The dynamic environment puts the management in different roles from
time to time. The internal interdependencies have to be aligned to the
external environment to achieve organizational goals effectively (Miles,
Snow, Meyer, & Henry J. Coleman, 1978). Depending on its strategy,
an organization establishes a particular structure over a period of
time. Some organizations are tight and give limited freedom and scope to
the employees, while the others are highly flexible. Structure is
basically a follow up of the strategic choice that an organization
Retail is one of the fastest growing businesses in the world today.
The progress of the economy and increased disposable income are one of
the biggest reasons for their growth. The spending power of the
consumers has resulted in aggressive competition among retailers and
entry of innovating store concepts in the market (J.Maronick &
M.Stiff, 1985). An unlimited number of new and innovative formats are
emerging day by day. Retail formats can be classified as Department
stores, convenience stores, hypermarkets, supermarkets, discount stores,
lifestyle stores, supercentres, specialty stores etc to name a few.
These retail formats choose different strategies that result in
different organization structures, cultures and the way they do things.
Strategic and structural relationship aspects of organization have
been investigated by a lot of researchers especially in the
manufacturing sector (R.R.K. Sharma & Abidi, 2006). This study
involves retailers categorized into various retail formats.
For the purpose of our study, we have taken five kinds of
retailers: department stores, specialty stores, convenience stores,
discount stores and hypermarkets. They are further categorized under
different strategy typologies proposed by Miles and Snow in 1978.
Further the structural relationships are build on the dimensions of
formalization, specialization, centralization, standardization,
flexibility and complexity of workflow proposed by Pugh et al. in 1968.
Later they have been identified on the cultural dimensions; Uncertainty
avoidance and power distance proposed by Hofsted in 1980 and finally on
Management Control System dimensions; Interactive and Diagnostic Control
2. LITERATURE REVIEW
2.1 ORGANIZATION STRATEGY
Based on their work "Organizational Strategy, Structure, and
Process" Miles and Snow (1978) have proposed four types of
organizations 'Defenders', 'Prospectors',
'Analysers' and 'Reactors'.
DEFENDERS are organizations that prefer a stable domain. They are
the ones that basically try to play safe and avoid competition in the
most aggressive manner. They have a myopic view towards developments
outside their domains and chose to grow through market penetration and
limited product development. Their limited or narrow product-market
domain helps them invest a lot of resources and gain high level of
efficiency. In contrast to defenders, PROSPECTORS are on the extreme
opposite end as compared to defenders. They perform in the most dynamic
environment and constantly look for opportunities in the form of new
markets and new products. They always look for new markets and
opportunities and always add new products to their domain. Their
managers are more dynamic in their approach than managers of the
Defender organizations. Their technology is contingent and product
development is not resticted and goes beyond the organizations present
technological capability (Miles et al., 1978). ANALYSERS are the
strategy types that inherit the characteristics of both defenders and
prospectors. Analyzers try to minimize risk and maximize the profits at
the same time. Analysers try to exploit new product and market
opportunities and at the same time maintain their core products and
customers. Analysers learn to achieve and protect equilibrium between
conflicting demands for technological flexibility and for technological
stability. REACTORS are organizations that fail to articulate the
organization strategy. Their managers maintain the organizations current
strategy-structure relationship despite over whelming changes in the
environmental conditions and hence fail to align the organization
strategy with the organization structure. Reactors are not a part of the
2.2 ORGANIZATION STRUCTURE
Organization structure is the blue print of the relationships that
exist in any organization. The structure varies according to the
organization strategy and the orientation of the top management. It
helps them carry out the strategic decisions well in the organization. A
proper strategy-structure alignment in the organization is a must for
the success of any organization. The various dimensions of organization
structure discussed below are formalization, Specialization,
Standardization, Centralization, flexibility and complexity of work
flow. These six dimensions were proposed by Pugh et al., (1968) in their
research work titled "Dimensions of Organization Structure".
FORMALIZATION is the extent to which the rules, procedures,
instructions, and communications are written. Degree of formalization is
the extent that roles are independent of specific personal attributes of
individuals occupying the roles. It helps the organizations in
regulating the behaviour of its employees and brings about a situation
of predictability in the organization (Pugh et. al, 1968).
SPECIALIZATION basically is the division of tasks and responsibilities
in the organization according to the skill sets of the employees. It is
an arrangement where a member of any organization is given a task that
best suits his or her technical skills, location, or other
qualifications (Child, 1973). STANDRDIZATION revolves around defining
and specifying a procedure for doing things in any organization.
