Answer to Question 1
A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreements, rather than by a formal hierarchy of authority.
The advantages of a network structure are:
1. To the degree that an organization can find a network partner that can perform a specific functional activity reliably, and at a lower cost, production costs are reduced.
2. To the degree that an organization contracts with other organizations to perform specific value-creation activities, it avoids the high bureaucratic costs of operating a complex organizational structure.
3. A network structure allows an organization to act in an organic way.
4. If the network partners of an organization fail to perform up to the desired standards, they can be replaced with new partners.
Answer to Question 2
B
