Thursday, February 2, 2012

Network Economy

The trend in economy has now changed. One company cannot survive just by fighting by itself alone. In the era of network economy, some businesses collaborating together to achieve the specific goals. The key term in network economy is shared resources. The use of shared resources can help company to reduce cost and increase productivity and profit.

Take for example the traditional form of business of Ford Motor Company where for each type of vehicle it wanted to produce, it needed to build another factory. Why? Because each vehicle type requires different speciality, tools, and technology. In the network economy, a company can collaborate with different suppliers for spare-parts, different assembler, and distributors. This help the company to reduce cost like the necessity to build new factory just to introduce new model of product. The company can create the design in America and assemble the product in other country like China.

The interesting thing with network economy is that even the new entrants can virtually be like a big company. It’s just like what the Jack Welch, the former CEO of GE, wanted that was to create a big company with soul of the small company. The advantage of small company is that the small company is more flexible and manageable. The small company can collaborate with the old market players to gain more knowledge and capability to fight the existing big companies to survive. This is called virtual integration.

This type of economy was actually failed in the 1950-1960. However, the probability of success of this type of economy is higher now. This is because the development of IS/IT that is very rapid and able to support this kind of economy, which was practically difficult back then. The development of IS/IT has lead to the development of new organisation structures. Below are some of them:

1.Task Focused Team
2.The Networked Group
3.Horizontal Organisation
4.Matrix Organisation
5.Learning Organisation

Each organisation structure has its own advantages and disadvantages. The most important thing is, the organisation structure must conform to the necessity of what the company wants to be.

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