Virtual Network Structure Overview

Executive summary

Many organizations are considering restructuring their organizations to meet the dynamic nature of the external environment resulting from globalization. One of the alternatives is the adoption of the virtual network structure that is enhanced by the advance in technology. Virtual network structure works within a cyberspace environment. The structure enables the organization to expand its boundary of operation such as foreign direct investment while control of subsidiary operation via the virtual teams. Effective integration of virtual network structure requires cooperation with the other organizations. The result of virtual network structure is the improvement in organizational performance resulting from being cost-effective, increased collaboration, and enhanced communication. There are some challenges such as incompatibility, lack of independent control, insecurity within the network.


In the current world, organizations are faced with the great competition due to the increased globalization. To be able to cope with these trends the organizations are pressurized to adopt a more flexible business structure. There has been an emergence of team-based projects that are decentralized which translates that the organization has to implement an appropriate structure. This turbulence within the external business environment such as the customer demands, scarcity of resources has culminated into the development of new organizational networks that are more flexible, require less formalization, and are more decentralized one of them being the virtual network. The virtual network structure has been perceived as an appropriate alternative that can be used to cope with the dynamics of the environment.

Definition of a virtual network structure

This refers to a large group of networks that are interconnected to ensure the attainment of a common goal. Implementation of an effective virtual network structure by large organizations is paramount in that it enables the firm to be effective in its communication across networks that are not necessarily similar. According to Giddens, structure results from a pattern of relationship that exists over time, (1984).

Characteristics of a virtual network structure

The virtual network structure concentrates on the collaboration of organizations that are interdependent but are located in different regions. It mainly relies on Information Communication Technology which enables the exchange of information and other resources that are vital for the success of the organization.


The structure enables the parties to operate in a cyberspace environment. This means that the parties meet electronically which is mediated by the interconnection of computers with the computer networks. The structure has to enhance the creation of an information space that facilitates the sharing of information and resources, (Alla, paragraph 11).

The decision of a firm to incorporate the virtual network structure into its operation many results the fortop–downfrom the need to increase the efficiency of its operation resulting from the increase in the degree of collaboration. For business organizations, this could be to increase the level of sales. This is due to the enhancement of the collective bargaining resulting from the increased linking amongst the organizations.

Factors Necessary For A Virtual Network Structure

The success of a virtual network structure depends on a number of factors. These include;

Degree of cohesion within the virtual business

For the structure to be effective there is a need for cooperation within or amongst organizations. The level of cooperation may include sharing of information regarding the best current business practices or new approaches to solving problems. Therefore it is paramount that there is an already established degree of cohesion, (Execution for system Incorporation, paragraph 4).

Duration of operation

In the determination of the network to use, it is necessary to consider its age if the network has been in application for a long period, then it means that it is reliable. A new virtual network has to prove its reliability by being in operation for a considerable amount of time to prove its performance before it can be incorporated into organizations.

Benefits Of Virtual Network Structure

The virtual network structure is currently being used as a structural alternative for many firms due to some reasons wincludeludes the following:

Increase in the degree of collaboration

The incorporation of the virtual network structure enables the organization to form a virtual web. This increases the degree of collaboration of the organization with other parties such as the competitors, clients, and customers. This structure also increases the service delivery of the firm to its customers hence contributing to solving their problems. Through the increased collaboration and integration, the firm can gain from the inter-dependence that results. These include a reduction in the level of overheads, advanced commitment from other parties, and also an increase in the chance of occurrence of opportunities for future collaboration. This means that virtual network structure leads to value addition to the organization.

The virtual network structure is proving feasible for adoption by organizations because it does not restrict the scope of operation for the organization to certain boundaries. The traditional structures are hierarchical in nature which means that there has to be a top-down type of control with more emphasis on formal this kind of structure, there has to be proximity between the management, employees and the departments for trust to be established. The virtual network structure focuses on informal communication thus bringing quality information that can be a source of opportunity or be used in solving problems.

