Kenneth C. Laudon,Jane P. Laudon Management Information System 12th Edition pdf

virtual company

, also

known as a virtual organization, uses networks to link people, assets, and ideas,

enabling it to ally with other companies to create and distribute products and

services without being limited by traditional organizational boundaries or

physical locations. One company can use the capabilities of another company

without being physically tied to that company. The virtual company model is

useful when a company finds it cheaper to acquire products, services, or

capabilities from an external vendor or when it needs to move quickly to

exploit new market opportunities and lacks the time and resources to respond

on its own. 

Fashion companies, such as GUESS, Ann Taylor, Levi Strauss, and Reebok,

enlist Hong Kong-based Li & Fung to manage production and shipment of their

garments. Li & Fung handles product development, raw material sourcing, pro-

duction planning, quality assurance, and shipping. Li & Fung does not own any

fabric, factories, or machines, outsourcing all of its work to a network of more

than 7,500 suppliers in 37 countries all over the world. Customers place orders

to Li & Fung over its private extranet. Li & Fung then sends instructions to

appropriate raw material suppliers and factories where the clothing is

produced. The Li & Fung extranet tracks the entire production process for each

order.

Working as a virtual company keeps Li & Fung flexible and adaptable so that

it can design and produce the products ordered by its clients in short order to

keep pace with rapidly changing fashion trends. 

Business Ecosystems: Keystone and Niche Firms. 

The Internet and the

emergence of digital firms call for some modification of the industry

competitive forces model. The traditional Porter model assumes a relatively

static industry environment; relatively clear-cut industry boundaries; and a

relatively stable set of suppliers, substitutes, and customers, with the focus on

industry players in a market environment. Instead of participating in a single

industry, some of today’s firms are much more aware that they participate in

industry sets—collections of industries that provide related services and

products (see Figure 3-13).