The article “Virtual Corporations” elaborates on the concept of corporations that rely primarily on electronic means in order to coordinate operations, communicate instructions, implement manufacturing requests and enable a system that enables a company to operate beyond what its current resources are capable of doing. Before proceeding it is important to note that the various concepts within the article center around 3 precise models for virtual corporations (Dominguez & Garrido, 2009).
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The first model is comparable to a temporary network of firms that are placed together in order to exploit market opportunities as they arise while utilizing the innate specialties each firm possesses in order to produce the best results. Such a model can actually be seen in the present with the rise of outsourcing and offshoring wherein multiple firms usually work in tandem across national borders in order to produce certain products or services.
The second models that the article elaborates on are virtual companies that focus on creating virtual products in order to address consumer needs. This particular type of virtual company often takes the form of software development firms that specialize in the development of applications that directly serve consumers. Corporations such as Java, Sun Microsystems, McAfee, AVG, Norton and other virtual production companies are some of the best examples of this particular type of company.
It should be noted, though, that the aforementioned examples have yet to reach the status of virtual corporations, however, due to the way in which their services and methods of operation continue to evolve, it is likely that they will virtual companies within the coming years. The last model the article elaborated on focuses on turning fixed workforce costs into variable costs during periods in which the market demands a particular market or service.
This particular model is actually utilized in the present by numerous retailers such as Wal-Mart, Costco, and Wholefoods who have set up a flexible workforce scheduling system based on computer programs that take numerous external factors into consideration before assigning employees to particular shifts. One way of understanding such a concept is through the current outsourcing industry.
As mentioned within the article, a virtual corporation acts as a network composed of a variety of organizations that focus on different aspects of a corporation’s manufacturing process. In most cases, the ability of a firm to produce certain items is inherently limited by the resources they have on hand. This does not refer primarily to monetary resources but can actually encompass aspects related to manufacturing facilities, skilled labor, natural resources, etc.
Through outsourcing, a virtual corporation is able to make use of the facilities, manpower and access to natural resources that one of its members has in a different country. As such, it does not have to physically construct the facilities nor develop the necessary processes and train employees to create the products; rather, it can make use of such aspects that are already present in another one of its members.
One iteration of such a process that can be seen in the present is the relationship that Foxconn enjoys with Apple, Sony, and the Microsoft corporation wherein the company acts as a third-party manufacturer for their flagship products such as the iPad, the Sony Playstation 3 and the Microsoft Xbox 360.
When examining Apple, Sony and Microsoft it can be seen that all 3 companies have in effect outsourced various aspects of their manufacturing process to third-party manufacturers, which enables them to operate in a similar way to the format of a virtual corporation elaborated on within the article. They no longer possess the manufacturing facilities themselves and instead rely on partners within their supply chain that have the appropriate facilities, manpower and method of mass production.
This enables such corporations to work with resources they do not currently have and focus more on the product development and operations side of the business. Full virtualization on the other hand, as indicated within the article, comes in the form of multiple partners within the same virtual corporation that focus diverse specialties (i.e. marketing, promotions, HR, manufacturing etc.) and can easily disband and move on to other projects once the a particular product has lost its market value.
Some aspects of such a degree of corporate virtualization have actually manifested itself within Silicon Valley, wherein virtual corporate teams do exist to a certain extent, which focus on the development of particular applications and disbands once the development stage is over.
As explained within the article, there are four characteristics that are in demand within a technology-oriented enterprise, namely: high market responsiveness, fast developments, low cost, and finally high levels of creativity, innovation and efficiency. Supposedly, virtual corporations are able to address all these issues since they rely on electronic rather than the traditional brick and mortar method of doing business (Dominguez & Garrido, 2009).
For example, virtual corporations were indicated as inherently having a high degree of market responsiveness due the greater facilitation of information and technology between firms which enabled them to better adapt to changing market forces as compared to more traditional organizations that had to rely on their own internal mechanisms in order to adapt to change.
It should also be noted that virtual corporations also act as low-cost entities that focus on innovation and efficiency, the reason behind this originates from the fact that by combining the specializations of various partner firms and through proper information and technology sharing within the virtual infrastructure that the company has developed, this in effect increases the overall level of innovation within the company and increases the level of efficiency it has in developing and producing the products it is selling.
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Creativity in this instance, manifests itself through the shared plans that the various partner firms contribute towards in order to manifest the finished product output of the company. Towards the end of the article, it concludes with a section on possible future trends regarding virtual corporations and indicates that within the next few years, it is quite possible that full virtual corporations may come to exist, but at the moment they do not.
When it comes to the statement “should exist in the near future” it actually becomes immediately obvious that the article has in fact alluded to the concept of virtual corporations as potentially becoming the future corporate structure of companies within the near future, however, it never really indicated that they currently existed. In fact, when examining the article again it was noticed that aside from Agile Web Incorporated, the article failed to give any solid evidence regarding the presence of other virtual corporations within the market at the present.
This does not seem to be a failure on the part of the writers to provide sufficient examples, rather, it extends from the fact that the writers did not have any other examples from the present to accurately utilized within the article. Thus, the article ends on a tantalizing note wherein it presents readers with the numerous possibilities that could possibly exist as a direct result of virtual corporations and presents the means by which it could be accomplished (Dominguez & Garrido, 2009).
Criticizing the Article
The main criticism I have against the article is that it states that it will be many years from now before a true virtual corporation can actually exist. This is actually rather fallacious given the current popularity of virtual products and the means by which they are created today. First and foremost, the assumption that it would take years before virtual corporations exist neglects to take into consideration the current popularity of the Apple Application store and how many of the apps created on it were actually conceived by virtual corporations.
Many of these virtual corporations actually came into being within the various development centers within Silicon Valley wherein select individuals acted as corporate partners who contributed their skills in order to help develop an application that can be sold on the Apple Application store, after which it was usually the case that these virtual corporations split up with their individual members going on towards other ventures within the area.
While this is no where near the globally encompassing virtual corporation that was envisaged by the article, the fact remains that it is clear evidence that virtual corporations do in fact exist at present.
In fact, there are other such examples of online virtual corporations existing such as through services such as Elance.com or odesk.com wherein various services related to writing, virtual assistance, marketing and product promotion can be outsourced to virtually hundreds of possible partners with an internal application existing on both sites enabling easy collaboration on shared projects in order to accomplish the designated goal of the virtual company.
It can also be seen that the creation of open-source software projects such as Mozilla Firefox and Linux often involved teams of individuals from numerous global locations all contributing towards the subsequent creation and distribution of the software.
Not only that many of today’s companies have increasingly been utilizing electronic services as the primary means by which they run their business. For example, Amazon.com is a clear example of a company that is on the forefront of being one of the first major corporations to become a virtual corporation.
It is based on examples such as these that it becomes clear that while the article was right regarding the shift towards virtualization, it got the timeline wrong given that various iterations of virtual companies with real-world goods already exist with one of the world’s largest online retailers set to become on of the first in what can be expected as a long line of new virtual companies that will come to dominate the market within the next century.
Dominguez, S., & Garrido, J. (2009). Virtual corporations. Electronic Business, 3992 – 3996.