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Virtual Organizations

Nowadays, there are many discussions about virtual organizations; however, not all of them come to a clear conclusion. Modern networked economy significantly increases its role. In response to these changes, companies are looking for new forms of cooperation and governance. On the basis of modern information technologies, there were created systems of reorganization of existing organizations and fundamentally new types of organizations – virtual companies. Gradually, managers are beginning to realize that their business will grow only when the organization is closely linked with the modern technology, including the Internet. Thus, the concept of “virtual organization” appeared

Potential Benefits

The advantages of virtual forms of organization are: the ability to choose and use the best resources, knowledge and a possibility to save time. Competitive advantages of virtual enterprises are:

• The speed of the market order.

• The possibility of reducing the total cost.

• The ability to meet the needs of a customer in a better way.

• The flexibility in adapting to changes in the environment.

• The opportunity to reduce the barriers on the way to entering new markets.

The analysis of virtual enterprises shows that the main characteristics of virtual forms of organization are: an open distributed structure, flexibility, a horizontal linkage priority, autonomy and specialization of network members, high status of information and human resources integration (Camarinha-Matos & Afsarmanesh, 2005).

Potential Drawbacks

Along with the above potential benefits, virtual enterprises have some drawbacks as well. They include excessive economic dependence on partners due to the narrow specialization of network members, virtual absence of social and material support of partners of such organizations due to some inappropriateness of the classical forms of long-term contractual and conventional labor relations, a danger of excessive complexity resulting in particular from the diversity of the members of the enterprise Uncertainty about membership, open networks, self-organizing dynamics, uncertainty in planning of the members of the virtual enterprise are some other shortcomings of the virtual organizations.

Internet is permanently penetrating into people’s lives, handling almost all social relations. Based on this fact, the organization directors must understand that its activities will be successful only when it becomes a part of the virtual structure. This will help an organization to respond quickly to rapid changes in the environment, to penetrate all areas of the market, including the ones at the international level, as well as save money on the premises, attracting additional staff, etc. With advanced technology, organizations can achieve unprecedented heights of development.

This post was prepared by Bridget Curry. More of her articles check at

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