The potential benefits of the virtual corporation concept include the following:
A) It permits greater flexibility than is associated with more typical corporate structures.
B) Virtual corporations form a network of static relationships that allow them to take advantage of the competencies of other organizations.
C) This form of organization increases management's control over the corporation's activities.
D) Virtual organizations reduce management's control over the corporation's activities.
E) It enhances the potential for opportunistic actions by partners.

Question

Quizplus · Accepted Answer

The virtual corporation concept has several potential benefits. In particular, it permits greater flexibility than other corporate structures. Rather than building competence from the ground up and incurring high startup costs that could limit future production decisions, virtual corporations form a network of dynamic relationships that allows them to take advantage of the competencies of other organizations in order to respond rapidly to changing circumstances. However, this form of organization can have disadvantages, including the potential to reduce management's control over the corporation's activities; networks are vulnerable to the opportunistic actions of partners, including cost increases, unintended "borrowing" of technical and other knowledge, and departure from the relationship at inappropriate times. From the standpoint of employees, the virtual organization may replace the security of long-term employment and the promise of ever-increasing salaries with the insecurity of a global market.

The Potential Benefits of the Virtual Corporation Concept Include the Following