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Virtual Organization Structure


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Virtual Organization Structure




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Attempts by companies to embrace the virtual organization structure is oscillated by a set of benefits and limitations. There is a likelihood that the benefits surpass the limitation, an assertion that is subject to review. The escalating need for business entities or organizations to retain their competitiveness within the open market steers companies toward concentrating on the core competencies but still searches for the alliances in the case scenarios where the additional skills or even resources are demanded towards fulfilling business opportunities (Vartiainen 2001). Accordingly, the dynamic business situation of companies, as well as, customer needs or expectations has resulted in the need to review the growing virtual organization structure idea (Mowshowitz 2007). The attempt by most companies in the contemporary business world demands that radical changes be made to address the rising challenges in the contemporary economic environment. The organizational changes and structures have been aimed at ensuring there is increased profitability and even maintain the market position as a way of improving the level of competitiveness in the newly emerging markets. Perfect examples of these changes include the integration of companies, having flexible production systems, and even total quality management and the ‘Just in Time’ logistics (Maznevski 2000). Embracing new information technologies provides a lead towards better informing of the market which in this case is being referred to as the virtual market (Majchrzak 2000). In this case, the research focuses on the virtual organizational structures a growing trend, especially in the business world.

In a bid to define the concept of Virtual Organization Structures, it is first imperative to understand that the term virtual originates from a Latin word ‘virtus.’ The terms mean apparent, hence referring to something that may be perceived not to be real but feasibly exists. From a more precise perspective, the term virtual can be seen as a force that exists but cannot be observed. Upon understanding that, then the virtual organization is often used to refer to the network of an independent firm that tends to join to produce a service or even a product together. The relationship, however, is perceived to be temporal in most cases. In that case, a business that embraces this structure operates in such a manner that members or workers are situated apart from a geographical perspective (Mowshowitz 2007). Their operations are facilitated by the use of technology, particularly use of groupware or even e-mails. However, to others, the entire setup is presumed to be a complete set-up with a particular physical location. From a professional perspective, through the virtual organization, a social network where the vertical and the horizontal boundaries are removed. Hence, it becomes a system that is does not have sufficient boundary. Instead, the people linked with any particular business that operates within this system tend to work in dispersed places using mobile devices.

In the process of understanding this business related structure, it becomes necessary and sufficient to consider the ICT as the backbone. It is with ICT incorporation that virtual operations sail from being impossible to being valid. The fact that the business embracing this business structure requires that people operate from different places but are expected to deliver in time implies that there is a need to have strong ICT systems supporting the entire process and make the virtual organizations a reality. 

Rationale for Analyzing This Structure 

In the business world, there are myriad changes that are occurring. Currently, there are several trends that cannot be overlooked from a macroeconomic or even microeconomic perspective. For instance, there is the aspect of working environments being affected by the different political forces. Also, there is the issue of supply and demand forces in the international markets being irregular requiring that some labor is garnered from differentiated environments. Ideally, the need for a change in the manner through which some businesses are run is on the rise. Resultantly, the use of technology to hire and even work with different business entities has become a frequented approach towards resolving these economic stalemates. Quite often, priority regarding research or analysis in as far as business practices are concerned is highly affiliated with the extent in which the business practice is trending. Remember, business practices gain validity and value in the market when more players seek to embrace it. From an analytical perspective, it is concise that some highly performing companies are appraising the trends affiliated with virtual organization (Mowshowitz 2007).

Most stakeholders in the business sector would find the analysis very essential since it would act as an informing tool.  Ideally, the changing business situation of companies, as well as, customer expectations are the main motivators of this research and analysis that is perceived to generate excellent ideas regarding the virtual organizational idea. In a bid to foster increased understanding regarding the subject matter, it is critical to highlight that virtual organization implies a temporary collection of enterprises which through cooperation, share resources, competencies and even knowledge towards the generation of better business opportunities (Orłowski 2008). Hence, through the analysis, the key aspects and concepts of virtual organization constituting of operational concepts, management concepts, properties and even authentication are explained.

Accordingly, analyzing this structure is going to be triggered by the escalating demand in the scholarly world and even in the business world of understanding the strengths affiliated with embracing the system as opposed to the traditional systems of operation (Davidow 2002). Hence, from a personal understanding, analyzing the system will influence understanding of the new trend in business leading to a more informed transition of the players in the business world from the traditional system to the ICT enabled virtual organization structure of business operations. In a bid to ascertain the stipulated rationale for conducting the analysis, below is a detailed overview of virtual organization structure, the benefits accrued to it and a life example of how a company has embraced and made use of the system.

