9/13/2017 Networking Organization: Features, Advantages and Limitations

Networking
Organization: Features,
Advantages and
Limitations
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Read this article to learn about the introductory

observations, definition, features, advantages and
limitations of networking organisation.

Introductory Observations of Networking

Organization:
Desire to maintain dominance in the global market
requires a flexible organisational structure – to cope
with the dynamic changes and challenges of the global
economy. Devising of a networking organisation is to
result of this desire of the entrepreneurs to be fulfilled
in a satisfactory manner.

This type of organisation is much popular in Japan, the

U.S.A. and in India also, where MarutiUdyog, Wipro,
Larsen and Toubro etc. are making use of a networking
structure of organisation.

Definition and Chart of Networking

Organization:
Literally, the word networking means a system of trying
to meet and talk to other people, who may be useful to
one in one’s work.

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9/13/2017 Networking Organization: Features, Advantages and Limitations

In the light of this concept of networking, a

networking organisation might be defined as follows:

A networking organisation is one that is created around

a central organisation (called the hub organisation) that
has relationship and arrangement with some other
organisations, to perform functions like designing,
manufacturing, marketing etc. for the central
organisation, on a contractual basis.

We can depict a networking organisation, by means

of the following chart:

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9/13/2017 Networking Organization: Features, Advantages and Limitations

A networking organisation is called a boundary-less

organization; as the central organisation has
relationships and arrangements with many business
partners beyond its own boundary lines. In an extreme
case of a networking organisation, the hub organisation
has arrangements with so large a number of business
partners that it, on its own, does only the co-ordination
work.

A networking organisation is also called a virtual

organisation, in that it is nearly a complete organisation;
and any slight difference in the structure of organisation
is not important.

Salient Features of a Networking Organization:

Following are some of the salient features of a
networking organisation:

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(i) In the central (or hub) organisation of the networking

structure, usually there is an absence of horizontal and
vertical boundaries within the organisation. There is
emphasis on cross hierarchical teams and participative
decision making.

(ii) A networking organisation rests on co-operative

relationships with suppliers, distributors and many
other business partners. Co-operation and co-ordination
are the hallmarks of a networking organisation.

(iii) In a networking organisation, the critical

management decisions are with whom to develop
business relations, for what and on what basis. The
central organisation management is specially involved
in strategic decisions of developing new relations and
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9/13/2017 Networking Organization: Features, Advantages and Limitations

abandoning some old ‘less useful’ relations with

business partners.

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(iv) Sharing of information among constituents of the

networking organisation is greatly facilitated by
electronic technology, such as computer, e-mail, fax etc.

(v) A networking organisation is a temporary

arrangement between a numbers of companies. It is
created to exploit fast changing opportunities; and may
come to an end when such opportunities disappear or
cease to be profitable at all.

Advantages of Networking Organization:

Following are the important advantages of a

networking organisation:

(i) Motivated functioning in the hub organization:

Because of the absence of vertical and horizontal

boundaries within the hub organisation, there are
minimum status and rank differentials. Hence people
work with a sense of enthusiasm; being motivated by the
organisational structural environment.

(ii) Utilisation of best capabilities:

A networking organisation allows different organisation

engaged in performing different tasks for the hub
organisation to bring their best capabilities together.
Hence, at least in theory, the performance of a
networking organisation is at its peak.

(iii) Less environmental uncertainty:

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9/13/2017 Networking Organization: Features, Advantages and Limitations

Management of the hub organisation faces less

environmental uncertainty; because it has sub-
contracted many responsibilities to partners, in the
networking structure.

(iv) Flexibility of structure:

A networking organisation possesses the advantage of

flexibility. Depending on environmental conditions, new
alliances can be made; and old dropped out. In a way, a
networking organisation quickens response to changing
environmental scenario; and helps in the best
exploitation of opportunities.

(v) Boon for small firms:

Small firms, who otherwise face problems of survival,

can ensure their survival by being a partner of a
networking organisation. A networking organisations is
an umbrella protecting the small, who are efficient but
cannot face up to the challenges of the environment.

Limitations of Networking Organization:

A networking organisation suffers from the following

limitations:

(i) Co-ordination – The biggest problem:

Co-ordination among the functioning of business

partners is perhaps, the biggest problem for the
management of the hub organisation, in the networking
structure. In fact, each partner has his own manner of
performing without regard to the nature of functioning
of related business partners.

(ii) Problem of reliability:

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A networking structure is successful only to the extent

that its business partners are reliable. How to ensure
reliability of business partners? For this, there is no
formula devised so far.

(iii) Lack of close control:

In a networking organisation, there is usually lack of

close control over manufacturing and marketing
operations etc. by the management of hub organisation.
Hence, there may be poor operational performance in
the networking organisation, produced by the
networking partners.

Concluding Observations:
There is no standard format of a networking
organisation. There are no guidelines for organisation
and management, in the networking structure. Critics
call networking structure as a ‘hollow corporation’ i.e. a
corporation without real value. Still, networking
organisation is getting very popular now-a-days, as a
way to dominate international markets.

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