Amazon.com Inc. was founded in 1994 in Washington and Amazon.

com website became

first active in July 1995 to become the largest online retailer in the world to offer Earth’s
Biggest Selection in less than two decades. The world’s largest online retailer and the 2nd
largest e-commerce company after Alphabet Inc. (Google) with a brand value of USD 70,9
billion, Amazon enjoys a high level of customer loyalty and more than 50% of customers are
repeat buyers.
Employing 560,000 people worldwide and attracting 2 million sellers on its platform, the
e-commerce giant earned USD 37 billion in Q4, 2017 alone, a 42% increase compared to a
previous year. Total sales increased 27% and 31% in 2016 and 2017, compared to the
comparable prior year periods (Annual Report, 2017).
Amazon has declared its adherence to four principles: customer obsession rather than
competitor focus, passion for invention, commitment to operational excellence and
long-term thinking. These principles represent sources of Amazon’s competitive advantage.
Amazon business strategy is a hybrid of cost leadership and business diversification. The
online retailer also benefits from encouraging communication between various elements
within its ecosystem and promotion of its leadership principles consisting of 14 points
discussed in this report.
Combination of pragmatist, visionary and autocratic leadership styles are exercised at
various levels at Amazon. The company has a hierarchical organizational structure.
Nevertheless, it remains highly flexible to adapt to frequent changes in the external
marketplace. Amazon organizational culture, on the other hand, are based on the principles
of high level of cost-consciousness, constant reinvention and improvement of organizational
culture and customer obsession.
Major weaknesses associated with Amazon include seasonality of the business, low profit
margins and lack of focus on product or service categories. Moreover, a weak competitive
position of Amazon’s Fire Phone and damage to the brand image due to tax avoidance
scandal in the UK can be listed as weaknesses of Amazon.

Amazon Organizational Structure

Posted on August 1, 2018 by John Dudovskiy
Amazon organizational structure can be classified as hierarchical. Senior
management team include two CEOs, three Senior Vice Presidents and one
Worldwide Controller, who are responsible for various vital aspects of the
business reporting directly to Amazon CEO Jeff Bezos. There are seven
segments such as information technology, human resources and legal operations
and heads of segments also report to Amazon CEO.
Hierarchical structure at Amazon has developed due to the immense size of the
business. The largest internet retailer in the world by revenue employs 560,000
people worldwide[1] and it has more than 300 million customers
globally.[2] Amazon organizational structure integrates many small teams that
deal with various aspects of the business. Amazon founder and CEO Jeff Bezos
is credited with the introduction of ‘two pizza rule”. According to this rule,
meetings should be held in teams small enough that could be all fed with only
two pizzas.
The figure below illustrates Amazon organizational structure:

Amazon Organizational Structure

It is important to note that despite its large size, unlike many other companies
with hierarchical organizational structure, Amazon remains highly flexible to
adapt to frequent changes in the external marketplace. Moreover, the online retail
giant leads changes in external business environment, it has caused disruptive
innovation in e-commerce and currently it is about to cause a disruptive
innovation in global logistics industry. This is mainly due to visionary and efficient
leadership by Amazon founder and CEO Jeff Bezos.
It can be forecasted that with the acquisition of Whole Foods for USD13.7 billion
in 2017, Amazon organizational structure is going to change in the foreseeable
future.  Moreover, due to the company’s adherence to business diversification
strategy in an aggressive manner, its organizational structure will remain
dynamic, being subjected to certain changes in a regular manner.
Conclusion

A corporation built around the customer has created Amazon into the superpower company that it is
today. CEO Jeff Bezos has implemented a structure into the company that allows innovation to prosper.
The leadership principles that Bezos established provide guidelines and expectations for employees to
follow and strive for. His vision of long-term success for the shareholders and the belief in maximizing
dollar free cash flows are also reasons for companies overwhelming success. Because of Amazon’s
principle to remain “customer obsessed”, the company has been able to disrupt multiple different
business segments. Migrating to different business segments has allowed Amazon to compete with a
multitude of organizations and show dominance in many sectors. The corporation has shown extreme
performance over the past two decades and will continue to do so for many years to come.

