicing data to
view costs from an internal management perspective and provide a view of
profitability beyond that of basic financial reporting.
Background of the Study
Implementation of an ERP is an extensive, lengthy, and costly process,
typically measured in millions of dollars. The investment is both in the software
itself and in related services such as consulting, implementing, training, and
system integration. Generically, the issue in implementing ERP is the fact that it
will cost the organization a million of expenditures such as software licenses and
implementing partners for training and support, it is not an overnight project, and
it is complex software that requires wide-ranging knowledge in ERP
implementation.

Various

critical

issues

occur

during

and

after

ERP

implementation, and the root of this issue is the lack of the knowledge in software
integration, this is the major problem in an ERP implementation (Pan et.al, 2003).
For KEPCO Group, wherein the company is currently on GoLive Phase,
lot of problems has been encountered during the system integration and
implementation. Problem includes the generated reports wherein the same
shows limited information that makes such reports incomprehensible and hard to
understand. Likewise, printing issues become one of the difficulties during
migration since hardware compatibility is likewise needed to consider. Further,
5

the system was designed generically, the company has not able to adopt
immediately the system requirements, failure of conducting business process to
study the needs of the organization so to customize and configure the system
itself.
This problem, challenges and critical issues on ERP implementation have
a direct and indirect effect on the progress and to the ability if the company to
earn profit in a minimal cost. There are various cases of failed ERP
implementation within the business like what happened to Hershey Company
failed to deliver candies for its customers, Nike lost shoes order and Foxmeyers
failure to process orders (Wailgum, 2009). This mere fact is evidence that ERP
implementation is not just technical based software, but has an impact on the
productivity and profitability of the organization.
This is the very reason why the researcher desires to assess the degree
of performance of the SAP integration before and after system migration,
particularly, the Financial and Control Process of KEPCO Group as a key in
developing a program that will sustain the dynamic needs of accounting system.
Further, the level of effectiveness will be assessed in order to determine how
effective the system for the whole organization in terms of financial and
controlling processes. Lastly, being formerly part of the organization, it is a
privilege of the researcher to provide a useful material that will serves as a basis
for enhancement of the SAP system of the organization.

Scope and Limitation of the Study

The study will aim to assess the degree of performance of the SAP
integration before and after system migration with respect to accuracy,
timeliness, efficiency, economy and productivity of KEPCO Finance Group. Also,
the study will determine the level of effectiveness of the SAP to the financial
accounting and controlling processes of KEPCO Philippines Finance Group.
Thus, the study will focus on one of the modules of SAP implemented by
KEPCO Philippines, the Financial Accounting (FI) and Controlling (CO) module.
The subject of the study will be the Philippine team of KEPCO Group
composed by three business units, the KEPCO Ilijan, KEPCO SPC and KEPCO
Holdings. In order to complete the methodology and data gathering of this study,
the researcher will need at least four (4) months to finish such phase, and it will
start from January to May 2014.
There are total of twenty seven (27) SAP users of FICO modules two (2)
from KEPCO Holdings, thirteen (13) from KEPCO Ilijan and twelve (12) from
KEPCO SPC. The researcher will use the one hundred percent (100%) of SAP
users as respondents for this study.
In evaluation of the degree of performance of SAP before and after
system migration, respondent will assess the system in terms of accuracy,
timeliness, efficiency, economy and productivity.
The researcher will use the descriptive method of research and will utilize
a questionnaire checklist to gather necessary information. On the other hand,
effectiveness will be measured through respondents personal point of view and
7

experiences in using the system whether it is effective or ineffective in terms of

various personal profiles.
The questionnaire has been design by the researcher and the instrument
will be content validated by experts in fields of SAP FICO, accounting and
controlling. The study will use the frequency, percentage distribution, weighted
mean, and two-way ANOVA.
Due to high technicality of the study, it is limited to Financial Accounting
and Controlling Module. The other available modules of the system will not be
discussed. Likewise, the platform and system architectural design will not be
tackle. Further, costs of the system implementation cannot be disclosed due to
confidentiality and all payments made to the implementing partner has been
done by the Head Office in South Korea for overseas SAP implementation is part
of the organizations contract with the implementing partner.

