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Virtual enterprise is based on the premise that work should be done where it can be done most optimally. In virtual enterprises, geographical boundaries merge seamlessly. It enables organisations to act in a way of flexibility and ability to adapt to rapid changes on the fly. However, different parties in a virtual enterprise must understand each other before they go further details in business. Ontologies are such kinds of ideal baselines to assist parties to communicate. One of the essential research issues with ontology is how to deal with changes during their evolving cycle. Therefore, ontology refinement is a crucial component in ontology evolution. This paper presents a taxonomy structure focusing on the is-a relations. In particular, the concept of closeness measurement is introduced based on the “distance” estimation. An extended cluster analysis process is provided. According to the algorithm presented, a new concept is generated according to its attributes. Additionally, the refinement mechanisms for primitive operations are proposed. Unlike some other ontology refinement mechanisms which leave ontology consistency checking to human users after modification, our method emphasises the importance of consistency checking by applying description logics which is demonstrated based on the proposed ontology.