Analysis of Amazon’s Corporate Strategy

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 Amazon's Business Strategy &
Leadership In Online Retailing

Jeff Bezos is the founder of Amazon since its establishment in 1994.  33 This article will
discuss various ways Amazon has been successful and responded to challenges in
their leadership in the online retailing sector. Please note that Profitworks does not
 necessarily endorse the way Amazon has achieved leadership, but we are merely
reviewing how Amazon has become successful and their strategies to achieve such
results. If you would like to discuss how you might be able to implement some of
these strategies for your business book a time with us to discuss.

What will be covered in this article:

1. Amazon's Strategy to Success

● Amazon Focuses On The Long Term Not The Short Term

● Amazon Builds Its Strategy On Things That Don't Change
● Amazon Sees Opportunities and Not Failures
● Amazon's Has Strong Values & Culture
● Amazon Stresses the Importance of Customer Satisfaction Instead Of The
Competitor
● Amazon Achieves Excellent Customer Satisfaction By Offering An Ever
Expanding And Large Selection of Products And A Personalized Experience
● Amazon Achieves Excellent Customer Satisfaction through Speedy Service
● Amazon Achieves Excellent Customer Satisfaction through Competitive Prices
● Amazon Trains Employees To Understand The Customer Experience To Get All
Employees To Understand The Customer
● Amazon's Marketing Strategy Is Providing Great Service That Creates Positive
Word Of Mouth and Focusing On SEO & PPC

2. What Has Amazon Been Successful in?

3. Statistics on Amazon's Leadership
4. How Does Amazon Respond to Competition?
5. How Does Amazon Position their Brand?
6. How Does Amazon Maintain Leadership?

● Amazon Maintains Leadership with Their Product Selection

● Amazon Maintains Leadership by Offering Various Features and Services
● Amazon Continually Improves the Customer Experience

7. How Does Amazon Respond to Failures and Setbacks?

8. Examples of Amazon's Marketing
9. Other Interesting Amazon Facts
10. References
We challenge you to take one thing you learn from this article and implement it
today in your business to see if it does not improve the results of your business. All
companies no matter how small they are can find at least one principle from this
article to implement in their business. If you own a family owned and operated
business contact us today to discuss ideas for how you can implement some of
these tactics into your business plan. 
 

Amazon's Strategy to Success

Amazon Focuses On The Long Term Not The Short Term
“We are comfortable planting seeds and waiting for them to grow into trees,” says
Bezos. “We don’t focus on the optics of the next quarter; we focus on what is going
to be good for customers. I think this aspect of our culture is rare .” 4
A perfect example of the long-term focus is Amazon Web Services (AWS) and how
it started with startups and developers and has now expanded to million of
customers.  Companies of all sizes use AWS such as Pinterest, Airbnb, GE, Capital
One, Johnson & Johnson, McDonald's and Time Inc. 39
 
Amazon Builds Its Strategies On Things That Don't Change
"Base your strategy on things that won’t change....Whereas if you base your
strategy first and foremost on more transitory things—who your competitors are,
what kind of technologies are available, and so on—those things are going to
change so rapidly that you’re going to have to change your strategy very rapidly,
too." 
5

Bezos notes customers want "selection, low prices, and fast delivery".  He shares
how these three desires of the consumer are likely not going to change.  5 
Amazon Sees Opportunities and Not Failures
Instead of focusing on setbacks, Jeff Bezos the founder of Amazon sees
opportunities and solutions. This is evident in how Bezos talks about failure and
planting seeds. "If you invent frequently and are willing to fail, then you never get to
that point where you really need to bet the whole company. [Amazon Web
Services] also started about six or seven years ago. We are planting more seeds
right now, and it is too early to talk about them, but we are going to continue to
plant seeds. And I can guarantee you that everything we do will not work. And, I
am never concerned about that. We are stubborn on vision. We are flexible on
details." 1 Bezos made risky moves early on in the establishment of Amazon that
helped in the long-run.  It is noted that Bezos invested in warehouses, which
caused the stock prices to drop significantly at first, but this contributed to their
journey to become the leader in online retailing.  2 & 3
Amazon Has Strong Values & Company Culture
The values of Amazon has impacted their leadership and success in Online
Retailing.  The website lists Amazon's principles and values for working at the
company and they are listed below:  10

● Customer Obsession (Starting with the customer)