In-Depth Analysis of Virtual Organizational Structure

Before getting to understand the micro aspect of this form of business organization, it is paramount to provide that virtual organization tends to exist within a space which is utterly not bound by either the legal or even the physical structures that are presumed to define the normal or conventional organization. That implies that there is minimal monitoring or even expense of running the entire process in as far as having a physical structure is concerned. Ever since the 1980s, most organizations have made changes in their organizational structures by flattening them (Orłowski 2008). Particularly, they have shifted the authority downwards through granting the employees elevated autonomy hence facilitating increased decision-making power. Merits of this form of management and organization consist of minimized need for the supervisors, middle management and even influence faster decision making, as well as, the prowess to process organizational information faster. That, in return, yielded in need to establish an even more flexible system particularly taking into consideration reduced monitoring of employees.

The said shift is that of embracing a new form of organizational structure, the virtual organizational structure, as a certified response to the unprecedented customer expectations and alternatives, time compression, complexity, rapid change, global competition and even the elevated usage of technology (Majchrzak 2000). In that context, the virtual model of organization is the lead organization that establishes alliances with groups and even individuals from alternative organizations. These individuals possess very high competencies towards building services or products in a short time frame (Maznevski 2000). The level of permeability of the virtual corporations is high as compared to the traditional organizational structures. For instance, the interfaces in the virtual organization structures between the customers, the suppliers and the employer company are continually changing blurring the traditional functions. Work groups are likely to shift where the trend of having an office is scrapped out in favor of the virtue office and channel of operation via the information communication technologies.

There are a series of elements that are of great essence to learn about them with reference to the virtual organization structures. For instance, partners in the virtual organizational structures often share risks, rewards, and even costs as they pursue excellence in the competitive global market. Usually, the most common feature of the organizational structure comprises of the fact that that it is motivated by world core competencies, market opportunities, interdependent relationships, information networks and even the permeable boundaries that are facilitated by ICT (Hilty 2005). First, virtual organizations do represent structures which are motivated by certain market opportunities. As such, when alliances are formed to address an opportunity until exploitation, these alliances can move to fresh partnerships and even alliances. Every partner in these virtual corporation contributes a world-class level of competence including manufacturing, marketing, and even designs. That potential results in the firms bearing this form of organization to stand in the position of creating synergies amongst the world-class functions and even yield some untold possibilities.

While organizations manage to establish the said new linkages, then advanced information technology becomes an essential element which is paramount to the success of the virtual organization. The computerized systems of information allow for employees from dispersed geographical locations to link and work together towards achieving desired objectives. The virtual stations may consider using desktops videoconferencing, intranet systems and even collaborative software.

There are different categories of virtual organizations. These include the telecommuters, the outsourcing employees or competencies, and the completely virtual entities. First, regarding telecommuters, the employees have the liberty to work from their homes. Computers facilitate their interaction. Examples of companies that are using this approach include Xerox, Coherent Technologies and even Dow Chemicals Inc. amongst others (Majchrzak 2000). Secondly, regarding outsourcing employees or the competencies, the companies are characterized by often outsourcing almost all the core competencies. The main areas that are subjected to this system include finance, research and development, engineering, human resource, information system and also marketing and sales (Hilty 2005). Ultimately, there is the completely virtual category. Here, the companies are metaphorically designated as institutions without barriers. There is a large network of suppliers, customers, distributors and even joint venture partners.   

After fathoming the features and elementary aspects of the virtual organization structure, the next thing is to identify the affirmative and even the adverse aspects of embracing it in the business world (Nami 2008). That involves providing particular cases as a sign of confirming the arguments postulated.

Benefits Achievable and the Limitations and Challenges of Virtual Organization Structure

Benefits That Can Be Achieved

There are a series of benefits that can be achieved by the use or employment of a virtual organization structure in the business context. Remember, when the virtual organization comes into the picture, ICT comes in parallel to it. One merit that can be realized is that is most likely to facilitate the saving of time. Also, it is likely to facilitate the reduction of costs such as those of traveling by the employees (Chand 2016). Also, it may eliminate or reduce the chances in which firms claim lack or inadequacy in accessing experts. Hence, the entire process of facilitating things to happen in an environment where there is minimal monitoring becomes less expensive and reliable. For instance, in the process of acquiring experts, most firms have been incurring the costs of travel in the traditional system. However, in this system, it is quite easy and less expensive (Block 2017).    

The virtue organization structure allows for increased dynamic team membership (Kirkman 2004). Ideally, this implies that the people are allowed to navigate from one project to another. Through the very system, the employees can easily be assigned to a multiple or even concurrent teams in which they are expected to participate in generating the ultimate solution (Chand 2016). Particularly, that means that there is a high level of flexibility for the employees in as far as their work is concerned.

Through the subject organization structure, is becomes feasible to spread the costs and risks to the partners. Increased accountability is, hence, experienced. Increased accountability means that the quality of work regarding flexibility of work, quality performance, sharing of knowledge and high scale marketing is facilitated (Block 2017). Through the system, it becomes feasible to identify or access new technologies and new customers considering that the aspect of accessibility is often influenced by increased access to the information systems (Hilty 2005). Cumulatively, the structure is expected to influence or act as a driver for doing business and operating in such networks (Ahuja 1998). The benefits of asynchronization and delocalization are experienced.

