Virtual Organizations

Virtual Organizations

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Virtual Organizations (graphics not included)
The virtual organization is a network of independent suppliers, customers, and even competitors, generally tied together by computer technology (Roger, 1991). They share skills, costs, and access to markets. It is tend to have flat structures in which information and decision making move horizontally (Judith R.G, 2002). Through the support of modern electronic system, it becomes possible to link people across formal organizational boundaries (Judith, 2002, quoted in S.G. Straus, S.P. Weisband, and J.M. Wilson, 1998).
Virtual corporations have some major characteristics (Judith, 2002, quoted in Byrne. n.d.) as following state: technology, excellence, opportunism, trust and no borders. Technology makes distance no longer a problem while entrepreneurs or companies far away from, due to the computer networks link people all over the world. Excellence was showed by each partner bringing its core competencies to the corporation, which can exert all advantages. Companies make alliances for specific market opportunity and this is a more efficiency work way than any others. Members in a virtual organization must trust their partners due to they meet the need by cooperating. The new communication ways were brought by computer networks, which blur the traditional hierarchies and boundaries.
Metersbonwe took the lead in adopting virtual organization among Chinese garment industry by brand chaining operation. The company stated to take full advantage of market resources by controlling, retailing, the core segment in the link in order to concentrate on its core business, Brand construction and Design, while non-core business was outsourced: Manufacturing and Sales network. At present, over 200 manufacturing factories have established long-term cooperative relations with Metersbonwe Group, saving 62.5m$ for the company. More than 900 franchising shops save an average of 62.5m$ every year as well. At the same time the company collects capital from the franchising fees. Metersbonwe achieved great success by using this model.

Figure 1: Metersbonwe¡¯s network

The market-oriented structure groups workers according to the market they serve, such as product, project, client, or geographical area. Large companies that implement a market-oriented structure may have market-based divisions or create a conglomerate of separate subsidiaries (Judith R. Gordon, 2002). I believe that this structure is more adoptable by those multinational corporations which have to respond to diverse cultures and meet the unique needs of various countries. The teams have the same goal meeting the market demands.

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However, this structure duplicates resource so as to increase the costs.
Before reformation, Philips had a market-oriented structure. Each region filiale had the same operation departments and each department had the similar function offices. Take Philips Shanghai Filiale for example, it led five operation departments: consume electronic product, family electrical equipment, lighting, medical treatment system and semiconductor. And under each of five departments, there also were several similar functional offices: marketing office, public relations office, HR office, etc. (Figure 2) As a result, there is a tree-like structure which highly duplicates resources and the managing costs. Due to the gloomy situation of the global economy and the competitors sharing the market, Philips faced the deficit for years.

Figure2: Philips Shanghai filiale structure

Organic structure looks most like the boundaryless organization. It is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network (using lateral and upward communication as well as downward), and involves high participation in decision making£¨Stephen P. Robbins, n.d.£©.Organic structure, in my opinion, is a highly adaptive and flexible structure. It is more suitable for the uncertain condition. The greater the uncertainty is, the greater this structure to be needed. Collaboration is both vertical and horizontal way, easy to control and change if the need arises. What¡¯s more, adaptable duties, low formalization and decentralized decision authority are also the characters of this kind of model. Thus the advantages of this open system are clearly pointed out: low in complexity, formalization and centralization, and keep activities furthest efficiency.
By establishing ¡°service sharing center¡±, Philips has successfully control the costs, as other giant corporations did. ¡°Share¡± means departments will not set up the same offices, instead, all background support will be offered by ¡°service sharing center¡±. By changing the structure, Philips does not only reduce nearly 0.3 billion EURO costs than before, but also optimize the resources and predigest the working flow. According to this ideal, ¡°Philips People Service¡± was the first part to establish a sharing background to take the first step achieving ¡°Transforming into One Philips¡± plan. At present, Philips has set up the ¡°HR sharing center¡± in Shanghai, which means in the short future, all HR problems of Philips¡¯ China filiales will be solved together in this center. (Figure 3) Now it establishes five core tasks: recruitment, position trade, encouraging management, employee training and HR information systemic management.

Figure 3: HR sharing center in Shanghai

An organizational culture describes the part of its internal environment that incorporates a set of assumptions, beliefs, and values that organizational members share and use to guide their functioning (R. H. Kilmann, M. J. Saxton, and R. Serpa, 1986). There are different types of organizational culture and each kind of culture was decided by varies condition: the nation background, what the orientation of this organization is, what leader¡¯s value is, how decisions are made and how people communicate with others, how the organization is structured, etc. Generally speaking, at the beginning of a culture forming, people have different channel and status to create their own culture in different types of organization; different structure mostly decides the people¡¯s behavior and the way people communicate with others. While it¡¯s already formed, it affects the whole organization with a strong power. Otherwise, organizational structure can be changed if it is no longer suitable the company developing; however, the culture is more fixed and stable while it¡¯s already formed.
I¡¯ll take Lenovo Group Ltd. for instance: Yang Yuanqing was appointed as CEO in this group in 2001. Following his lead, Lenovo develops a family-type organizational culture, which emphasize the harmony and equality in communication. Yang Yuanqing would love staff call him name instead of ¡°sir¡± or his official title (Chinese always avoid to call boss¡¯s name directly because it is a kind of disrespect basing on Chinese traditional culture). Everyday Yang stands in front of the gate of company to welcome his underlings by saying ¡°morning, xx (name)¡±, and people always respond as ¡°morning, Yuanqing.¡± And also, in some feast days, his employees make up as a nurserymaid with a baby-car on which there is a big doll named ¡±Yang Yuanqing¡±. He wants to make a notion that every one in this company should feel solidary and cohesive as a big family, and all of people have the responsibility to exterminate any sense of repression and hierarchical relationship. I assume that affected by this kind of organizational culture, Lenovo has not any possibility of bureaucracy growing up. Culture affects the way staff communicating with both colleagues and leaders, so as to affect the organizational structure.


Each of models has its own advantages; however, we can¡¯t figure out simply which is the best structure for companies as different situation made different results. Structures are frame of companies to carry out leader¡¯s idea and operate its business. A good structure is not the only factor of a corporation¡¯s success; however, a good structure can bring the minimum encumbrance and make the management well-ordered. Basing on different market environment, region or other factors, structures should be changed if it is no longer fit for corporation¡¯s development, or it will increase the costs, difficulties and reduce the profits. Otherwise, culture is an important part affecting organization. An excellent corporation must have cultures which agglomerate its people to achieve the same goal.
Due to the speedy developing of the society and emerging of new technologies, it will come out new structures or theories of organization. How to select a suitable one helping companies well-managed will never stop being researched.
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