● Ownership (Looking at the long-term results and what is the best for the
company)
● Invent and Simplify (Expect innovation from the team)
● Are Right, A Lot (Have good instinct, strong business judgment) 
● Hire and Develop the Best (Leaders develop leaders, hiring exceptional talent)
● Insist on the Highest Standards (Raising the bar, ensuring high quality)
● Think Big (bold direction, thinking differently)
● Bias for Action (Speed, and calculated risk-taking)
● Frugality ("There are no extra points for growing headcount, budget size, or fixed
expense")
● Learn and Be Curious (Always exploring and improving)
● Earn Trust ("Leaders listen attentively, speak candidly, and treat others
respectfully")
● Dive Deep (Look at details, audit regularly, work at all levels)
● Have Backbone; Disagree and Commit (Respectfully challenge others, don't
compromise for social cohesion)
● Deliver Results (Timely fashion, deliver quality)

Amazon Stresses The Importance Of Customer Satisfaction Instead Of The

Competitor
"If you're competitor-focused, you have to wait until there is a competitor doing
something. Being customer-focused allows you to be more pioneering."  11

"Each year the University of Michigan calculates a customer-satisfaction index for

225 of America’s largest companies. Amazon has led the online retailing category
for years and has repeatedly placed in the top 10 among all companies."  4 

Bezos adopted an approach to help never lose the importance of customer

satisfaction and Amazon narrows in on eliminating the risk of unsatisfied customers.
As you can see from the quotes above, Amazon walks the talk in being successful in
maintaining customer satisfaction (See Michigan Study for further details). Amazon
strives for excellence in customer satisfaction, perhaps one could say a strive for
perfection. Bezos states that “We’re not satisfied until it’s 100%.”   It is noted that
9

Bezos would have an empty chair to remind staff in the meeting to imagine a
customer present and to consider what they would want.  He called the customers
"“the most important person in the room.” 4Bezos describes the importance of
knowing your customer and things that will not change.  He notes customers want
"selection, low prices, and fast delivery." He shares how these three
consumer desires are likely not going to change.  5 
Amazon Achieves Excellent Customer Satisfaction By Offering An Ever Expanding
And Large Selection of Products And A Personalized Experience
Amazon focuses on customer service and waits to see where opportunities present
to sell them personalized products. "We’ve had three big ideas at Amazon that
we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the
customer first. Invent. And be patient."  1  Amazon observes the actual purchase
behaviour of the customer. They take an individual approach to each customer.
They are noted to target middle and upper-class customers that are comfortable
with basic technology and look to save time by purchasing online.  6 Amazon
implements customer reviews and showcases items that would be personalized for
the customer based on their previous purchase behaviour. 
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Click Above to Watch Jeff Bezos about the Importance of Evolving
Amazon Achieves Excellent Customer Satisfaction Through Speedy Service
It is noted that Amazon is very focused on preventing any delays (in products,
delivery, web page loading).  "Amazon has metrics showing that a 0.1 second delay
in page rendering can translate into a 1% drop in customer activity."  Amazon
4 

stresses the importance of fast delivery for the consumer. In addition to fast
delivery, they also value efficiency within the operations of the company and
affordability for the consumer.  
Amazon Achieves Excellent Customer Satisfaction Through Competitive Prices
Bezos tries to keep all costs low within the business to allow for him to provide the
low prices.  “Frugality” is one of eight official company values as stated earlier -
This will align for how Bezos operates the company and ensures unnecessary
expenses are not occurring which would result in the consumer having to pay
more. For example, he is known for keeping old black-and-white printers and other
office equipment at low cost, no one in the company flies first class, and keeping
the size of the teams small.  He also has a "two pizza rule" which essentially is that if
you require more than two pizzas to feed a team, it is too big.  4 & 7 Bezos restricts his
salary to $81,840 as well as his management team's salary to help keep costs low. It
appears that employees get some ownership in the company (stock options) to
counter the lower salaries.  8 

Amazon Trains Employees To Understand The Customer Experience To Get All

Employees To Understand The Customer
Jeff Bezos ensures managers and all staff understand the experience of the
customer. He arranges for them to take a two-day training at a call center to allow
them to understand what the customer goes through and to ensure humility.  4 &
 Bezos not only encourages his managers to be sensitive to the customer
9

experience, but he also has role modeled this in his interactions with the
consumers.  This can be seen when Bezos showed humility to his consumers when
Amazon made a mistake of deleting e-books of their customers and he sent out a
personable apology. The apology is noted to make customers remain loyal and
quickly forget about the issue.     9