Real Life Example

An array of companies has embraced the use of the virtual organization structure in running their business activities. The singular case will be analyzed in the juncture is Amazon company. It is rational to argue that without the concept of a virtual organization structure, Amazon Company would not be successful or even existent in the competitive international market (Fremson 2017). Definition-wise, the company, deals with electronic commerce, as well as, cloud computing where it acts in the capacity of an international retailer of diverse products from information to items.       

Through this structure of the organization, the company has managed to have Accessory Brainstorms to be the company’s sales representative in New York. Also, the company did partner with New York public relations towards promoting fashion accessories, as well as, beauty products with the objective of raising the awareness in the market (Fremson 2017). The company has, in its history managed to establish and even expand an extensive network of outsources vendors with the objective of dealing with myriad business activities. The company enjoys millions of sales annually courtesy of its strong virtual organization structure. Also, it has myriad virtual employees who all play a role in ensuring that the company achieves its desired goals.

Limitations and Challenges of Virtual Organization Structure

In as much as the employment of the virtual organization structure in businesses results in reduced costs and ease of operation by the workers, there are some challenges and limitations that are likely to discourage its use (Vakola 2004). For instance, through this structure, there is an absolute lack of physical interaction between the parties. Hence, it becomes hard for one party to understand the reality or authenticity of messages passed. Therefore, the managers get a very hard time having to deal with emerging issues especially because they do not have sufficient control over most activities and even the employees in question (Chand 2016). On the same account, it becomes hard to control and address the relationship gaps that tend to emerge between different employees. The nature of business in this system is that partnerships and contracts are likely to last only towards the end of a project that which is a common course for these parties. Hence conflicts between partners are not easily resolvable since each partner knows well that the relationship is short-run. The ultimate challenge could be organizational failure and loss of truck in as far as the major tasks are concerned (Vakola 2004).

Another major limitation or setback that is associated with the possibility different team players from different area fail to cooperate towards achieving the desired objective (Kirkman 2004). One weakness associated with this structure is that the possibility of having a one-term partnership is very high. Hence, when things fail to sail according to the expectations of some partners, they are likely to exit the partnership chain without the knowledge of the top leadership. Ultimately, the company is likely to face a major setback.

Besides the internal challenges, there is also a likelihood that the market may be in doubt of the credibility of the company or institution. The idea here is that the company does not have a physical address or location in the real world where the consumers can make proper claims or recommendations (Chand 2016). Resultantly, the process of establishing a successful entity is very low. From a general perspective, it is clear that there are divided chances of succeeding in establishing a successful business within the virtual organization structure system.

Real Life Application

The emerging issue, in this case, is that of companies being required to create a vivid line between contractors and employees. The incentives to work for the success of the company are often strangled by the remote environment that is created by this organization structure. A perfect example of companies that have been discouraged by this system includes Groupon and Living Social. In a case affiliated with these companies, platforms were provided where the retailers were expected to sell discounted offers to the consumers (Hagiu & Rothman 2016). The two companies, as a result of employing the virtual organization structure, expanded in an aggressive manner in such a manner that it attracted millions of users and also thousands of merchants. However, the success was as short-lived as the relationship that was created with these stakeholders. When the merchants came to a realization of the fact that the Groupon and Living Social companies’ discounts failed to attract repeat customers, they also commenced conducting business on a series of competing for deal sites (Hagiu & Rothman 2016).

Resultantly, the value of Groupon Company dragged down from a value of 18 million dollars during the 2011 IPO to almost less than 2 million dollars. The same case applied to Living Social whose trade fell from 10 billion dollars in the year 2011 to the 250 million dollars in the year 2014 (Hagiu & Rothman 2016). In relations to the already discussed limitations, the aspect that is reflected in this case is that of loyalty and inability of the management to handle or control the decisions made by the contractors or even employees.


Upon conducting the analysis of the organization structure, it is rational to argue that attempts by companies to embrace the virtual organization structure are oscillated by a set of benefits and limitations. Further, from the very analysis, it is clear that the benefits surpass the limitations of embracing it. The central idea of this organizational structure is that or eliminating the traditional systems of organization and embracing a virtual system where physical and legal structures are also eliminated. The businesses that embrace this system often enjoy the benefits comprising of reduced cost of traveling especially in the context of accessing experts. Besides, it saves time and even relieves the managers the task of having to monitor employees. However, there a set of setbacks including the issue of loyalty by the employees. In consideration of the stipulated case studies, it is clear that, if well managed, there is a feasibility that it will certainly serve the businesses or companies well. 


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