Standardization gives regularity to the occurrence of events that
stabilises the organizational activities. CENTRALIZATION is the process
by which the activities of an organisation, particularly those regarding
planning and decision-making, become concentrated within a particular
location and/or group. Centralization has to do with the locus of
authority to make decisions affecting the organization (Pugh et. al,
1968). FLEXIBILITY is the willingness and ability of any organization to
bring about changes in the work pattern of any organization. It results
in the capability to produce customized products during uncertain times.
COMPLEXITY OF WORK FLOW is the degree of complexity introduced in the
organization structure by the top management. It is a result of
increased autonomy and decentralized decision making power of people at
the lower level in the organization (Pugh et. al, 1968)
2.3 ORGANIZATION CULTURE
Culture is said to have a high impact on the working of an
organization. The figure below shows the influence of national cultural
dimensions on organizational culture and competencies.
Past research has shown a lot of strong link between organization
culture and organization strategy decisions. The various cultural
dimensions as proposed by Hofstede are uncertainty avoidance, power
distance, masculinity, Individualism and long-term orientation. For the
purpose of our study on retail organizations only uncertainty avoidance
and power distance are taken up.
UNCERTAINTY AVOIDANCE indicates the level to which the members in
any organization feel uncomfortable in unstructured situations.
Unstructured situations are known and surprising, organizations that are
high on uncertainty avoidance seek to minimise such situation by
following tight organization structures. They have very formal business
conduct with a lot of rules and regulations. POWER DISTANCE indicates
the degree or extent of distribution of power in any organizations. High
power distance indicates unequal distribution of power in any
organization. It represents inequality from below and not from above.
Organizations with high power distance are highly centralized and have
strong hierarchies (Hofsted, 1980)
2.4 MANAGEMNET CONTROL SYSTEM
The management Control System (MCS) helps in evaluating the
performance of various organizational resources that contribute to the
achievement of various organizational objectives. It provides
information to the managers that is useful for them in performing their
jobs and to organizations in maintaining feasible patterns of behaviour
(Smith 1997). There are various kinds of controls identified in the
organizational behaviour literature, like formal control system where
rules, standard operating procedures and apparent control mechanisms are
used and informal controls which are not deliberately designed and
comprise of unwritten rules and policies of the organization. For the
purpose of research under retail formats two kinds of MCS are taken,
Interactive and Diagnostic Control Systems.
INTERACTIVE CONTROL SYSTEMS are information systems that help
managers involve themselves in the decisions taken at the subordinate
level. These systems stimulate search and learning, allowing new
strategies to emerge throughout the organization and to respond to
perceived opportunities and threats. It helps in routine information
gathering. Supervisors are continuously involved in the decision making
process. This is very helpful in dealing with the uncertain environment.
DIAGNOSTIC CONTROL SYSTEMS are formal information systems that help
managers monitor the organizational outcomes and correct deviations from
present standard of performance. Their main characteristics are their
ability to measure the outputs of a process, the existence of
predetermined standards against actual results and the ability to
correct deviations from standards.
2.5 RETAIL FORMATS
Retail organizations can be classified in a number of formats
depending majorly on the kind of merchandise they store. Sometimes they
are also classified on the floor space they occupy. The various retail
formats chosen for our study are described as under.
CONVENIENCE STORES can be as small as a kiosk of a size of around
800 sq ft or as big as 4000 to 5000 sq ft. Their prime attraction is the
easy location and convenience that they provide to the customers. The
items stocked by convenience stores are the daily use products. Most of
the sales of convenience stores come from refrigerated goods (Kirby,
1986). Along with convenience of location, these stores also offer
extended working hours to the public (NACS online, 2011) The product
categories range from beverages, snacks, and confectioneries, groceries,
gasoline, fresh or frozen food and limited use items.
HYPERMARKETS are large establishments combining the characteristics
of a supercentre and a department store. These establishments are
generally larger in size and cover 1, 00,000 sq ft or more floor space
in a retail outlet. Their business model focuses on high volume and low
margin sales. They stock around 35, 000 to 60, 000 Stock Keeping Units
(SKU). Food items constitute around 60 to 70 percent of the sales of
hypermarkets (Castrillo, Mira, & Gurdjian, 1998). Their basic
concept is providing all the products to the customers under a single
roof. Of the total, around 10 to 15 percent of their products are
SPECIALTY STORES provide a variety of goods under the single
category. They generally cater to high-end as well as mass-consumer
segment (Datamonitor, Global--Hypermarkets & Supercentres, March
2009). A traditional specialty store concentrates on a limited number of
complementary merchandise categories and provides a high level of
service. They are smaller in size. A speciality store can vary in size
from large to small depending on the type or category of product.
