Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which type of boundaryless organization primarily outsources all non-strategic functions to third parties?

1. Virtual organization

2. Hollow organization

3. Modular organization

4. Geographical organization

The correct answer is: Hollow organization

The correct answer highlights the concept of a hollow organization. A hollow organization is characterized by its focus on core competencies while outsourcing all non-strategic functions to external parties. This allows the organization to maintain a lean structure and reduce costs by relying on third-party providers for support services such as manufacturing, logistics, or even customer service. By doing so, the hollow organization can concentrate on its primary business activities and strategic initiatives, thus enhancing agility and responsiveness in the marketplace. In contrast, other types of organizations may not fully embrace outsourcing to the same extent. A virtual organization, for instance, primarily relies on technology and remote work arrangements to operate but does not inherently focus on outsourcing all non-strategic functions. A modular organization may have components or modules that can operate independently but does not prioritize outsourcing non-strategic functions to the same degree as a hollow organization. Lastly, a geographical organization relates to the distribution of business operations across different locations and does not specifically address the outsourcing of functions. Overall, the emphasis on outsourcing all non-strategic functions makes the hollow organization the appropriate answer.