Network Organizations
Typically, a network organization refers to a collection of autonomous units that behaves like a solitary larger entity, employing social mechanisms for control as well as coordination. It is also be conceived as an organization that is flexible in adapting to any change in its environment. Consequently, the entities that make up a network organization are normally legally independent but not always. Again, some of the entities may be wholly-owned subsidiaries. Moreover, they can be divisions within the firm but treated as separate firms that sell to outside clients. On the contrary, environmental processes refer to actions, processes, cycles, and operations that occur naturally in an environment with any intervention of assistance of man. For this assessment, it is convenient to distinguish the various types of network organizations. They include internal, stable, dynamic, and market.
Internal Network
Mainly, the internal network is a large firm that sees its units as separate profit centers. The firm may encourage the units to vend its products outside the firm as well. The main purpose of the firm doing this is as a result of the belief that if its units have to carry out business operations with the set prices by the market, then they have the incentive to both reduce prices and improve performance. Moreover, in an internal network organization, the corporate headquarters acts as a broker. Moreover, this kind of network exists in a firm that bases itself on the basic premise of exposure of the internal units to the harsh competitiveness in the market, they will remain innovative and also rise to capture both market and entrepreneurial benefits without the whole firm engaging much outsourcing. Further, each internal unit has the power and capacity to negotiate with central units just like any outside vendor. A good example of a firm that has adopted this type of network organization is the General motors. The component business of General motors maintains independent divisions that typically specialize in the production of the automotive system. The independent decisions are encouraged to carry out business operations on the open market, even though the cooperate with GM’s central unit whenever appropriate. The net outcome is greater effectiveness for the company as a whole.
Stable Network
A stable network typically consists of a central firm whose role is outsourcing much of its operations to other firms. For instance, at BMW, the firm outsources sixty-five percent of the total production cost of a vehicle. Although the company does not own its vendor companies outright, it ensures that stable relationships with them are maintained and may also make financial investments in these firms where appropriate. Consequently, the central organization has a lasting relationship with suppliers. In that regard, the suppliers have access to the firm’s computer system and again, they may be present when the firm is having private planning sessions. Moreover, the organization possesses several alliances, long term contracts, joint ventures, etc. going with different firms. Another example is Dell that has a long-lasting relationship with Intel for processers.
Dynamic Network
In this type of network organization, outsourcing is even more heavily. Typically, an integrator company identifies and then assembles assets owned by other firms. The integrator is a convenient downstream player with core competence in understanding the market. Moreover, less emphasis is placed on discovering companies to service the central organization only. Again, partnerships with vendors are not often. The central organization also focuses on contracts for most other functions. For instance, Nike Inc. is the center of a dynamic network with its only functions being marketing and R&D. Dynamic networks are most common in motion pictures, publishing, biotech, toys, and fashion industries. Other examples include Reebok whose main focus is redesigning strengths and outsourcing the rest. Ikea main focus is on retailing strength and although it coordinates everything else, it also outsources most of the other operation.
Market Networks
This is the fourth type of network organization. In this type of network organization, there is no lead player to coordinate the others but rather is a collection of various companies trading in the market fall into a stable pattern of correlation that slowly becomes solidified. In that regard, members of this kind of network organization may not be cognizant that they have fallen into this pattern. Such organizations can be termed as natural subassemblies of the economy.