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Virtual Organisation:

A firm is said to be having a virtual organisational structure while it contracts out almost all functions. The only function retained through the organisation is the name and the coordination between the parties. A virtual organisation might not have even had a permanent office. This is especially general in the fashion industry while you could have clothing labels which are just that.  Say the label is "XXX". The label has a clear identity within the public eye, but while you try to track down the XXX Taylor Company, you search there are no XXX designers, no XXX manufacturers. There are only 3 people in an office subcontracting out all functions.

Therefore, a virtual organisation is a network of firms held together through the product of the day.  It is an open-ended system of activities, ideas, and firms.

Table: Advantages and Disadvantages of Virtual Organisation






1.   These structures enable business with less capital, less human resources and other inputs.

2.   These structures give flexibility of operation.


3.   These structures develop ancillary industries.








1.   Companies do not have strong foundations or strengths within their operations.

2.   Organisations have to heavily depend on outside support.

3.   Failure in the network results within failure of the organisation.

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