DEPARTMENT STORES are general merchandise retailers offering
various kinds of quality products and services. Rather than having a
full service category, they stock some limited speciality products. The
goods are separated in the form of departments for the purpose of
selling. Department stores usually sell products including apparel,
furniture, home appliances, and electronics. They stock high quality
assortment with a good focus on the length and breadth of the
assortment. (Berman & Evans, 2007)
DISCOUNT STORES are characterized by extremely Low prices, no frill
services, simple product displays, limited stock- keeping units and own
manufactured brands etc. They have the minimum operating cost as
compared with the other retailers in the sector. Their basic operations
revolve around minimizing cost and delivering goods at low prices. Price
is the key to their success. (Berman & Evans, 2007)
2.5.1 RETAIL FORMATS AND STRATEGIES
There has been a transformation in the retail sector with the
advancement of time and change in consumer preferences. The consumers
have been on a lookout for variety and quality. Different retail formats
have different priorities for different elements, a factor highly
important for one format may be the least important factor for the other
retail format. Thus it's a play of various strategies and
priorities that differentiate one format from the other.
Retail formats evolved as a process of the development of the
retail sector. A retail format is determined by the strategic choice of
a retailer. The kind of retail format run is dependent on the
competitive plan of the retailer. There are various retail formats,
department stores, specialty stores, hypermarkets, discount stores and
convenience stores having different strategic parameters with different
level of importance assigned to them. A list of 22 parameters have been
identified and the review of literature. It has been observed that
different parameters hold different level of importance for various
retail formats. These parameters are Quality of Assortment, Length of
Assortment, Width of Assortment, Accessibility, Competitiveness, Product
Display, Product Availability, After Sales Services, Product
Performance, Profitability, Sales Volume, Product Pricing, Freshness of
Stock, Personnel Management, On time delivery, Operational excellence,
Product Promotion, Floor Space, Location, Ambiance, Loyalty Programs and
The review of literature reveals that these parameters hold
different levels of importance for different retail formats. For example
for specialty stores quality of assortment, Length of Assortment,
Competitiveness, Product Display, Product Availability, After Sales
Services, Product Performance, Freshness of Stock, Personnel Management,
On time delivery, Loyalty Programs and In-store service are highly
important parameters that cannot be compromised with, while
Accessibility, Product Pricing, Operational excellence, Product
Promotion, Floor Space and location etc are parameters that have limited
importance. For Hypermarkets, Quality of Assortment, Length of
Assortment, Width of Assortment, Product Display, Sales Volume, Product
Pricing, Personnel Management, Operational excellence, Floor Space and
Location are highly important parameters, while Accessibility, After
Sales Services, on time delivery, Ambiance and Loyalty Programs are not
so important parameters.
Factors like Accessibility, Competitiveness, sales volume,
operational excellence, location and product pricing are highly
important for discount stores while length and width of assortment,
product display, after sales services, promotion and ambiance etc hold
very low importance for discount retailers.
3. THEORITICAL FRAMEWORK
When the retail formats are observed in the light of strategy
typologies of Miles and Snow and Structure dimensions by Pugh et al. a
pattern evolves among the various retail formats. This pattern forms the
basis of the theoretical framework discussed further.
3.1 ORGANIZATION STRATEGY ACROSS RETAIL FORMATS
Not all retail formats are equal and neither do they follow similar
strategies. As already mentioned earlier every retail format has
different parameters of importance for them. When the organization
typologies of Miles and Snow is applied to the retail formats mentioned
above it is found that some are defenders, while the others are
prospectors and analyzers.
CONVENIENCE STORES are retail formats whose characteristics
resemble a lot with that of Defenders. They are stores with a limited
line of product that caters specifically to a limited set of customer
segment with a high emphasis on service quality. Their basis strategy is
to service a niche segment that is defined by the geographical area that
they serve. A chain of convenience stores have limited incentive to
enter into new products and new markets. They try to achieve competitive
advantage by offering the best bargain to the customer that it is
difficult for the competitors to enter. Their service strategy equips
them to prevent competitors.
HYPERMARKETS in a sense have characteristics of both Defenders and
Prospectors. They can be categorised as Analysers based on the evidence
about their characteristics. Hypermarkets have large product line in
terms of the length and width of the products (Cataluna, Franco, &
Ramos, 2005) (Johnson, 1994). Apart from variety, their focus on quality
is also very high (Zentes, Morschett, & Schramm-Klein, 2007). They
prefer to operate in a dynamic environment and change themselves quickly
as the external environment changes. Their focus on customer is high but
they don't ignore the market opportunities waiting for them, all
such characteristics makes it a true prospector. However, apart from the
above, they focus a lot on operational excellence and along with high
service they provide the best bargain to the customers in terms of price
offerings. Their concern for improving the efficiency of their
operations lands them in highly competitive positions. All these factors
make them Defenders. Thus Hypermarkets have the best of both the
Defenders and Prospectors.
