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Managing Virtual Web Organizations in the 21st Century:

Issues and Challenges

by

Ulrich J. Franke



Book Description

As the concept and use of virtual organizations grows, it is necessary to gain a better understanding of how the virtual economy operates. provides a guideline of how to manage virtual organizations, by introducing the concept, explaining the management theories behind the concept and presenting practical examples of successfully operating virtual organizations.

About the Author

Ulrich J. Franke is a researcher at Cranfield University, England. He has extensive international work experience in the field of logistics management. He has worked for major German blue-chip companies, with his latest position as the head of logistics of a manufacturing company. He holds German degrees in economics and business information systems. Additionally he received an MBA degree from Oxford Brookes University and a PhD in organizational theory from Cranfield School of Management. Presently, he is at Cranfield School of Management and conducting comprehensive research in the management of virtual organizations.

From the Inside Flap

With the development of the Internet and modern information and communication technology (ICT), new ways of conducting business have been evolved. The term e-commerce has become a buzzword and Internet applications such as virtual marketplaces, Internet auctions and Internet procurement platforms are becoming more and more popular with companies in purchasing and selling products and services in virtual space and in the global marketplace. However, e-commerce does not create any value on its own; it basically improves the market transparency, and it increases competition and provides companies with an extended potential customer base.

On the other hand, e-business aims to improve the value creation process between companies or company units by making use of Inter- and intranet applications. Thus, B2B e-business seeks to generate synergies between value chain elements through the fast and detailed exchange of data and information along the supply chain. Theoretically, e-business is a way to organize cooperations between individual parts of value chains without geographical limitations and to generate benefits for all parties involved.

However, despite the differences, both e-commerce and e-business have to be integrated on the company and intercompany level. Both concepts, the kinds of e-relationships within the supply chain and towards the external environment, are interrelated and constitute the emerging global e-economy.

Today, many e-commerce and e-business concepts promise economic benefits through ad-hoc market transaction, short-term ones of collaborations and almost unlimited access to global resources. All these e-solutions are short-term driven and exploit the immediate global market opportunities. This short-term thinking and opportunistic behavior lead to uncertainty and mistrust between the value chain elements and consequently to unsatisfied final customers. The main criticism is that these e-solutions lack sustainability, neglects long term strategies, and hinder the generation of synergies through cooperations. Basically, the businesses become opportunity driven.

In contrast, the virtual Web organization is a different and particular form of an e-business organization model with long-term prospects. Like other e-business models the virtual Web concept aims to improve the collaboration between independent economic actors. However, in addition it focuses on the fast and flexible configuration and operation of dynamic value chains. Similar to other new forms of organizations the main drivers of virtual Web organizations are customer orientation and globalization facilitated by the global spread of the Internet and efficient ICT applications. The main difference compared to traditional and other new forms of organizational arrangements is the different business understanding of the partnering virtual Web member firms. On the one hand, the tendency towards concentrating on core competencies has been resulting in the fact that individual companies cover smaller parts of the total value creation process. This tendency increases the need of companies to be included in many different value chains in order to market and exploit their specialization and core competencies. On the other hand, this development increases the dependency on other, more powerful value chain partners, as well as the need to coordinate the activities along the supply chain. The different business understanding of virtual Web partner firms is integration and cooperation with other partner firms in dynamically formed and temporally operated virtual corporations.

Basically, it is the openness of partner firms for ‘real’ cooperation, which means the preparedness of partner firms to share costs, risks, benefits and profits. The competitive advantage of such interorganizational virtual organizations (virtual corporations/virtual enterprises) is the dynamic and flexible configurations of (world-class) value chains.

However, the major concerns of partnering companies are how to find suitable partner companies with complementary (core-) competencies, how to establish a trust-based partnership in a very short period of time and how to coordinate the activities of the geographically and organizationally dispersed independent partner companies.

The virtual Web organization, as an e-business organization model, provides an organizational framework that facilitates the coordination and cooperation between virtually partnering companies. Basically, the virtual Web concept incorporates three sub-concepts: the virtual Web platform, the virtual corporation, and the Net-broker.

First, the virtual Web platform is a pool of independent companies that generally agree to cooperate. This virtual Web platform provides the environmental condition, such as trust and coordination mechanisms and tools, necessary for the dynamic configuration of market and customer-driven value chain constellations.

Thus, deriving from the rather stable virtual Web platform, virtual corporations are temporary operational units that are configured on market opportunities and/or customer needs. Moreover, virtual corporations are characterized not by close but integrated cooperation between independent and dispersed partner firms. Virtual corporations can take the form of supply chains, joint R&D projects and any other form of vertical or horizontal partner cooperation. Both the relatively stable virtual Web platform and the dynamic virtual corporations are integrated and constitute the virtual Web organization.

The third organizational element of the virtual Web concept is the management organization, the so-called net-broker (management service company) that acts as a inter-firm network facilitator. Basically, the net-broker initiates the virtual Web platform, maintains the relationships between the Web partner companies and facilitates the formation of market and customer driven temporary virtual corporations. Modern interorganizational ICT applications and a common business understanding of partnering companies facilitate the collaboration between the virtual Web partner firms.

This book and its individual chapters aim to provide readers with a better understanding of this new kind of e-business organization concept. Thus, this book deals with issues and challenges of managing virtual Web organizations. Besides introducing the organizational concept of virtual Web organizations, the individual chapters provide theoretical background, practical examples and guidance on how to manage virtual Web organizations.

The different book contributions view and investigate the virtual Web organization from different managerial perspectives, identify issues and challenges about the management of the stable virtual Web platform and, in particular, the deriving dynamic virtual corporations (virtual enterprises) as well as introduce management models, concepts and tools that are suitable to operationalise virtual Web organizations. In general, this book can be regarded as a handbook – guidance for the management of a new kind of b2b e-business organization, namely the virtual Web organization.

The first part of this book reviews the particular challenges in respect to managing virtual Web organizations and proposes possible solutions on how to tackle those challenges by applying a number of distinct managerial models, concepts and tools developed to facilitate the management of dispersed and independent partner firms in virtual space and real day-to-day business performance.

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