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The Power Of (Virtual) Corporation – Part 2

“When we talk about virtual corporations today, we’re mainly talking about alliances and outsourcing agreements. Ten or 20 years from now, you’ll see an explosion of entrepreneurial industries and companies that will essentially form the real virtual corporations (John Sculley, the former chairman of Apple).

What is a “virtual corporation”?

The virtual corporation is a temporary network of independent companies, suppliers, and customers - all linked by information technology to share skills, costs, and access to one another’s markets. It has no hierarchical structure, no central office or headquarter, and no vertical Integration. It therefore cannot be viewed as an institution in the traditional sense, as was shaped during the Fordist era. It is virtual since its form organization is based on the ability to acquire and maintain critical competencies through a liquid and flexible design.

The term “virtual corporation” was a buzzword in the 1990s, especially during dot-com era, when there was a high demand from traditional organization to provide new kind of services, based on outsourcing. In the days of the dot-com related businesses, it seemed that everyone was so busy, that they had to outsource most of their tasks to someone else. It was than when the idea that a business actually didn’t need to have a large number of regular employees to be a major player - caught on.

There are several motivations for formation a virtual corporation: first and foremost it creates synergy between business, thus allowing them to combine their efforts to increase and improve their performance (we might call it “economies of scale and scope”). Furthermore, it allows businesses to reduce complexity, and achieve greater flexibility of response to changing market situations. Last but not least, it enables resourcefulness, a priority requirement in unstable markets, which is based on the ability to reconfigure the business’s network quickly, without incurring any increased risk by doing so.

Virtual Corporation depends more than anything on information technology. The more potential partners, suppliers, and customers have access to the technology, the greater the flexibility - in technical and operational terms - that can be built into the network structure. Here is where SOHO OS becomes relevant, as it provide small and medium businesses with a platform which meet technological and functional requirements for the establishment of not only one but many virtual corporations.

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