The virtual organisation - Business Environment

As indicated above traditional organizations have structures which are designed to facilitate the transformation of inputs into output. Increasingly as the business environment changes, relationships both within and between organizations have needed to become more flexible and this has given rise to such developments as the growth in teleworking and the establishment of dynamic broker/agent networks involving considerable outsourcing of sub-tasks to ‘agents’ (e.g. manufacturing, distribution) by the core organisation (the ‘broker’). It is fair to say that this demand for greater flexibility has been driven partly by the market and partly by cost considerations and the process of change has been facilitated by relatively rapid developments in information technology. One area currently exciting the interest of writers on management and organization is the concept of the virtual organisation, arguably the ultimate form of organizational flexibility.

In essence a virtual organisation or firm signifies an extremely loose web of essentially free lance individuals or businesses who organize themselves to produce a specific customer product (e.g. an individual holiday package with particular features unique to the customer). Without any permanent structure or hierarchy this so-called firm can constantly change its shape and, despite existing across space and time, tends to appear edgeless, with its inputs, outputs and employees increasingly dispersed across the linked world of information systems. Given modern forms of communication, the potential exists for a totally electronic-based organization trading in expertise and information with no real-world physical identity. This stands in stark contrast to the traditional view of the firm as an arrangement which adds value by transforming basic economic inputs (e.g. land, labour, capital) into physical outputs or services.


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