SPECIALTY STORES are pure Prospectors. They have a large variety of
width in its product length (Skallerud, Korneliussen, & Olsen,
2009); (Gagliano & Hathcote, 1994), that provides the customers with
a large variety of products to choose from. They have a broad
product-market domain and always look for new opportunities in terms of
new markets as well as new products. They are in a continuous state of
development. They have a high degree of fluidity or flexibility that
helps it to adapt quickly to the changing environment. Specialty stores
have been creators of change in their specific domain that brought about
a revolution in the retail sector. They not only focus on their current
range of product categories but at the same time observe trends and
changes in the consumer behaviour and adapt themselves accordingly. They
have decentralized operations that take care of each single geographical
DISCOUNTERS are retail organizations that can be characterised as
'Defenders'. Like Defenders, they achieve stability by trying
to seal off a portion of their total market by trying to target on a
fixed group of price conscious customers. They pursue this by producing
only a limited number of products and Stock Keeping Units. This way they
are able to put competitors away to a large extent by offering the most
competitive prices to its customers. They follow a very safe strategy
and restrict themselves to a limited domain only. They ignore new market
developments and find it difficult for themselves to adapt with the
change in the external environment. Like true Defenders they employ the
best technology restricted to their product domain and try to achieve
operational excellence and achieve a high competitive advantage in terms
of the lowest prices in the Industry that it is very difficult for the
competitors to enter.
DEPARTMENT STORES are Analysers; they combine the qualities of both
Defenders and Prospectors. They have a medium product lines in terms of
both length and width. They cater to a specific set of customers on the
basis of high quality of services and loyalty programs. At the same time
they are always on a look out for an extended market and new product
categories that would attract new customers segment to their stores.
They have a blend of both existing and new technologies and have medium
degree of flexibility in the organization structure.
3.2 ORGANIZATION STRUCTURE AND RETAIL FORMATS
As discussed above, different organization strategy results in
different structures in organizations. A defender will have a different
organization structure as compared to a prospector. The strategy and
structure dimensions of Miles and Snow and Pugh et al have been
researched from time to time (Sharma & Abidi). It has been observed
that defenders are high on centralization, formalization, specialization
and standardization while they are low on complexity of work flow and
flexibility. The reverse is found true for Prospectors. They are high on
flexibility and complexity of work flow while low on centralization,
formalization, specialization and standardization. The table below
summarises the strategy-structure relationship among the various retail
Thus, based on the strategy structure relationships it can be
observed that C-stores and discounters being defenders, follow an
organization structure that has high formalization, centralization,
specialization and standardization and low complexity of workflow and
flexibility. Specialty stores are Prospectors and have high complexity
of workflow and flexibility. Hypermarkets and Department stores are
Analyzers and have medium or average formalization, centralization,
specialization and standardization and high complexity of workflow and
3.3 ORGANIZATION CULTURE AND RETAIL FORMATS
Culture plays an important role in demining the strategic choices
made by an organization. Especially new businesses are affected by the
national cultural values. The acceptability of a new retailer or any
business is highly dependent on the national cultural traits. The
failure of Wal-Mart in Germany is the best example of unacceptability of
retail formats because of the failure to understand the culture of a
nation (Knorr & Arndt, 2003). Organization culture to a great extent
is a function of organization strategy. An attempt has been made here to
link the organization strategy typologies by Miles and Snow to
Hofstede's culture dimensions. Defenders are organizations that
stabilize their external environment to the maximum extent possible.
They are highly careful about taking decisions and reduce the
uncertainty in their environment. Defenders have high uncertainty
avoidance and power distance. While Prospectors and Analysers have low
high uncertainty avoidance and power distance, as they operate in an
uncertain environment. They pay little focus on bringing about stability
and are highly dynamic in nature. They are more risk taking and are
highly entrepreneurial in nature. Ambiguous situations are not at all
perceived as a threat to these organizations.
Hence it can be concluded that C-stores and discounters are
defenders and have high uncertainty avoidance and power distance in
their organizations. While department stores, specialty stores and
hypermarkets being prospectors and analyzers are low on uncertainty
avoidance and power distance.