Statement of the Problem

This study will aim to determine the level of effectiveness of Systems,
Applications and Products (SAP) as a medium in recording, processing, and
translating financial data into reports of KEPCO Philippines Finance Group.
Specifically, this will seek to answer the following questions:
1. What is the degree of performance of Systems, Applications and Products
(SAP) before and after the system migration of Financial and Control
Processes of KEPCO Group as assessed by respondents with respect to:
1.1 Accuracy;
8

1.2 Timeliness
1.3 Efficiency;
1.4 Economy; and
1.5 Productivity?
2.

Is there any significance difference in the performance of KEPCO

Finance Department before and after system migration?

3. What is the level of effectiveness of Systems, Applications, and Products

(SAP) with respect to various aspects in terms of personal profile?
Hypothesis
Hypothesis is a wise guess prepared and temporarily adopted to explain
the observed factors covered by the study. It helps the researcher in designing
the study such as the methods, research instruments, and sampling design to be
used as well as the data to be gathered. It also use as bases for determining
assumptions and for the explanation about the data gathered.
The study will test the null hypotheses as follows:
1. There is no significant difference in the degree of performance KEPCO
Finance Department before and after system migration.
2. There is no significant difference in the perception of the respondents on
the level of effectiveness of Systems, Applications, and Products (SAP)
with respect to various aspects in terms of personal profile.

Chapter 2
EVALUATION DESIGN AND FRAMEWORK
This chapter discusses the expected output and justification, theoretical
framework, conceptual framework, and the variables and their definitions and
importance to the study.

10

Discussion of Expected Output and Justification

The expected output of the study is an action plan that will be able to give
the company a certain program that will enhance the SAP implementation and
avoid future problems in working with the system that might hamper the daily
operation of the business specifically in the financial side. The objective of the
action plan is to point out various system troubles that sometimes impede the
processing of the financial transactions, and what will be the key action or
companys move in order to solve such problems. The SAP of KEPCO group has
been running for just one year, and it can be concluded that it is still in the initial
stage of using the system, thus, troubles in using and in generating reports are
likewise not perfect. Still there are problems arises that users and even key users
are unable to solve. The researchers goal is to achieve a certain program that
the company can use as a guide in dealings with unnecessary system dilemma
that might encumber the purpose of the system which is to make the company
effective and efficient in running its daily financial operations.
The objective will be attain through the use of survey questions that will
determine the level of effectiveness of the system compared the old system and
process of Finance Department in processing the financial data into reports.
Theoretical Framework
In today's competitive world many major companies have decided to use a
popular tool that has evolved over the past few decades. ERP, the descendant of
MRPII offers the "answer" to the economic and productivity troubles of
manufacturing and service enterprises. Thus, the ERP system has become very
11

popular as an enterprise management software tool. Implementation of ERP

system in the organization is the most complex and crucial part of the whole
integration and many researchers have proposed stage models of ERP
implementation so to provide successful implementation.
Collins and Hussey (2009) stated that theoretical framework is a collection
of theories and models from the literature. It is logically developed, described,
and elaborated network of associations between the variables deemed relevant
to the problem situation, and which have been identified through such process.
This is study is based on the ideas of by Robert D. Carisen and James E.
Lewis on system analysis, they view system analysis as a study of operation to
evaluate the system in terms of accuracy, timeliness, efficiency, economy and
productivity (Lizo, 2004). System analysis is a set of interacting entities, including
computer system analysis; this field is closely related to requirements analysis or
operation research. Likewise, it is an explicit formal inquiry carried out to help a
decision maker to identify a better course of action and make better decision than
he might otherwise have made. Thus, based on this idea, the researcher used
the perception of the respondents with regards to their age, sex, job position and
Nature of Work as independent variables, while the test of effectiveness of using
SAP as a medium in processing financial information into reports and making
sound decisions in terms of accuracy, timeliness, efficiency, economy and
productivity as dependent variables.
Further, this study is based on the theory on competitive advantage by
Michael Porter, this theory is about taking offensive or defensive action to create
12