It is cost-effective in communication

The virtual network structure enables effective communication. In an organization, communication has to be very effective so as to ensure the efficient execution of tasks. In case there are many projects that are distributed in different geographical areas; the virtual network enables the manager to coordinate all of them at a minimal cost. Traditionally organizations were required to use leased lines to which is costly. With the incorporation of the internet, the cost of communication has been greatly reduced due to the ease of connectivity that is availed by different internet service providers at a reasonable cost. The virtual network structure also enables ease of communication amongst organizational departments through the intranet. The intranet refers to password-protected sites with restrictions of usability, that is, it only allows communication amongst the members of the organization, (Fisher 89).

Cost of maintenance

The cost of maintaining the servers is minimal from the fact that the organization can incorporate outsourcing from third party organizations that serve a large number of client bases and hence enjoy the benefits of large scale economies. As the organization expands to different locations there is no introducing a new network to integrate the other branches but only one virtual network will be deployed. This means that the virtual network structure enhances the organization’s scale of operation while the quality of service remains to be superior.

If the virtual network structure is implemented well, the ease of use increases while it is also possible to program it to work automatically. The success of utilizing the virtual network structure in an organization is increased by the use of the correct software and hardware that support the local network. This software will also enhance the security of the transmission of information within the structure so that credibility is maintained.

Limitations of virtual network structure

According to Deborah, despite increased incorporation of the virtual network structure to being an alternative to many organizations, there are limitations that organizations face, in the effort to adopt the virtual network structure into the organization, (34).

These include the following;

Compatibility difficulties

It becomes challenging for the organization in its effort of the organization to integrate the products of the virtual network with the old systems. This may result in technical problems for the organization which may result in inefficiency in the operation of the organization. Incompatibility challenges may also result from the fact that the products necessary to ensure the success of the virtual network structure from different suppliers may not be compatible. This can lead to an increase in the cost of maintenance of the structure since the organization is forced to rely on only one supplier.

Lack of independent control

The control of the operation of the virtual network structure does not fully lay with the organization itself but is with the service providers. This implies that the reliability and the effectiveness of the structure depend on the quality of operation of the service provider hence it lacks independence, (Deborah 34).

Increased Insecurity

The virtual network structure requires the organization to comprehensively understand the security implications that result from the virtual networks. This is due to the increased hacking that occurs during the electronic transfer of information which reduces the credibility of the information. By understanding all the necessary virtual network structure installation requirements and configurations, the organization can be sure of increased security in the event of using public networks such as the internet.

It leads to dilution within the organization

Adoption of the virtual network structure by the organization leads to dilution. This is due to the increased interdependence and which means that there will be more projects being worked on by multiple teams. More work is required to ensure that the teams remain interconnected. Its implementation is demanding since it will require a new management approach that can be able to deal with the challenges, (Alla, paragraph 7)


The Coca -Cola Company is a multinational company that conducts foreign direct investment in various countries around the world in its effort to increase profitability by the global expansion of its scale of operation rather than concentrating on a local or regional scale of operation. Global expansion has called for the need to utilize fast and effective communication to ensure integration with its widely dispersed offices. It specializes in the production of soft drinks. It faces stiff competition from other companies. To ensure that it remains competitive it has to improve its product quality and establish more firms. This calls for good organization and hence the need to incorporate a virtual network structure that will foresee the success of its projects.

In its adoption of the virtual network structure, the company has appreciated the importance of virtual teams towards the productivity of the organization. The virtual teams consist of a group of individuals who are dispersed geographically but the structure provides a strong link through the incorporation of the communication technology. The virtual teams are dispersed all over the globe whereas they have to achieve a common goal. To ensure coordination of all the teams there is a need for there to be a well-formulated virtual network structure,(Peterson &Stohr, pp. 56-59).

