Strategy and Structure in a Virtual Organization

Introduction

Advances in internet and communication technologies are mandating organizations to experiment newer forms of organizations structures such as; distributed structures, network structures and virtual organizations for their business. A virtual organization is a network of companies which support each other around a product and or a service idea. The companies in the network should be seamlessly integrated by information and communication technologies so that to the customer it is not apparent that the different processes are handled by separate companies. With the availability of internet and other communication technologies a VO is a viable option for many innovative entrepreneurs. According to Lipnack and Stamps (1997), virtual team is “a group of people who interact through interdependent tasks guided by common purpose” that “works across space, time, and organizational boundaries with links strengthened by webs of communication technologies” (p. 7). We are using the same definition for our study.

(Mowshowitz, 1986, 1994) used the term Virtual Organization for the first time in 1986. Since then, literature on virtual organizations has grown. There have been numerous definitions of virtual organizations (Dubinskas, 1993).

A virtual organization (VO) is an alliance of companies formed for the purpose of delivering specific products and or services. According to Porter (1990) “A virtual organization is a collection of business units in which people and work processes from the business units interact intensively in order to perform work which benefits all” (Skyrme, 1999). The literature suggests that virtual organizations tend to be non-hierarchical (Beyerlein & Johnson, 1994; Goldman et al., 1995) and decentralized (Baker, 1992). The company who is responsible for the products and services may be called the “core” company. The core company is linked together by information and communication technologies (ICT) with other companies called “satellite” companies or VO partners. Core company and satellite companies share information, resources and skills in a seamless way so that the core company can deliver products and services to the customer and can create an impression to the customer that they have control over every aspect of the business process (Townsend et al., 1998). With the availability and ubiquitous nature of networked based information technology, a company's business processes theoretically can span across the entire globe. Opportunity exists for organizations to deliver goods and services to the customer efficiently without the need to have physical control and ownership of many of the businesses processes. So the viability of VO's is a present reality rather than a distant possibility (Kotorov, 2000; Coulson & Kantamneni, 2000).