NETWORK ORGANIZATIONS

ORHAN BALIKÇI

Introduction

1. The Notion of Network

2. Define of Network Organizations

3. Functions of Network Forms Of Organizations

4. Disadvantages of Network Organizations

5. Kinds of Network Organizations

6. Virtual Organizations versus Network Organizations

7. Examples of Network Organizations

8. References

What’s Network?

A network is a pattern of social relations over a set of persons, positions, groups, or organizations.

A strategic view of networks is that «long term purposeful arrangements among distinct but related for-profit organizations that allow those firms in them to gain or sustain competitive advantage.»

The notion of a network implies nodes and links. The nodes can be people, teams or even organizations - networks operate at many levels.

Define of Network Organization

Network organizations are defined by elements of structure, process, and purpose. Structurally, a network organization combines co-specialized, possibly intangible, assets under shared control.

We can characterize network structures as long-term agreements among companies, which enable them to obtain and maintain competitive advantages in relation to other companies not belonging to the network.

In network structures a managerial center is created for the purpose of a coordination of all cooperating companies on the basis of the contract. The responsibility is divided among all parts of the network.

Functions of Network Forms Of Organizations

Network forms of organization foster learning. If an actor’s partner in a network form of organization

possesses considerable legitimacy or status, then the actor may derive legitimacy or status through the affiliation.

The network form of organization is the adaptability of this form to unanticipated environmental changes.

These organizations can alleviate sources of external constraint or uncertainty by strengthening their relationship with the particular sources of dependence.

Disadvantages of Network Organizations

The coordination problems arising from having different companies perform different parts of the work process would be enormous.

There has to be trust between the different groups so that they can share their ideas, something necessary of successful new product development.

In general, the more complex the value creation activities necessary to produce, market goods and services, the more problems there are associated with using network structure.

Kinds of Network Organizations

The general network organization framework permits several gradations in type. Network organizations are distinguished between three kinds:

internal,

stable, and

dynamic.

Internal networks

BROKER

SUPPLIER

DESIGNER

PRODUCER

MARKETER

Stable networks

Core Firm

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

Dynamic networks

Virtual Organizations versus Network Organizations

Network Organizations All of virtual organizations are

network organizations. But All network organizations are not virtual.

Network organizations can be long-term or short-term.

Separation from network and joining network are in the form of units.

Virtual Organizations Virtual organization is a special form

of the network organizations.

The structure of virtual organizations is temporary. When project is over, virtual network is gone.

There is no only one leader firm.

Separation from network and joining network can be at many levels.

Examples of Network Organizations

Sun Microsystems:

it has been considered highly decentralized organization comprised of independently operating companies. Sun positions information systems as a top priority, trying to achieve faster and better communication. With numerous "SunTeams," members operate across time, space, and organizations to address critical business issues. Sun managers identify key customer issues and then form teams with the critical skills and knowledge needed to address the issue. This team might include sales people, marketing personnel, finance, and operations from various places around the globe; customers and suppliers may become episodic members as necessary.

Examples of Network Organizations

Nike

It is a global brand with its Swoosh as the most recognizable logo. Nike utilizes the network structure to outsource manufacturing particularly because the company owns no manufacturing facilities and are keen in moving production when the needs arise. Nike, as a network organization, had dispersed members that is linked using advanced technology.

Nike is outsourcing everything except two activities: Marketing and Design. Nike keep them within the company, not only because they do it better than anyone could do, but also outsourced activities are easy target for copycat.

Examples of Network Organizations

Dell Computers (US)

Most of the components in a Dell computer are made by other companies while Dell focuses on its strengths--marketing, customer support and integration of these components into the final computer products.

Examples of Network Organizations

REUTER

This financial information services company created virtual teams with representatives from 12 companies around the world to work on user interfaces for the company. Facilitated by the signing of nondisclosure agreements, there has been savings in recruitment costs, staff benefits and overhead as a result of this virtual organization approach

References

Koçel, Tamer. İşletme Yöneticiliği. İstanbul: Beta Yayınları, 2010.

Boonstra, Jaap. Dynamics of Organizational Change and Learning. The Netherlands: John Wiley and Sons Ltd, 2004.

Jones, Gareth R. Organizational Theory, Design, and Change, Text and Cases. Fourth Edition. London, Pearson.

Nemiro ,Beyerlein, Bradley, Beyerlein The Handbook of High Performance Virtual Teams: A Toolkit for Collaborating Across Boundaries. John Wiley & Sons, 2008

The State Of Network Organization: A Survey In Three Frameworks, 1997. http://ccs.mit.edu/papers/CCSWP192/ccswp192.html

Joel M. Podolny and Karen L. Page, Network Forms Of Organization, Annu. Rev. Sociol. 1998. 24:57-76

Barbe and Alegre. Reshaping the Boundaries of the Firm in an Era of Global Interdependence. Emerald Group Publising Ltd. 2010.