Amazon's Marketing Strategy Is Providing Great Service That Creates Positive Word
Of Mouth and Focusing On SEO & PPC
“If you make customers unhappy in the physical world, they might each tell six
friends. If you make customers unhappy on the Internet, they can each tell 6,000 .”  11

Amazon focuses on making the customers happy. Their budget for advertising is
small for its size of the company, but they focus on word-of-mouth being an
essential part of their success. "If you do build a great experience, customers tell
each other about that. Word of mouth is very powerful."  4 & 11 Amazon spent 2.8
billion dollars on digital marketing. If you look at their sales from 2014-2015, it was
$71.84 billion in sales. 
12 & 13
In 2015, Over 90% of Amazon's marketing budget was focused on
both SEO and PPC.  It is noted that Etsy is the only other large brand that spent
more of their budget on search marketing. Following Amazon, the budget for Apple
was 85%, and Target, Best Buy, Home Depot and Kohls were less than 20% for their
search marketing budget. 12Below we discuss a chart that displays the statistics for
Amazon's search engine. It shows that Amazon has been successful in the response
of how consumers use Amazon as a search engine to look for the desired product.  
 

Become The Leader In Your Market

 "Our overall sales to new customers has improved as a
result of detailed analysis, proposed solutions, and
successful execution.” 
Tom  - Business Owner & Customer

What has Amazon been successful in?

● Amazon grew within two decades of growing from a leader in book sales, to
competing in every other industry (electronics, music, clothes, toys, etc).  14

●  "The company has also grown at a tremendous rate with revenue rising from
about $150 million in 1997 to $75 billion in 2013."  15

● “AWS, Marketplace and Prime are all examples of bold bets at Amazon that
worked, and we’re fortunate to have those three big pillars. They have helped us
grow into a large company, and there are certain things that only large
companies can do,” said Bezos.  16

Statistics on Amazon's Leadership 

● Amazon is noted to have over 130 million visitors each month.  17 

● According to Reasonate, 86% of online shoppers make purchases on Amazon

(based on surveying 200,000 consumers annually).  18 

● “Amazon became the fastest company ever to reach $100 billion in annual
sales,” said Jeff Bezos, chief executive and chairman of Amazon. “Also this year,
AWS (Amazon Web Services) is reaching $10 billion in annual sales — doing so
at a pace even faster than Amazon achieved that milestone.”  16

● Below you can see a chart of Amazon's net sales.   It is noted that in 2015
19

Amazon reached $100 billion in annual sales.

● When looking at Amazon's sales, there are other companies that are higher (ex.
Walmart), but it is noted how fast Amazon has achieved the 100 billion mark in
such a short time (22 years). 
19

● 55% of online consumers start searching their product of interest on Amazon.   

20

● Bloom Reach 20 did a study on Amazon that suggests: 

 o When consumers are looking for a product, 90% will check Amazon even if
they are going to purchase elsewhere. This could be related to the customer
reviews. It is noted that 78% people will do this either often or always.
o 50% of mobile shoppers try Amazon first, compared to search engines on
34% and other retailers on 16%.
o It is noted that consumers get inspiration from Amazon even when they are
not necessarily going to Amazon to purchase a gift (49% start on Amazon to
search for an idea, compared to 28% on a search engine, and 26% for
retailer)
o In addition to inspiration, when the shoppers are aware of the item they
want to purchase, 59% start on Amazon (compared to 24% on a search
engine and 16% retailer) 
● Below you can observe BloomReach's finding in 2015 when exploring Amazon
and Online Purchases.  21
How Does Amazon Respond to Competition?
“What’s really happening out there is that Amazon is shredding the competition,
and the competition just doesn’t know what to do about it.”   22

Amazon expanded their services quickly and have caught competitors by surprise
by some of the industries they have invested in (such as making movies). By
expanding quickly and taking minimal profit, it is hard for competition to keep up
with Amazon.  23 

