Cima E2 Exam Question No 65

Question No 65:

Network organisations and transaction cost theory
A network organisation depends to a large extent on relationships it builds with other parties. Indeed the term "network" derives from the dependency of the firm on the networks it builds with others.

The organisation itself typically aims to keep the number of directly employed staff to a minimum and as far as is possible its activities be outsourced to an external provider with the role ofthe organisation to co-ordinate the outsourced activities.

The organisation will tend to keep "in-house" the key drivers of its ability to compete. They may also rely on strategic alliances with other firms in order for the organisation to be a success. Examples include the Research and Development of joint products, or agreements to on-sell work to each other.