a defendable position in the industry, in order to cope successfully with

competitive forces and generate a superior return on investment.
To maintain competitive advantage and to augment performance,
companies need a solid resource management capability and dynamic
capabilities that is, the companies should be able to effectively control, integrate,
and utilize the internal and external resources, and adaptive to environmental
changes and competition. ERP system by nature is one resource management
system, since ERP system itself is invented for material resource planning
(MRP). This system is one model to manage, integrate, and control enterprise
resources. This model links with company's management culture, management
processes and management objectives, and each enterprise application of ERP
systems can be seen as the unique ability to manage resources. Therefore, it is
to believe that its implementation can enhance the company's resource
management capabilities and help the company gain a competitive advantage.
Moreover, the use of the ERP system, is based on Business Process
Reengineering method defined by Hammer and Champy as the fundamental
reconsideration and radical redesign of organizational process, in order to
achieve drastic improvement of current performance in cost, service and speed.
BPR expound the possibility of substantial increase in efficiency and productivity
in a relatively short of amount of time. According to Hammer, re-engineering is
the mechanism for creating strengths and operating processes which can then
be exploited in many ways, re-engineering can be used to provide cost
advantages or improve customer service, thereby defending an existing market;
13

it can enable entry into entirely new businesses either by turning internal
processes into revenue generating services or by identifying new applications for
the same skills.
Value creation is the leading factor in BPR and information technology
plays a vital enabling role. Since ERP system is a technology driven tool for an
organization that will enabled the companies to maintain or reach an optimum
spot in their own industry, likewise it is considered by some as a major support
for new forms of working and collaborating within an organization and across
organizational borders.
Conceptual Framework
The purpose of this section is to explain and rationalize the conceptual
framework proposed by the researcher. A model was used to show the
perception of the researcher regarding the study for a better and vivid
understanding.
The paradigm is based on IPO model that convey system fundamentals
which are the input, process and output. Based on the researches made, through
theories and concepts, the researched came up with a paradigm which consists
of three (3) boxes. The first box pertains to the independent variables which are
profile of respondents in terms of age, sex, job position, and Nature of Work.
Further, the second box relates to dependent variable which is the level of
effectiveness in relations to accuracy, timeliness, efficiency, economy and
productivity. The third box or the output of the study, this is the main product of
the study which the business process flowchart of the company so that for any
14

future system upgrade there is a guide on how to the configuration of the system
and likewise an intranet based manual for FICO users for an easy access and
guide.

Input

Process
Documentary
Analysis

Criteria of
measuring
System
Effectiveness
Accuracy
Timeliness
Efficiency
Economy
Productivity

Development and
Administration of

Output

Effectiveness of
Systems,
Applications, and
Products (SAP)

the Questionnaire
Checklist
Proposed
Action Plan
Analysis and
15

Interpretation of
Data

FEEDBACK
Figure 2
Conceptual Model Showing the Effectiveness of Systems, Applications,
and Products (SAP)

The Variables, their Definitions and Importance to the Study

This chapter gives the meaning to the users or readers of this research
study the variables used, as well as its definition and importance in the study.
Below are the variables that defined operationally and conceptually.
Accuracy
In the fields of science, engineering, industry, and statistics, the accuracy
of a measurement system is the degree of closeness of measurements of
a quantity to that quantity's actual (true) value. The precision[1] of a measurement
system, also called reproducibility or repeatability, is the degree to which
repeated measurements under unchanged conditions show the same results.
Although

the

two

words

precision
16

and

accuracy

can

be synonymous in colloquial use, they are deliberately contrasted in the context

of the scientific method.
According to ISO 5725-1 the terms trueness and precision are used to
describe the accuracy of a measurement. Trueness refers to the closeness of the
mean of the measurement results to the actual (true) value and precision refers
to the closeness of agreement within individual results. Therefore, according to
the ISO standard, the term "accuracy" refers to both trueness and precision.
ISO 5725-1 also avoids the use of the term bias, because it has different
connotations outside the fields of science and engineering, as in medicine and
law (JCGM, 2008).
Accuracy in the field of accounting, is the precision of financial data, it is
said to be a financial statements is accurate if it is free from biased, it is recorded
in its true value and data should be existing. In this study, accuracy will be
basically to be measured against manual data and manual lapsing schedules to
test that systems are runs accurately against raw data.
In information systems, the concepts of accuracy and precision have also
been studied in the context of data bases, information systems and their
sociotechnical context. The necessary extension of these two concepts on the
basis

