10 Advantages of Holonic Business System

Some of the advantages of Holonic Business System are as follows:

(i) Leverage:

There is true synergy achieved by combining the best capabilities of many operations.

Small companies can develop the competitive clout of large companies at a fraction of the cost.

(ii) Speed:

Decision making is streamlined and hence fast. There are no “layers of management”, so no need to sell ideas up the management ladder. Information moves through all forms of telecommunication (Electronic Data Interchange). Businesses as that are able to act as nodes in a virtual company have had their core competence that they alone manage. Thus, decisions are as rapid as saying “yes” or “no” to the questions.

This speed shows up as “time to market” because one company does not have to “invent” an entire new product. It can call on a host of partners with their own core competencies to create a virtual company and to design the new product. It can also show up as “speed to customer” since the virtual company establishes the most effective production core business process.

(iii) Flexibility:

Coupled with speed is the ability to change the service or product capabilities to match rapidly changing market requirements.

(iv) Shared risk:

Because several nodes form a holonic network, there is a shared risk and reward. There is also a reduction in the fear of change, since each holon is confident in its capabilities.

(v) Independence:

Each holon is independent, free to come and go as it pleases and to compete and cooperate as it wants, but the holonic system requires a great deal of cooperation.

(vi) Faster growth and increased profits:

It was observed that companies that are one-third more responsive to their customers had a growth rate of three or more times their competition and were two to five times more profitable.

(vii) Sustainable customers:

Once customers have become used to the flexibility and responsiveness of a holonic system as their supplier, it will be tough for competitors to wean them away.

(viii) Less capital required:

A holonic system significantly requires less capital because each node only uses equipment that is specific to its core business processes. This in turn results in requirement for less working capital, lower maintenance costs, higher return on assets and considerably fewer fixed assets.

(ix) Quick failure recognition:

Since the network operates in real time it should recognise failure quickly. A well-designed network will have an exit strategy that can be put into effect quickly. The network should be capable of getting dismantled without damaging the reputation or image of any node.

(x) Increased ability to deal with inevitable change:

This can be explained with an example of a joint venture of Digital Equipment Company (DEC) of US with Tandy, the low cost manufacturer of radio shank products to participate in the personal computer (PC) market in the mid 1980s.

Along came Compaq which offered higher performance to the market. DEC forced to compete on the performance plans, reconfigured its alliance, adding Intel as a partner in the development of its next generation of PCs. Then came Dell into the market, which offered both low cost and good performance. DEC dropped the alliance with Tandy and began manufacturing on its own. This was a mistake as it turned out and in practice was also directly contrary to the PC industry’s trend towards holonic network.

Submitted by : Professor Brinda, Category : Business, Tag : Articls on Business