3 Internet sales by manufacturer only. It would be unusual if a manufacturer chose this
option if it already had existing resellers in place. Were the manufacturer to do so, it
would probably lead to lost sales as the reseller would perhaps stop selling through
traditional channels.
4 Internet sales by all. This option is arguably the logical future for Internet sales. It is
also likely to be the result if the manufacturer does not take a proactive approach to
controlling Internet sales.Strategy will need to be reviewed annually and the sales channels changed as thought
appropriate. Given the fast rate of change of e-commerce, it will probably not be possi-
ble to create a five-year plan! Kumar (1999) notes that history suggests that most
companies have a tendency to use existing distribution networks for too long. The
reason for this is that resellers may be powerful within a channel and the company does
not want to alienate them, for fear of losing sales.4 Virtual organisations
Benjamin and Wigand (1995) state that ‘it is becoming increasingly difficult to delineate
accurately the borders of today’s organisations’. A further implication of the introduc-
tion of electronic networks such as the Internet is that it becomes easier to outsource
aspects of the production and distribution of goods to third parties (Kraut et al., 1998).
This can lead to the boundaries within an organisation becoming blurred. Employees
may work in any time zone, and customers are able to purchase tailored products from
any location. The absence of any rigid boundary or hierarchy within the organisation
should lead to a company becoming more responsive and flexible, and having a greater
market orientation.
Davidow and Malone (1992) describe the virtual corporation as follows:
To the outside observer, it will appear almost edgeless, with permeable and continuously
changing interfaces between company, supplier and customer. From inside the firm, the
view will be no less amorphous, with traditional offices, departments, and operating divi-
sions constantly reforming according to need. Job responsibilities will regularly shift.Kraut et al. (1998) suggest the following features of a virtual organisation:
1 Processes transcend the boundaries of a single form and are not controlled by a single
organisational hierarchy.
2 Production processes are flexible, with different parties involved at different times.
3 Parties involved in the production of a single product are often geographically dis-
persed.
4 Given this dispersion, coordination is heavily dependent on telecommunications and
data networks.Introna (2001) notes that a key aspect of the virtual organisation is strategic alliances
or partnering. The ease of forming such alliances in the value network as described in
Chapter 2 is one of the factors that has given rise to the virtual organisation.
All companies tend to have some elements of the virtual organisation. The process
whereby these characteristics increase is known as virtualisation. Malone et al. (1987)
argued that the presence of electronic networks tends to lead to virtualisation since they
enable the governance and coordination of business transactions to be conducted effec-
tively at lower cost.CHAPTER 5· THE INTERNET AND THE MARKETING MIX
Virtual organisation
and virtualisation
A virtual organisation
uses information and
communications
technology to allow it to
operate without clearly
defined physical
boundaries between
different functions. It
provides customised
services by outsourcing
production and other
functions to third
parties. Virtualisation is
the process whereby a
company develops
more of the
characteristics of a
virtual organisation.