of

theory

of

science

suggests

that

they

(as

well

as data

quality and information quality) should be centered on accuracy defined as the

closeness to the true value seen as the degree of agreement of readings or of
calculated values of one same conceived entity, measured or calculated by
different methods, in the context of maximum possible disagreement. In using
17

SAP as ERP solution, accurate data is the key to building relationships with local
and international customers, suppliers, and partners. Accuracy is one of the four
goals of ERP installation, accuracy relates to both the system and the people.
Make sure the people know where and how to create, read, update and delete
data. The system should inform them when their actions are not correct. Once
the data is in the system, processes and additional entry should protect the data
to produce accurate outputs. An example includes the chain of events in
distribution that range from purchasing to fulfillment (Boecking, 2013).
Timeliness
The concept of timeliness is studied in many different fields, including
cognitive

sciences,

logic,

and library

and

information

science.

Most

fundamentally, however, it is studied in epistemology (the theory of knowledge).

Different theories of knowledge have different implications for what is considered
relevant and these fundamental views have implications for all other fields as
well.
In the world of Finance and Accounting, timeliness means it will make
difference to a decision maker. It is the relationship or the relatedness of financial
data and reports itself in making a certain financial decision. In timeliness, great
timing is needed and in accounting accuracy is sometimes sacrificed. For this
study, timeliness is to be tested in the easiness of generating reports and
schedules that might needed for a certain decision that needs immediate action.
Timeliness is a potential property not only of utterances and other
observable phenomena, but of thoughts, memories and conclusions of
18

inferences. In timeliness-theoretic terms, any external stimulus or internal

representation which provides an input to cognitive processes may be relevant to
an individual at some time. According to timeliness theory by Sperber and
Wilson, utterances raise expectations of timeliness not because speakers are
expected to obey a Co-operative Principle and maxims or some other specifically
communicative convention, but because the search for timeliness is a basic
feature of human cognition, which communicators may exploit. In this section, we
will introduce the basic cognitive notion of timeliness and the Cognitive Principle
of Timeliness, which lay the foundation for the timeliness-theoretic approach to
pragmatics. In this theory, an input is RELEVANT to an individual when, and only
when, its processing yields such positive cognitive effects.
In the modern business scenario ERP is verisimilitude to the oxygen. As
oxygen is the essence of life similarly ERP is the lifeblood of the business. A
business irrespective of type and size cannot run smoothly in absence of
properly drafted and formulated ERP software (Gupta, 2005).
Efficiency
In general, describes the extent to which time, effort or cost is well used
for the intended task or purpose. It is often used with the specific purpose of
relaying the capability of a specific application of effort to produce a specific
outcome effectively with a minimum amount or quantity of waste, expense, or
unnecessary effort. "Efficiency" has widely varying meanings in different
disciplines. Efficiency is can be computed through what they called Efficiency
Ratio, a ratio that typically applies to banks, in simple terms is defined as
19

expenses as a percentage of revenue (expenses / revenue), with a few

variations. A lower percentage is better since that means expenses are low and
earnings are high. It relates to operating leverage, which measures the ratio
between fixed costs and variable costs.
Efficiency in accounting generally refers to the use of certain ratios and
measurements designed to assess the effectiveness of a specific company or
firm and used to assess the financial condition of a company based on the way it
manages its assets. This paper intends to measure efficiency of the accounting
application through resources management and likewise the impact of the
system with regards to overall efficiency in the organization and consequently
their profitability and sustainability.
The potential benefits of ERP are significant: a more smoothly running
operation with efficiencies in virtually every area of administration, from
automated payroll to course registration to scheduling and just about every facet
in between. The stakes are high. Depending on the size of the college, an ERP
implementation often translates into a multimillion-dollar investment. It can also
take a long time to complete and require significant IT resources. Still, for many
institutions ERP has become a "must-have" technology. The business case for
adopting the technology is strong, even if there might not be an immediate
financial payback (Violino, 2008). ERP systems provide the opportunity to
integrate high levels of business processes integration, improve communications
at different levels, and combine internal and external communication for faster
and easier data accessibility, but maximum efficiency is only accomplished when
20

