Why did companies like Nike and Dell decide not to own their manufacturing facilities but rather outsource this to independent manufacturers? How does this differ from the traditional approach?

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The Answer is These and other companies have found that they can become quite profitable without actually having to own their entire operation. The traditional bureaucracy is structured so that production occurs in company-owned plants, research and development are conducted by in-house experts, and sales and marketing are performed by the company's own sales and marketing department. Companies that want to be more "virtual", don't believe that they need to "own" everything. Dell Computer owns no plants and simply assembles computers from parts whose manufacture has been outsourced. Nike achieved success by focusing on what they do best-designing and marketing their products. They outsource almost all their footwear manufacturing to outside suppliers. The virtual organization doesn't just outsource the peripheral function of the company; it outsources whatever costs less to outsource than to do in-house.
There are a number of gains potentially achieved by going virtual:
1. The cost savings are significant: A virtual organization does not need to own its own plants, nor employ its own research and development teams, nor hire its own sales staff. This means the virtual organization also doesn't need to hire the extra staff to support all these functions-such as personnel specialists, company lawyers, accountants, and so on. The virtual organization can outsource most of these functions and focus on what it does best. So there is little if any administrative overhead, so to speak, because work activities are largely contracted.
2. The virtual organization is a great alternative for entrepreneurs: Individuals seeking to start up a new business or venture may face huge startup costs. The network of arrangements within a virtual organization can exploit the expertise of different companies while not requiring the initiator of the business to buy everything and start a business from scratch.
3. For a mature company, going virtual can be a fast way to develop and market new products: Relying on the expertise of partners means that no huge investment is required to enter a new product or service territory.
4. Virtual organizations are fast and flexible: For example, the flexible arrangements of those parties involved can be of a temporary nature to produce a good or service; resources can be quickly arranged and rearranged to meet changing demands and best serve customers; management isn't getting bogged down in peripheral functions, but is simply focusing on central functions.

Why Did Companies Like Nike and Dell Decide Not to Own