Page 214 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes
Example:Athletic shoe companies like Nike and Reebok have outsourced
manufacturing of their shoes to countries such as China and Indonesia, where labour costs
are low. What Nike or Reebok does is the design and marketing of shoes. Networked
computer systems and the Internet enable the organisation to exchange data and
information. The organisation may be viewed as a hub surrounded by a network of
outside specialists.
As may be seen from the above, the core organisation is only a shell with a small
headquarters acting as a broker connected to supplier, design, manufacturing etc.
organisations.

Example: Hennes and Mauritz( H&M), a famous Swedish retail clothing company,
is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which
are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible
than many other retailers in lowering its costs, which aligns with its low-cost strategy.
The potential management opportunities offered by recent advances in complex networks
theory have been demonstrated including applications to product design and development,
and innovation problem in markets and industries.

6. Virtual Organisation: This is an extension of the network structure. In this approach,
independent organisations form temporary alliances to exploit specific opportunities,
then disband when their objectives are met. The term virtual means “being in effect but
not actually so”. The virtual organisations consist of a network of independent
companies – suppliers, customers or even competitors – linked together to share skills,
costs, markets and rewards. The members of a virtual organisation pool and share the
knowledge and expertise of each other.
Creating Agile Virtual Organisation: New ways to manage change and to compete in a
rapidly changing business world are emerging under the concept of the agile enterprise.
Agile organisations can be almost any size or type, but what distinguishes them from
their lumbering traditional business counterparts is the ability to read and to react quickly.
They can also be virtual, meaning they can reconfigure themselves quickly and temporarily
in response to a challenge, which gives them agility, but then dissolve or transmute
themselves into something else.
Virtual organisations have been existing throughout history, from the whaling companies
of the 19th century through the film studios of the 20th. The virtual organisations have few
full-time employees or usually temporarily hire outside specialists to complete a specific
project, such as a new software application. These people do not become a part of the
organisation, but join together as a separate entity for a specific purpose. Sometimes
companies use a virtual approach to harness the talents and energies of the best people for
a particular job, rather than trying to develop those capabilities in-house.
Now that serious management tools are beginning to appear, the agile virtual enterprise
is no longer just a theoretical possibility. When an organisation uses a virtual approach,
the virtual group typically has full authority to make decisions and take actions within
certain predetermined boundaries and goals. Most virtual organisations use electronic
media for sharing of information and data. Some organisations have redesigned offices to
provide temporary space for virtual workers to meet or work on-site.

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