there is strong alignment between the ERP system and the company's business
processes. The success or lack of a successful implementation can be partially
measured by examining the four key antecedents of ERP system integration
(Interconnectivity, Interoperability, Semantic

consistency, and

Convergent

integration) and ERP performance (Yousefi, 2011)

Economy
Economy

consists

of

the production, distribution or trade,

and consumption of limited goods and services by different agents in a given

geographical location. The economic agents can be individuals, businesses,
organizations, or governments. Transactions occur when two parties agree to the
value or price of the transacted good or service, commonly expressed in a
certain currency. A given economy is the result of a set of processes that involves
its culture, values, education, technological evolution, history, social organization,
political structure and legal systems, as well as its geography, natural resource
endowment, and ecology, as main factors. These factors give context, content,
and set the conditions and parameters in which an economy functions. Some
cultures create more productive economies and function better than others,
creating higher value
Further, SAP implementation requires large budget amount, it is a capital
expenditures that cost a million dollar of investment. Aside from lack of time and
budget, as well as lack of apparent value, one of the visible reasons why many
companies are not open for switching their accounting system to complete ERP
software is mainly because of the deteriorating economic and existing business
21

condition. Economic factor is the first and foremost aspect that needs a heavy
consideration for the success of the implementation is basically based on the
capacity of a certain company to support all the monetary needs in running the
projects (Wailgum 2009).
However, given this large amount of money, a proper implementation of
the system means huge cost savings, not just in terms of IT supplies and office
supplies, but likewise with the time save in processing various transactions. In
this era, most organizations are asked to do more for less. Accounting system
can certainly help in that goal, however, focus tends to rest on the for less part
of this request. In reality, organizations focusing solely on saving money will have
to make sacrifices in terms of quality, service, and operations that will impact
internal and external customers and ultimately the business (Franklin, 2009).
Economic cost is defined as the sacrifice involved in performing activity or
following a decision or course of action. It may express as the total opportunity
cost and the explicit cost. This paper will identify some points whether the
benefits of using and implementing Systems, Applications and Products (SAP) is
much higher than the cost if the implementation. Likewise, to test the ability of the
system in implementing a paperless transaction that could be a savings for the
company in terms of supplies.
Productivity
"Productivity isnt everything, but in the long run it is almost everything. A
countrys ability to improve its standard of living over time depends almost
entirely on its ability to raise its output per worker. Productivity is considered a
22

key source of economic growth and competitiveness and, as such, is basic

statistical

information

for

many

international

comparisons

and

country

performance assessments. There are different measures of productivity and the

choice between them depends either on the purpose of the productivity
measurement and/or data availability (OECD 2008).
Productivity is measure efficiency in producing goods or services. It is a
degree to which a real income is being measured. Increasing national
productivity can raise living standards because more real income improves
people's ability to purchase goods and services, enjoy leisure, improve housing
and education and contribute to social and environmental programs. Productivity
growth also helps businesses to be more profitable. Thus, in processing and
communicating financial information, a certain group is to be said productive
when the resources are being fully utilized, that the system does not require too
much time in running and processing data that might caused some delays and
became a hindrance in immediate translation of numerical data that is needed in
preparation of financial reports of the enterprise.
Measuring the impact of applications on ERP end-user productivity is a
complex undertaking because of the wide range of business functions, vertical
industry requirements, and user types who interact with such systems. In recent
study of Keystone Strategy Inc handled by Professors Marco Iansiti and David
Sarnoff wherein they developed a business productivity framework to measure
how end users feel SAP applications impact their personal productivity (Iansiti,
2007).
23

