CLASS 8 - Virtual Corporations


Virtual (Defined): 


     Possessing powers or capabilities of something else.

     Producing the impression of existing anytime and at any place (pervasive).


Virtual Corporation:  An ad hoc organization composed of teams from various companies, suppliers, customers, etc., brought together to accomplish some specific project.  Virtual corporations are a result of the development of office and communication tools that allow several people or groups to work on a project from various locations, each providing his or her skills or services without necessarily meeting personally. Virtual corporations are loosely developed "arrangements" of different people or companies who work together on a project, to deliver a service, or to create a product, and then (once that project is finished), disband, and move on to other projects and form other "virtual corporations". In essence, a special informal corporation has been formed with each member providing what he or she does best, with the result that all members of the "corporation" benefit.

The concept of virtual corporations can redesign the way staff work and the space in which they do so. It is a movement toward a more fluid structure. It can take down "walls" and encourage more interaction between staff members. This is not just about making staff members telecommuters, but about changing the way they work. Through the concepts of virtual corporation a group can be formed to customize a product for a specific client's needs -- mass customization, rather than mass production, to meet the needs of the future.

Virtual Product (physical or service): 


Formerly well defined structures begin to lose their edges, permanent things start to continuously change, and products or services adapt to match our desires.


     Available at any time, in any place, and in any variety.

     Provides instant gratification to consumer

     Made possible by innovations in information processing, organizational dynamics, and manufacturing systems


Examples of Virtual Products and Services:



     Photographs (Polaroid, 1 hour developing)

     Video Cameras (action and still)

     Desktop Publishing

     Jiffy Lube (service)

     Travel Reservations


     Banking Transactions via ATMs



Consider how Internet technologies have/will facilitate the growth of the “Virtual” concept.


Virtual products may actually exist before they are produced.  Their concept, design, and manufacture stored in the minds of cooperating teams, in computers, and in flexible production lines.


A perfect  "Virtual" Product can never actually exist, however, they can come close.


Example:  Japanese Car Manufacturers are striving to virtualize automobile production by putting manufacturing systems in place that will produce cars to domestic order in just seventy-two hours.


Characteristics of Virtual Corporations:


     Common partnership or affiliation

     Common identity among all members

     Common technologies

     Common methodologies and procedures that ensure consistency and quality of services and products

     Complementary and non-competing capabilities and goals


Back to the definition of the VC:  Customers are integral to the concept.  Alvin Tofler in "Future Shock, circa 1980, talked of "prosumers" (consumers who produced what they consumed), and "de-massified" production.


Customers of the VC must be integrated into the design, manufacturing, and distribution process on a real-time basis. 


In the VC, the customer plays a role that may, at times, be indistinguishable from that of their supplier.


Workers in a VC may find massive changes to the culture of their traditional work environments.  For example:


     Greater responsibility and individual control whether they like it or not

     Lack of a familiar "status-quo" because there no longer is one

     Forced interaction with customers, suppliers, management and membership in ad hoc teams

     Demand for greater levels of education and technical capability


Innovation is becoming the key to success and VC's will be very

innovative.  Example:


Beneton:  Rather than knitting sweaters in different colors, they knit sweaters in neutral colors and dye the completed garment to meet current market demand.  When coupled with a real-time reporting system from retailers, response to color demand becomes instantaneous and obsolete inventory is minimized.


Quick Response (QR) Chains are becoming the leading production improvement initiative in the textile and textile related manufacturing, distribution/retailing industry.  QRs:


     Rely on multi-directional, real-time information

     Pass sales and inventory status to suppliers and manufacturers instantly

     Trigger JIT activities up  to the retail level


Services in the Virtual World:  A good is an object, a device, a thing; a service is a deed, a performance, an effort  ..... It is whether the essence of what is being bought is tangible or intangible that determines its classification as a good or a service (Texas A&M's Leonard Berry).


All Virtual Products are service like in that they: 


Are not inventoried, rather they are produced for immediate consumption

Are produced with a high degree of customer involvement

Customer competence yields higher quality products


Marketing challenge:


Value marketing will replace Strategic marketing.  (Define Value Marketing)


Relationships with customers will be developed that enable them to obtain maximum value from the product they have purchased (and probably helped produce)


Customer satisfaction must be absolute, not nearly perfect.


Customer expectation will drive product performance.


Government Influence on VCs:


     Tax and Government climate must encourage long-term investment

     Education must be superior to current levels

     Resource conservation must be encouraged

     Research must be incentivized

     What do you think about the concept of Virtual Corporations?



Some Links to Articles about Virtual Corportations:

Virtual Corporations and Outsourcing

The Virtual Corporation

The Virtual Corporation #2

The Performance Advantage





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