Network Design of an Organization

• A temporary or permanent arrangements of independent organizations or associates ,forming an alliance to produce a

product or service by sharing costs and core competencies.
• The network based organizational design is built around alliances between organizations within the network.
• Each associate or organization of the network focuses on its core competency and performs some portions of the
activities necessary to deliver the products and services of the network as a whole.

Why the Network Design Important?

• The knowledge and physical resources associated to the development and production of most of today’s products often
exceed what a single firm is able to accomplish.
• The firm simply searches for operation with other companies, under several formats, ranging from the well-known
solutions of subcontracting other companies or creating strategic partnerships or joint-venture associations.
 Network Organizational Design
Advantages of Network Design

• Rather than being housed under one roof, services such as accounting, design, manufacturing, and distribution are
outsourced to separate organizations that are connected electronically to the central office. 
• Networked computer systems, collaborative software, and the Internet enable organizations to exchange data and
information rapidly and smoothly.
• Using network organizational structure, work can be outsourced to other firms which are specialized in that
particular work. This way, the firm will not only face lower costs but will also receive a better quality service than if it
had done it itself.

Drawbacks of Network Structure

 
• As the network of an organization grows, it gets more and more difficult to control such a widespread network.
• On top of that, some of the firm’s partners may be in other countries. This makes it more difficult to communicate
and deliver things around.
• While pursuing a network organizational structure, when an organization outsource some work to another firm,
that firm may also be doing work for your competitors. 
• When an organization outsource important work to external firms, that firm lose significant control over their
own operations.