An example of how Amazon responded to competition (Netflix) in the area of

movies is how they introduced offline streaming a year well before Netflix offered
this feature. 37 Amazon did this to lessen the cost for the customer (offline streaming,
no data), and increase ease of use anywhere (no limitations with
connectivity). 36 This is a perfect example of how Amazon is pushing the bar for
innovation and is ahead of their competitors.  Originally, Netflix stated they
wouldn't offer offline streaming, but after a year of Amazon offering this, Netflix
introduced it to their consumers as an option. As discussed earlier, Jeff Bezos does
not focus his energy on competition, but rather on the consumer and how he can
appeal to their loyalty and satisfaction.  As a result, this overflows into
advancement and development of ways that consumers are more satisfied (such as
offline streaming).

Amazon is also hopeful to capture as many Americans to subscribe to the Amazon

Prime membership.  Statistics show that members of Amazon Prime spend on
average almost $900 more than non-members a year.   Analysts suggest that in
28

2015 there were between 40-50 million members worldwide.  Amazon expanded
25  

quickly and aggressively when they introduced Amazon Prime.  It is noted that over
the last 10 years they expanded their items from 1 million to 20 million.  They also
expanded internationally aggressively for Amazon Prime to maintain their
leadership and as a result, they are pushing out any competition in their market
worldwide. 25  Amazon focuses on building customer loyalty - by offering free trials
or bonus features such as free e-books, music streaming, and video/tv series when
purchasing Amazon Prime.  25  By having the loyalty of the consumer, they will be
more apt to continue to make purchases long-term and not turn to other
competitors for their purchases.
 

How does Amazon position their Brand?

Amazon logo 35
In 2015, Amazon's brand was worth $176 billion USD.  Amazon has developed their
6 

brand story through how Jeff Bezos started the business. An entrepreneurial story
about how he started selling books from his garage to an extensive successful
online store that sells a vast amount of selection.  34 The brand of Amazon is also
strongly associated with putting the customer at the center. Jeff Bezos has focused
on getting his brand to be associated with having a vast variety of products, low
prices, and customer satisfaction. 
 

How Does Amazon Maintain Leadership?

Amazon Maintains Leadership with Their Product Selection
Amazon maintain's their leadership by creating a diverse product selection.  They
have moved from the arts (literature, music, movies) to online groceries, cloud
computing, and film/TV production.  Amazon is known as the "everything store".
There are some odd selections of products as well that can be found on Amazon,
such as a model of fat replica or inflatable unicorn horns for cats. 
22 & 37

Amazon Maintains Leadership by Offering Various Features and Services

A list of Amazon business segments are as follows:  24 & 42

● Amazon Prime - a free two-day shipping for eligible purchases and extra
benefits (unlimited streaming of movies and TV with Prime Video, and Kindle
Owner Lending Library)
● Amazon Video - to purchase, rent, and watch digital movies and tv shows
● Amazon Cloud Drive & Cloud Player - 5 GB for storage for photos, files, videos
etc.
● Amazon Web Services -a secure cloud services platform
● Amazon Fresh & Amazon Prime Pantry - to purchase household products and
groceries
● Amazon Dash - a wifi connected device that will reorder your favourite
products by pressing a button
● Amazon Kindle - a device and database where consumers can browse,
purchase, download and read a variety of literature 
● Amazon Echo - a hands-free speaker that is controlled by your voice
● Fire TV - connects your HDTV and allows you to stream TV shows and movies

List of Amazon's Subsidiaries:  24

● Audible - Sells digital audio books, audio magazines, audio newspapers, radio
and TV programs  40
● Create Space - A service that allows you sell your books, music, and videos
through internet retail, your website, or other bookstores/retail outlets, etc.  43
● A9.com - Manages and develops search engine and advertising technologies 44
● Twitch.tv - A live streaming video platform  45
● Goodreads - A free website that allows you to keep track of the books you've
read and plan to read, and for people to see other people's book lists and their
reviews 46
● Woot - Internet retailer that offers various daily deals and sales  47
● IMDb - Stands for Internet Movie Database - a source for movie, TV, and
celebrity content 48
● Zappos - Online clothing and shoe shop 49
● Alexa.com - Provides web traffic data and analytics  50
● DPReview - Known as Digital Photography Review - a website about digital
cameras and photography 51
● Box Office Mojo - An online box-office reporting service that tracks revenue  52
● AbeBooks - An online marketplace for books (new, used, rare, collectibles)  53
● Double Helix Games - An American video game developer  54
● Brilliance Audio - Produces audio books  55
● Shelfari - A social cataloging website that merged with Goodreads in 2016  56
● Beijing Century Joyo Courier Services - A small freight service company in
China 57

