With the developments in the management of corporate structure, many theorists (e.g. Gummesson, 1996) believe that the traditional concept of structure should be abandoned, and organizations should be viewed as a network. The network is flexible, so that the business can be reconfigured to respond to changing environmental conditions or to exploit opportunities. Perhaps most importantly, the network extends beyond a single organization, creating what Gummesson (1996) termed an ‘imaginary organization’. The need for this type of organization is partly due to the trend towards downsizing, with suppliers being asked to perform tasks that were previously handled by internal staff (Griffiths et ah, 2001).
Research into the nature and operations of typical networks can be valuable in helping an organization to manage relationships in supplier markets or with other marketing channel partners. In a dynamic marketing environment, it is easier to respond to change by reconfiguring the network than by restructuring a large internal resources base.
The hollow network
This form of network is found in highly unstable marketing environments. The core organization has limited internal capabilities, but uses other organizations to perform functions in response to individual transactions. The network is transaction based – the core organization forges temporary links with other organizations as and when needed, but does not maintain these in the long term. Cravens and Piercy (1994) give the example of The Registry Inc, which recruits software engineers, programmers etc. to perform contract services for corporate clients. The business uses a database of 50,000 technical specialists to recruit teams for each contract.
The flexible network
In contrast, the core organization of a flexible network maintains longer-term relationships with other network members, but each member is more adaptable in the face of new demands or changing conditions. Thus the network is able to thrive in a dynamic environment with limited changes to the structure of the network.
The value added network
Here, the organizations come together because of the way in which their core competencies complement one another in the creation of customer value. The core organization is usually responsible for product innovation and design, using a range of suppliers and distributors on a transactional basis. This configuration is better suited to stable markets, where the core organization is confident that the choice of suppliers and intermediaries will remain wide.
The virtual network
Still operating in a stable environment, the members of the virtual network seek to create competitive advantage through closer collaboration and the creation of joint systems. This form of network lacks the adaptability of the flexible organization, instead focusing on the incremental development of collaborative systems. It is therefore more suitable to a stable environment.