Given the scale of ERP implementation projects as well as the possibility

for both large successes and failures, it is reasonable to expect that ERP
deployment have a significant and measurable effect on firm performance. While
both costs and potential benefits are high, it is not clear whether the net effect
results in higher productivity for the firm. In addition, because implementation is a
difficult and uncertain process, firms that are successful in implementing the
system may gain competitive advantage over other firms that are unwilling or
unable to make similar changes.
Definitions of Terms
The following terminologies are operationally defined for a better
understanding of the study:
Business Process Reengineering. This is a business management
strategy, originally pioneered in the early 1990s, focusing on the analysis and
design of workflows and processes within an organization. BPR aimed to
help organizations fundamentally rethink how they do their work in order to
dramatically improve customer service, cut operational costs, and become worldclass competitors.
Competitive Advantage. It is an advantage that firms has over its
competitors, allowing it to generate greater sales or margins and/or retain more
customers than its competition. There can be many types of competitive
advantages including the firm's cost structure, product offerings, distribution
network and customer support.

24

Enterprise Resource Planning. Principally this is an integration of business

management practices and modern technology. Information Technology (IT)
integrates with a corporate houses core business processes to streamline and
accomplish specific business objectives. Consequently, ERP is an amalgamation
of three most important components: Business Management Practices,
Information Technology, and Specific Business Objectives.
Financial Accounting/ Controlling Module. FICO module is a tool used in
Systems, Applications and Products in Data Processing, or SAP. FICO modules
are used for information technology through SAP, which is a package mainly
employed for financial accounting.
Systems, Applications, and Products Software. It is a business solution
that will help enterprises to manage its operation. SAP provides software tailored
to fit different aspects of business.
Technology.The branch of knowledge that deals with the creation and use
of technical means and theirinterrelation with life, society, and the environment, d
rawing upon such subjects as industrial arts,engineering, applied science, and pu
re science.

25

Chapter 3
RESEARCH METHODOLOGY
This chapter presents the discussion on the research design, setting and
the subject of the study, sources of data, procedure of the study and the
statistical treatment.
Research Design
This study will use the descriptive qualitative research design utilizing a
questionnaires checklist as a medium in gathering information that is needed in
the conducting this study. Descriptive Research studies are those studies which
are concerned with the describing the characteristics of a particular individual, or
if a group (Kothari, 2004). The principal aims of descriptive method are to
describe the nature of the situation as it exists at the time if research and explore
the cause of the particular even. Data gathering is the primary means of
collecting information to conclude and answer the questions concerning the
current status of the study.

26

The study aims to determine the extent of extent of SAP system in

processing financial data by Finance Department of KEPCO Philippines Group.
This will be measures through the use of input data such as Business Process
Reengineering, configuration of the system, trainings of the end users, testing of
the system, going-live of the integration and the post-implementation. Likewise,
the level of effectiveness will be asses in this study. Effectiveness shall be
measured suing the test of system accuracy, timeliness of the system with the
decision of the management, efficiency and economic value of the system and as
well as the productivity of the SAP users in processing financial information.
Setting of the Study
KEPCO Philippines was established when Korea Electric Power
Corporation won a bid for Operate, Maintain, Service Contract (OMSC) with the
Philippine Government, National Power Corporation (NAPOCOR) specifically, in
response to the call of the government to develop and utilize the countrys
indigenous resources and augment its power supply. Currently, KEPCO group
has a three power plant. Last September 12, 1997 a natural gas power plant was
built in Ilijan, Batangas under Build-Operate-Transfer (BOT) contract, it is the
largest natural gas facility in the country comprising 1200MW combined-cycle,
dual-fuel electricity generation facilities with a design life of 25 years. Another two
power plants are located in Naga, Cebu with Built-Operate-Own scheme. The
two units of coal-fired that cater the Visayan Grids composed of two units
185.8MW and one 100MW Thermal Power Plant. This project is conceptualized
under the scheme of a merchant power plant, characterized by executions of
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power sale contracts (PSCs) with distribution utilities and electric cooperatives,
instead of power purchase agreements with the government. The Manila head
Office is located at the heart of Makati City, the existing plant site of KEPCO
group are located in Ilijan, Batangas and Naga, Cebu City for LNG Power Plant
and Coal-operated Power plant respectively.
KEPCO Head Office has been using SAP as their medium in operating the
business and for a stress-free consolidating the reports of all their subsidiaries
and overseas projects, the Management ordered all KEPCO Group to use same
system with server at Korea and user ID provided by the Head Office. Prior to the
implementation, all employees had undergone a rigid and tremendous Systems,
Applications, and Products (SAP) trainings for a couple of months, training
include theoretical classroom style introduction and a complete hands-on training
using client test server. However, there are some encountered transactions that
has never been considered, some complex and complicated that failed to
ruminate thats why it makes hard for the team to complete the processing of the
transaction and became a back log that to be raised to the Head Office and
consultant.