Amazon strategies by expanding their business and service aggressively, to the

point that they will embrace minor profit margins or experience losses for the
"rapid growth." 25Amazon focuses on keeping the customer happy and customizing
products that would appeal to the customer. One study suggests that consumers
value personalized shopping as an important factor (85%) compared to what
retailers weighed personalized experiences (2% of retailers weighed personal
experience, and put more weight on brand recognition). 26 Another study states that
almost 9/10 consumers said they are more likely to purchase from a virtual store
that caters to their shopping preferences as well as 7.5/10 feel Amazon is superior
at offering the accurate recommendations for purchase.  27
Amazon Continually Improves the Customer Experience
Amazon is constantly looking to improve their customer service. Amazon has
implemented using drones to deliver packages faster. This started in England in
December 2016.
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Click Above to watch how the Drone delivers packages
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Another Video on Amazon's Drones
Amazon looks for new ways to satisfy customers. Jeff Bezos stated,  "Our job is to
invent new options that nobody’s ever thought of before and see if customers like
them.”   An example of this creativity is Amazon Go (Grocery shopping without any
23

waiting in line) and Alexa in Ford Cars. 

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Click Above to Learn More about Amazon Go  
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Click Above to Learn More about Alexa and Ford
 
How Does Amazon Respond to Failures and
Setbacks?
Amazon has been known for having a high turnover rate with staff, which is an
expense for the company. Constant demand on resources for hiring new
employees and training would be inefficient and costly. Amazon has attempted to
alleviate the employee loyalty concern by offering employee stocks options as
compensation (which increases the amount the longer you are with the company).
They also try to entice workers to stay longer by requiring the employee to pay
back a portion of their signing bonus if they leave early. Some describe the
workplace as "Darwinism." 29 

One writer discusses how Jeff Bezos "brags" about his failures (Auctions and
zShops). The major difference between Amazon is that the company embraces
their failures and tries learns from them. 
30 

Examples of Amazon's Marketing

● Below you can see how Amazon utilizes Online and Offline Marketing.   
31
Amazon maximizes e-mail marketing to dominate the online retailing. Amazon takes
a personalized approach instead of promotional. They use the information about
the consumer such as their online behaviour, previous purchases, demographics
(age, gender, location, amount spent). One writer breaks down the email marketing
steps after signing up an account and making some purchases:  1

1. Welcome e-mail
2. Receipt e-mail of purchase
3. Shipping e-mail confirmation
4. A thank-you email for purchase which includes Amazon plugging their services
and other Amazon features that the consumer may not be aware of, and
invitation to make further purchases that are targeted to consumer demographic
5. Upsell e-mail that is relevant to your purchasing/browsing traits
6. Promotional emails of sales occurring such as black-Friday
7. A review e-mail that encourages purchaser to provide feedback on the product
8. and lastly, a browsing e-mail (which shows what you have looked at and not
purchased)
Above is an example of how Amazon is using email marketing and personalization 8
In 2015, Over 90% of Amazon's marketing budget was focused on both SEO and
PPC.  It is noted that Etsy is the only other large brand that spent more of their
marketing budget on search marketing. Following Amazon, the companies that
spend the highest percentage of their marketing budget on SEO and PPC was Apple
at 85%, and then Target, Best Buy, Home Depot and Kohls, which were less than
20%. 12 Above we discuss a chart that displays the statistics for Amazon establishing
itself as a search engine for online shopping. It shows that Amazon has been so
successful with its SEO and PPC marketing that now 44% of people just go directly
to Amazon when they start to look for the desired product and 90% of people will
check Amazon when making a purchase. 

Here is an example of how Amazon is utilizing SEO:

Here is an example of how Amazon is utilizing PPC:
 

Other Interesting Facts 

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Click Above to Watch an Overview of Amazon's Story

● The name Amazon was chosen because Amazon River is one of the largest in
the world.  31 

● Young Women purchase more frequent at Amazon and thus are a targeted
consumer (women are known to be more impulsive, Prime Amazon targets
mothers who will re-purchase many items such as diapers, wipes, etc).  32

● Amazon has a spot that showcases funny reviews.  

