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Traditional Retailer Vs. online Retailer

Essay by   •  June 21, 2012  •  Research Paper  •  903 Words (4 Pages)  •  3,887 Views

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The internet has created new ways to do business for organizations with much less capital planning as opposed to the high capital needs of traditional brick and mortar organizations. In the following paper, I will discuss the organizational structure of a traditional retailer and an online retailer business. I will also identify two management or leadership challenges in each type of business. I will also give advice to those who want to go from a traditional retail business to an online business.

Traditional retailers and online retailers have some of the same traits but also have their differences. As online retailing continues to evolve, retail leaders are faced with finding e-commerce business leaders in an environment where the sources of talent are limited in the extreme (How to Open a Business Guide, n.d).

Wal-Mart's organizational structure is known as a divisional structure. "A divisional structure is made up of separate divisions each run by management" (Lilly, M., 2005). Wal-Mart's structure is made up of three divisional structures. These structures are Wal-Mart Stores, Sam's Club, and International Stores. "The international division makes up about 20 percent of the company's overall business income and is responsible for several different types of restaurants and stores including Wal-Mart and Sam's Club in 13 countries and Puerto Rico" (Ball, D.; McCulloch, Jr., W.; Geringer, J.; Minor, M.; & McNett, J.; 2003, pp 390).

Ebay has a flat organization because it has a short chain of command. Ebay's organizational structure is unorganized because the chairman has the most authority out of the rest of the team. Their organizational structure is "decentralized because they pass their decision-making authority and responsibility to other organizations" (C.A., 2009). All management decisions are left to the senior management team.

Two management challenges that a traditional retailer may face is recruitment and retention and competition. Since "many traditional retailers promote within" (How to Open a Business Guide, n.d.), the management team may face the lack of team members who are fit for the job. When management promotes within, they have to take in consideration how hard an employee works, their attendance record, and so on. Most employees that have a bad retention rate will not be considered for the position. These challenges can hinder management's decision making. The manager may then start looking outside of the business for someone else with experience and education. Another challenge that management can face in a traditional retailer is competition. If another retail business opens up in the same area, there will be some type of competition. This competition depends on the prices, how well they pay their employees, and their hours of operation. "Competition may result in prices falling below the long-run break-even price of traditional retail shops" (Hoffmaister, A.W., 2006). When the traditional retailer lowers their prices to beat their competition, they have a chance of going bankrupt or just being put out of business.

One challenge that online retailers face is order fulfillment. Customers complain about an online



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