There are several types of network organizations which are classified according to the activities and purpose of formation. The following are the most common types of network organizations in the world today:
Virtual network Organizations
These types of network organizations perform by contracting their activities to other organizations and stay behind the scenes. The only function the organization performs is the coordination of other organization and the maintenance of its name. All other major functions are contracted and it may not be easy to find out the main people behind the organizations. Interestingly, these types of network organizations may not even have a recognized head office.
The virtual network organization is most prevalent in the fashion industry. There are some clothing labels that bear names that are well identified by the public but do not have direct staff or employee working in such organizations. You may find maybe 4 people working in a small office as their major work is to subcontract all their jobs to different units that are not owned by them. Other organizations carry out the product design and manufacturing for them while they control and oversee all the processes from their small office.
Independent Network Organizations
These types of network organizations use social tools to control and coordinate their processes to ensure they pool their resources together. These entities are mostly separate and legally independent. However, some of them might be subsidiaries of other major companies, or even divisions in a company.
Internal Network organizations
These types of network organizations are large companies that have separate units and subsidiaries. These companies can allow its units to set prices of products based on the market demands and other factors prevalent in the unit rather than what the parent company decides. These types of network organizations operate for the purpose of giving the units the free hand to reduce prices and improve market performances. In these types of network organizations, the corporate heads usually act like brokers and are only involved when their assistance are sought by the unit company.
Stable Network organizations
These are the most common types of network organizations. They don’t perform most of their tasks themselves but rather outsource them to other organizations. They always have a strong relationship with these outsourcing organizations and they may be given access to some of their resource for ease of operation. The main organization may equally be involved in other forms of long venture contracts and alliances with different organizations. The main reason engaging in this type of organization is to benefit from economies of scale and reduce cost of producing all materials and components by a single organization. Some electronic companies are involved in this type of system where different parts are manufactured by different companies. A very good example of types of network organizations is BMW who outsource about 70% of their car production process.
These ones are even involved in more outsourcing than the stable network organizations. Usually, other firms are involved in the production and assemblage of components owned by another organization. A very good example of a dynamic network organization is Nike, whose only involvement in their own production process is Marketing and R&D.