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Rational Organizational Structure: For Brick-and-Mortar Lifestyle Retailers in India to Overcome Diseconomies of Scale and Protect Firm’s Sustainability (ROLS-b)

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  • H. R., Ganesha
  • Aithal, Sreeramana

Abstract

A majority of organized brick-and-mortar lifestyle retailers in India believe that the brick-and-mortar retailing model ensures economies of scale as they keep opening new stores. Having more stores might help retailers to gain product sourcing advantages in addition to generating additional revenue to the firm but at the same time, it fails to provide any other benefits towards economies of scale as every new store comes with new one-time capital expenditures and recurring fixed expenses. Another misconception is that lifestyle retailing must follow an organizational structure (OS) that is adopted by their parent company and hence a majority of OS adopted by lifestyle retailers in India is dependent on organizational form. This study was not limited to just recommending a rational OS based on exploratory research and existing theories in the OS domain. Once the ROLS-b was designed, we have experimented with the proposed rational OS on one of the ten lifestyle retailers in the study to test the validity and reliability. Experimentation results empirically and qualitatively demonstrate that the existing belief of brick-and-mortar lifestyle retailers in India which assumes economies of scale and long-term firm’s sustainability as the retailer increases the store count is just a misconception and does not hold. On the other hand, when we experimented the ROLS-b for over twelve months at over 25 percent stores of a select retailer, results demonstrate that these stores which have gone through the treatment have shown 5.34 times improvement in the store-level profit and 1.97 times in the firm-level profit in addition to eliminating a majority of gaps found in the existing OS that was leading to diseconomies of scale and deteriorating firm’s performance.

Suggested Citation

  • H. R., Ganesha & Aithal, Sreeramana, 2020. "Rational Organizational Structure: For Brick-and-Mortar Lifestyle Retailers in India to Overcome Diseconomies of Scale and Protect Firm’s Sustainability (ROLS-b)," MPRA Paper 102553, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102553
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    1. H. R., Ganesha & Aithal, Sreeramana, 2020. "Sales Personnel Attrition Control and Retention – An Integrated Framework for Lifestyle Retailers in India (RSPR-LS)," MPRA Paper 102867, University Library of Munich, Germany.
    2. H. R., Ganesha & Aithal, Sreeramana, 2020. "Theory of Brick-and-Mortar Retailing in India (ToR-b)," MPRA Paper 102869, University Library of Munich, Germany.

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    More about this item

    Keywords

    Indian Retail; Brick-and-Mortar Retail; Lifestyle Retail; Firm’s Sustainability; Sustainable Business; Organizational Structure; Diseconomies of Scale; Organizational Form; Degree of Integration; Atmospheric Consequences; Bureaucratic Insularity; Incentive Limits; Communication Distortion; Bounded Rationality; ROLS-b;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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