Considering the scale of operation, the Coca -Cola Company has ensured that the virtual system enables proper selection of the right personnel to foresee the implementation of the project. The management at the Coca-cola headquarters has to communicate electronically the personnel required to the project manager of the subsidiary company. The goals, vision, and mission of the company have to be communicated to the teams.

The company has to ensure that the virtual network structure is secure. This will prevent it from losing confidential information regarding its products such as the production model that makes its products unique thus giving it a competitive advantage.

Through the virtual network structure, the company has been able to increase its value chain. This is due to the efficiency in the control and the increased collaboration. The company is able to undertake its transactions that are beyond the boundaries of its operation such as business to business and business to customer in a more cost-effectively manner. This means that the company is able to conduct its marketing functions in a more amicable way.

To ensure that there is well coordination between the parent company and the subsidiary, the Coca-Cola Company has ensured that the software used is collaborative. This reduces technical barriers that may result from incompatibility making interfacing amongst teams difficult.

The virtual network structure has to ensure that it builds trust amongst the parties involved. This will ensure that the parties in the subsidiary company maintain the quality of the products. Despite the challenge faced by virtual networks in terms of the credibility of communication, the coca-cola company has effectively built and maintained trust by establishing strong business ethics.

The virtual network structure has been formulated in a manner that it enhances effective long-distance communication. This is through the implementation of current communication technology that has ensured immediate feedback and also taken into account the language diversity amongst its staff. The company has also established a communication center with a particular project. This enables the project team members to be updated with information regarding the project progress. In enhancing communication the virtual network structure has also ensured that it is possible for the Coca-Cola Company to review the audit reports of the subsidiary firm.

The implementation of the virtual web through the virtual network structure has increased the effectiveness of communication also enabling the company to gain an edge in its competition strategies due to rapid response to market changes and also capitalize on emerging opportunities.

The virtual network structure has reduced the complexity of the tasks of the project manager. Being a multinational company, the scope of operation is large making project leadership to be complex. This is due to the different environments that surround the project teams. The virtual network structure has made it possible to build systems that link data and also intermediate with the headquarters. The virtual network structure has also enabled the company to be effective in the storage of large volumes of data from it subsidiary firms. For the company, control of the virtual teams has become effective.

The Company has to conduct an appraisal of its subsidiary firms and that of the teams for effective compensation. This presents a challenge in the determination of the criteria to use. The shift of the firm from the traditional approach into a virtual network structure has led to harmonizing of the criteria used due to the presence of special software that aids in their evaluation.

The company has also utilized the virtual network structure in conducting its training in its subsidiary firms. This is through the development of training programs that are personalized to meet the specific needs of the teams.

The company has also shifted from using the leased lines due to its limitation such as the cost associated with an increase in the distance and incorporated the virtual private network into the structure enabling the accommodation of the requirements of the distant employees and offices.


In conclusion, the virtual network structure is an effective strategy that organizations should consider in order to enhance the achievement of their objectives. Through the adoption of his virtual network structure, it is possible for organizations to maintain and enhance the relationship between entities regardless of barriers that may exist such as the location or time differences. it also enhances the relationship between various parties who have got different interests but their needs are complementary such as the customers and the employees. Organizations that use the virtual network structure are more flexible in their operation and hence their ability to respond effectively to the market changes. To remain competitive organizations that have no strategies to change their structure to the virtual networks should start considering this alternative so that they can fit well in the environment. This is due to the fact that the virtual network structure is multidimensional in that it enhances business-to-business transactions and business to customers’ transactions. This is due to the fact that it allows instant communication irrespective of place and time.

Adoption of a virtual structure can increase the entrepreneurial capability of the organization which in the long run leads to improvement of organizational performance.

The virtual network structure enables the harmonization of operation across boundaries in that time sharing of information is made possible through networking. The implementation of the virtual network structure should ensure the consideration of the relationship that exists between the organization and the virtual structure.


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