Network Organizations: Woolworths Holding Limited Case Study

This report provides a comprehensive analysis of network organizations, beginning with a definition and exploration of their key characteristics. It delves into various types of network organizations, including internal, stable, dynamic, and market networks, highlighting their distinct features and operational models. The report further examines the conditions that favor the adoption of network structures, such as frequent transactions, customization needs, and structural embeddedness. It then discusses the strengths and weaknesses of network organizations, considering aspects like governance, control, and the impact on communication and collaboration. To illustrate the practical application of these concepts, the report includes a case study of Woolworths Holding Limited, exploring how network organizational principles can be applied to enhance focus, flexibility, and resource utilization. The conclusion summarizes the benefits of network organizations in terms of resource efficiency, adaptability, and their ability to foster innovation and growth.

NETWORK
ORGANIZATIONS
Submitted by:

Introduction
The discussions in this presentation will be made by focusing on characteristics
of network organization followed by identifying types of network organization
and their comparative advantage and conditions that make them favorable.
Also for clear understanding a real life example is taken about Woolworths
Holding limited that is operational in South Africa.
A network organization is defined as an integration of independent units which
act a single larger organization
As stated by Ivancevich, Matteson and Konopaske (2007) the entities which are
comprised in a network organization are generally legally free organizations
Some of the firms involved in a network organization can be wholly owned
subsidiaries by nature

Types of network
organizations
■ Internal Network: According to Evtodieva et al. (2016) an internal network is defined as a large organization
which utilizes its various units or subsidiaries as separate profit centers of the organization.
■ Stable Network: The stable network organization consists of a central or hub organization which outsources
majority of their operations to separate entities. One of the most popular examples of stable network organization
which outsources work to other organizations is BMW, as the company outsource close to 65% of their total
production cost of a car of the company (Zaraychenko et al. 2017)
■ Dynamic Network: As stated by Scott (2015) the dynamic networks organizations outsource larger volume of
their operations to other companies. For instance, Footwear and Accessories Company Nike is considered as the
focal point of a dynamic network organization as the sole functions of the company comprises of Marketing and
Research and Development. Dynamic networks are most commonly observed in the fashion industry, toys
industry, publishing industries, motion pictures industries, and biotech industries.
■ Market Networks: According to Papa, Daniels and Spiker (2007) Market network organizations do not have a
central organization that remains responsible for coordinating with the others. Instead, a market network
organization is a combination of organizations. Originally, members of the market network organization might not
be knowledgeable regarding the fact that they have started belonging into this pattern (Balestrin and Verchoore
2014)

Conditions favoring networking
organizations
■ Frequent transactions- Exchanges which are not frequent are dealt with in the best possible way in the market through
network organization
■ Customization- It is also termed as specificity of assets and is defined as the exchanges which comprise of individually
customized products or services that is suitable in network organization
■ Structural Embeddedness- It is defined as the limit to which organizations and its units are linked to one another in order to
ensure that information regarding each other is always available which helps in the coordination and controlling within
network organization (Naseri, Rouhani and Anvari 2014)
A network organization resembles a daily organization which does not possess a system of direct supervision, nor have set
standard of rules and procedures which apply in the entire firm. They need to combine and control their divisions in various ways
which are as follows:
■ Joint payoffs- Networks are organized accordingly revolving particular products or projects. Payments regarding work are
arranged depending on the end commodity, so that even if the product fails to work, none gets any money which provides
incentives for everyone in order to give their best.
■ Restricted access- As stated by Bass and Bass (2009) network organizations do not outsource to anyone available in the
market and instead they regulate their exchanges to just a few partners who are long term in nature which make the
companies more reliant on one other, in order to that there is more cost involved in defaulting. Additionally, but enhancing the
possibility of future exchanges, which develops the conditions for currently avoiding an ineffective deal in order to receive
future rewards.
■ Reputation- In the film industry, every member interacts with each other. If an individual is found hard to work with, or does
not pull their weight, every member hears about the same which affects the ability of those individuals to get future jobs.
■ Macro culture- As opined by Cantino et al. (2017) the presence of a shared culture of industry helps in greasing the wheels
regarding coordination. Every member communicates with the same language, possess same expectations and
understandings regarding the activities, and therefore more can be implicit rather than explicit.

Strengths of network
organization
■ Allows wider scope by linking subsidiaries. But most of their decisions are
taken independently by subsidiaries itself at their respective locations
(Balestrin and Verchoore 2014). The design of their structure is based
suiting to their operations which hence requires limited decisions to be
made through centralized involvement of headquarter.
■ It also allows organizational culture cut beyond traditional structure to
share information and resources amongst subsidiaries in a flexible way
which helps to maintain competitiveness in changing business scenario.
■ Allows governance in network organization like Woolworths Holding
Limited helps to lower costs of governance as it enhances communication
with potential suppliers on online medium

Disadvantages of networking
organization
■ Primary organization may not have control over exercise of
subsidiaries which may lead to coordination issues. Also as structure
in subsidiaries like Woolworths Holding Limited varies from parent
firm, so such structure change can lead to poor collaboration between
subsidiary and primary firm (Petković, Ana Aleksić Mirić, and Čudanov
2014).
■ Also social interaction between subsidiary arm like Woolworths
Holding Limited and their primary firm is less so there is lack of
exchange of ideas and experiences between both entities

How it can applied in today’s organization
(Woolworths Holding)
Concept and principles of Network organization can be applicable to Woolworths
Holding Limited :
■ Helps to build clear focus where focus can be on building core competency
through network organizational structure.
■ Also network organization can help Woolworths Holdings to use their time in
doing what can be best done with optimal resource consumption as decision can
be taken independently(Bass and Bass 2008).
■ Further network organization can be applied to Woolworths Holding Limited to
enhance flexibility which can allow them to modify production technique, design
and quantity without facing much resistance as is common in traditional
structure, which can enable Woolworths Holding Limited to remain responsive to
change in demand

Conclusion
Hence it can be concluded that network organization helps in better
utilization of resource and adaptability to environment . It allows rapid
intelligence filters to distribute information and enables prompt decision
to permit more flexibility which together enables focus towards
innovation and efficiency that drives towards growth without any formal
structure or silos

References
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