Amazon.com Inc.’s Organizational Structure Characteristics (An Analysis)

http://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

UPDATED ON UPDATED ON SEPTEMBER 8, 2018 BY PAULINE MEYER

Amazon.com Inc. organizational structure characteristics advantages disadvantages online retail
e-commerce recommendations case study and analysis

Defense Secretary Ash Carter (left) with Amazon CEO Jeff Bezos on March 3, 2016. Amazon.com Inc.’s
organizational structure enables managerial control of the e-commerce business. (Photo: Public Domain)

Amazon.com Inc.’s organizational structure enables extensive control on global e-commerce operations.
An organizational or corporate structure establishes the design and system of interactions among
members of the firm. For example, Amazon’s corporate structure determines how managers direct and
influence operational activities in various business areas. As the leading online retail business in the
world, Amazon.com must maintain an organizational structure that adequately supports its expanding
market reach. An evolving corporate structure could even benefit Amazon as the company adds more
products and gradually diversifies its business.

Amazon’s organizational structure enables managerial control. The characteristics of this structure also
provide support necessary for Amazon.com Inc.’s new product launches in the e-commerce market.

Features of Amazon.com’s Organizational Structure

Amazon.com Inc. has a functional organizational structure. This structure focuses on business functions
as bases for determining the interactions among components of the organization. The following
characteristics are the most significant in Amazon’s corporate structure:

Global function-based groups (most significant feature)

Global hierarchy

Geographic divisions

Global Function-Based Groups. Function-based groups are the strongest characteristic of Amazon’s
organizational structure. Each major business function has a dedicated group or team, along with a
senior manager. The strategic objective in having this structural characteristic is to enable Amazon.com
to facilitate successful e-commerce operations management throughout the entire organization.
Considering its ongoing global expansion, the company grows through this feature of the corporate
structure in terms of ease of establishing operations in new markets [Read: Amazon.com Inc.’s Generic &
Intensive Growth Strategies]. The following are the major function-based groups in Amazon’s
organizational structure:

Office of the CEO

Business Development

Amazon Web Services (AWS)

Finance

International Consumer Business

Accounting

Consumer Business

Legal and Secretariat

Global Hierarchy. Hierarchy is a traditional organizational structural characteristic. In the case of

Amazon.com Inc., such characteristic is expressed in terms of a global system of vertical lines of
command and authority that influence the online retail firm. For example, senior managers’ directives
are applied throughout the organization, affecting all relevant offices of the company worldwide. The
strategic objective of this feature of the corporate structure is to facilitate managerial control of
Amazon’s entire organization.

Geographic Divisions. Amazon’s organizational structure also involves geographic divisions. In this
structural characteristic, groups are based on geographic regions and related business goals. For
example, Amazon.com Inc. uses geographic divisions to make it easier to manage the e-commerce
business based on economic conditions of certain regions. The strategic objective in having this
characteristic of the organizational structure is to enable the company to address issues or concerns
relevant to each geographic region, considering differences among regional markets. Amazon has a
simple approach for this structural feature, involving the following geographic divisions in its operations:

North America

International

Amazon.com’s Organizational Structure Implications, Advantages & Disadvantages

Amazon’s corporate structure is effective in supporting international growth in the e-commerce market.
The company’s continuing success in expanding its business is an indicator of the suitability of this
organizational structure. An advantage of function-based groups and hierarchy is that they enable
Amazon.com Inc. to rapidly and effectively implement managerial directives. Also, geographic divisions
are advantageous in supporting focus on online retail market concerns and related economic conditions
in certain regions, such as North America.
A disadvantage of this organizational structure is that it has limited flexibility and responsiveness. The
dominance of the global function-based groups and global hierarchy characteristics reduces the capacity
of Amazon to rapidly respond to new issues and problems encountered in the e-commerce business.
Thus, a recommendation is for the company to consider reducing the dominance of these structural
characteristics. Amazon could also establish higher flexibility and responsiveness by increasing the
empowerment or degree of autonomy of regional or local offices.