3.4 MANAGEMENT CONTROL SYSTEM AND RETAIL FORMATS
Strategy and Management control systems have an effect on each
other (Simons, 1990). Similarly the strategy followed by retail
organizations determines and indicates the type of MCS it follows. As it
can be explained that Defender strategies requires a conservative and
strict control over the situations and hence a Diagnostic control system
is the solution to such an organization while prospector firms are
entrepreneurial organizations that operate in an uncertain environmental
situations and thus require an Interactive control system.
Similarly in context to the retail formats, Convenience Stores and
Discount Stores need a conservative and careful approach (as they are
associated with Defender type manufacturing organizations) and hence
they follow Diagnostic control system. Specialty stores are associated
with prospector type of manufacturing organizations and hence they
follow an interactive control system. On the other hand Hypermarkets and
Department stores are associated with Analyzer type of manufacturing
organizations and need neither a very strict nor a very loose control in
their organizations; hence they follow a control system that is a
combination of the Interactive and Diagnostic control systems.
The paper holds good scope for conducting future research. These
parameters can be further verified through empirical data. This has good
potential for accessing and building up a strong conceptual background
for further literature on organization strategies, structure and culture
dimensions across retail formats.
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Strategic Approach. New Delhi: Pearson Education India, 2007.
(2.) Castrillo, Javier, Rafael Mira and Pierre Gurdjian. "Have
Hypermarkets had their day?" 1998.
(3.) Cataluna, Francisco Javier Rondan, Manuel J. Sanchez Franco
and Angel Francisco Villarejo Ramos. "Are hypermarket prices
different from discount store prices." Journal of Product &
Brand Management 14.5 (2005): 330-337.
(4.) Child, John. "predicting and understanding organization
structure." Administrative Science Quarterly (1973): 168-185.
(5.) Datamonitor. "Global--Hypermarkets &
Supercentres." March 2009.
(6.) Etgar, Michael and Dalia Rachman-Moore. "The relationship
between national cultural dimensions and retail format Strategies."
Journal of Retailing and Consumer Services, 1-8, 2011.
(7.) Gagliano, Kathryn Bishop and Jan Hathcote. "Customer
Expectations and Perceptions of Service Quality in Retail Apparel
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Work-related values. London: Sage Publications, 1980.
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Specialty Retail Center on Downtown Shopping Behavior." Journal of
the Academy of Marketing Science 13.3 (1985): 292-206.
(10.) Johnson, Jay L. "The supercentre phenomenon."
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(11.) Kim Langfield Smith. "Management Control Systems and
Strategy: A critical review." Accounting, Organizations and Society
(12.) Kirby, David A. "Convenience Stores: A polarisation of
British retailing." RETAIL & DISTRIBUTION MANAGEMENT (1986):
(13.) Knorr, Andreas and Andreas Arndt. "Why did Wal-Mart fail
in Germany?" 2003.
(14.) Miles, Raymond E., et al. "Organizational Strategy,
Structure and Processes." Academy of Management Review (1978):
(15.) mindtools. Hofstede's Cultural Dimensions: Understanding
workplace values around the world. July 2011.
(16.) online, NACL. State Executive Newsletters. Saturday June 2011
(17.) Pugh, D. S., et al. "Dimensions of Organization
Structure." Administrative Science Quarterly (1968): 65-105.
(18.) R.R.K.Sharma and Suhail Abidi. "Different Cultures of
Prospectors and Defenders." Seventh International Conference on
Operations & Quantitative Management. 2006. 777-782.
(19.) Simons. "The Role Of Management Control Systems In
Creating Competitive Advantage." Accounting, Organizations and
Society (1990): 127-143
(20.) Skallerud, Kare, Tor Korneliussen and Svein Ottar Olsen.
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(21.) Zentes, Joachim, Dirk Morschett and Hanna Schramm-Klein.
Strategic Retail Management: Text and International Cases. GWV-Vieweg,
Saba Iqbal, Indian Institute of Technology, Kanpur, India
R.R.K.Sharma, Indian Institute of Technology, Kanpur, India
Ms. Saba Iqbal is a Research Scholar in the Department of
industrial and Management Engineering, Indian Institute of Technology,
Dr. RRK Sharma is professor in the Department of industrial and
Management Engineering, Indian Institute of Technology, Kanpur, India.
He has published more than 85 articles of international repute.
DIMENSION OF C-STORES HYPER SPECIALTY
ORGANIZATION MARKETS STORES
Formalization High Medium Low
Centralization High Medium Low
Specialization High Medium Low
work flow Low High High
Flexibility Low High High
Standardization High Medium Low
DIMENSION OF DISCOUNTERS DEPARTMENT
Formalization High Medium
Centralization High Medium
Specialization High Medium
work flow Low High
Flexibility Low High
Standardization High Medium