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Figure 3
Map of Makati

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Figure 4
Map of Salcedo Village, Makati City.

Subject of the Study

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The respondents of this study will be the personnel of KEPCO Group

Finance Department having a key ID as users of SAP. They chose as
respondents are the one who underwent trainings and the one with SAP access.
The researcher will employ the 100 per cent (100%) of the population or total of
27 respondents, two (2) from KEPCO Holdings, thirteen (13) from KEILCO and
twelve (12) from KSPC. Below is the table that shows the total number of the
respondents for this study.
Table 1.0
Subject of the Study
Business Group
KEPCO Philippines Holdings, Inc
KEPCO Ilijan Corporation
KEPCO SPC
Total

No. of Repondents
2
13
12
27

They are chosen purposively to determine the level of effectiveness in

accordance to their own perspective about the system being implemented. They
are described according to age, sex, educational attainment, position, Nature of
Work and user classification. The group consists of two (2) users from KEPCO
Holdings, thirteen (13) users from KEILCO group and twelve (12) users from
KSPC.

Procedure of the Study

The researcher prepared and presented three (3) proposed theses to the
research professor for selection and approval. The title of the study at hand has
been chosen and approved by the four (4) members of the panel during the title
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defense. The researcher used different medium in gathering necessary

information to construct and have ideas for the chosen topic. Those medium are
the different thesis writing available in libraries, leaflets and journal, IT
practitioners point of views and knowledge, browse the internet and the SAP
portal for various ideas and techniques in the world of ERP.
After completing the three (3) chapters, it is need to present and defend
during proposal defense so to continue with the remaining chapters and improve
the write-up as well. Once approved, the researcher needs to develop the
questionnaire checklist which is subject to test for reliability and validity with the
assistance of the adviser and with the expertise of the statistician. As soon as the
reliability and validity was determined the researcher can proceed with the
dissemination of the questionnaire checklist among respondents. Moreover, the
researcher needs to secure a permit to conduct study from the University to
conduct study and interviews to the respondents and institution that could feed
information and body of knowledge to the researcher.
Finally, after the distribution of the research instruments, the researcher
has to collate all the data. The information must be encoded and with the aid of
the statistician, the data gathered was tallied, tabulated, analyzed and
incorporated. This procedure was the key that answered the hypothesis of the
study.
Statistical Treatment
In this study following statistical tools will be used:

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1. To determine the profile of the respondents, the frequency, percentage,

and rank distribution will be employed.
2. To determine the level of effectiveness of integrating SAP of KEPCO
Philippines in their Financial and Control Process as assessed by
respondents, weighted mean will be applied.

The Likert scale will be

used:
Scale

Scale Interval

Degree of Importance

1.0 1.79

Ineffective (IE)

1.8 2.59

Less effective (LE)

2.60 3.39

Effective (E)

3.40 4.19

Much effective (ME)

4.20 5.0

Very much effective (VE)

3. To find out the significant difference of the effectiveness of SAP integration

of KEPCO Philippines in terms of accuracy, timeliness, efficiency,
economy and productivity the one-way ANOVA will be utilized.

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