What is a Virtual Company? Explain it and provide an example.

As information and communications technologies overcome the constraints of time and distance, it becomes possible to create virtual organizations. Virtual is usually taken to be something that does not exist in reality. So a typical definition of a virtual corporation or companies (taking the dimension of time) is: “a temporary network of independent companies linked by IT to share skills, costs, and access to one another’s markets”.

However, another definition relates to an organization not having a clear physical locus. Here a typical definition is: “an organization distributed geographically and whose work is coordinated through electronic communications.”

Both definitions show how information and communications technologies can be used to exploit the dimensions of time and space. A virtual company is a specific example of a networked organization. Many smaller companies are now realizing the benefits of being part of a virtual corporation, which can give them the benefits of the resources of a large organization while retaining the agility and independence of a small one.

Besides, a virtual company conducts all or most of its business via the internet and does not have physical premises to interact with customers face-to-face. A purely virtual company may outsource nearly all of their business functions such as product development, marketing, sales, shipping, etc. However, most virtual companies retain some of these activities in-house and may still require a physical presence in the form of headquarters, warehouses, shipping and delivery hubs, etc.

virtual-office

 

Advantages and Disadvantages of Victual Company:

It has many potential advantages, including:

  • Cost savings – reducing the need for employee, as work space saves money on overhead (expenses such as commercial building leases, utilities, insurance, etc. (
  • Flexibility – a less rigid organization can react faster to changes in the marketplace.
  • Happier employees – working from home creates a better work/life balance for the staff.
  • Since employees can work anywhere, organizations can provide employment in rural locations or areas of high unemployment.

On the other side the possible disadvantages include:

  • Lack of cohesiveness in the organization due to employees being located in diverse regions, with possible language and cultural differences.
  • Lack of face-to-face interaction between employees and teams resulting in communications-related issues.
  • Reduced productivity from work-from-home employees who lack self-discipline.

 

The Largest Virtual Business in the World

amazon_logo_rgb is the most famous virtual retailer and the largest in the world, with over 150,000 employees and over $90 billion in annual revenue. Founded by Jeff Bezos in 1994, it began as a virtual bookstore and with the advent of digital books (e-books) and e-readers has turned the publishing industry on its head.

Traditional “bricks and mortar” book sellers such as Borders (who at its peak had over 600 retail stores) were unable to compete with Amazon’s huge selection, low-prices, and free shipping. Borders filed for bankruptcy in 2011. In addition to e-book sales, Amazon markets its own line of Kindle e-book readers. On average, 12 new books are added to Amazon’s catalog every hour of the day.

Amazon quickly expanded their online offerings to include sales of CDs/DVDs, video games, electronics, and a huge variety of dry goods in almost every retail category including apparel, home and garden, automotive, hardware, etc. In 2002 Amazon began selling cloud computing services and is now the world’s largest cloud computing provider.

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