Value Network Business Model; Amazon’s Success

Amazon strategy has been formulated around pursuing online commerce opportunities, in different segments, utilizing technology to create a powerful economic model. Long-term thinking, customer centricity, investment on infrastructure and focus on employees have been Amazon values as the CEO’s, Jeff Bezos’, clearly outlined in his letter to Amazon shareholders in 1997 when we apply retrospective approach (Amazon.com, 2019). Amazon has implemented value network business model successfully in the retail space to create differentiation in competing with brick-and-mortar stores since inception.

Amazon, as a leading online retail business, must maintain an organizational structure that adequately supports the corporate strategy in market expansion. A hybrid and evolving corporate structure benefit Amazon as the company diversifies its product lines and services. The business requires managerial control to fulfill operations, flexibility to implement growth and/or improvement programs, and global exposure to expand the market shares. Therefore, the corporate structure needs to be functional, matrix, and geographical.

Each function has a dedicated group or team to execute e-commerce operations management. The following are the major function-based groups in Amazon (Meyer, 2019):

  1. Office of CEO  
  2. Business Development
  3. Amazon Web Services (AWS)
  4. Finance
  5. International Consumer Business
  6. Accounting
  7. Consumer Business
  8. Legal

Developing and maintaining programs such as innovation, sustainability, supporting small businesses, etc. require flexibilities in horizontal movement while the strong vertical hierarchy has set to fulfill the operations. This matrix structure makes Amazon organization dynamic. The organizational structure also involves in geographic divisions to respond to the regional demands and consider differences among the markets. Amazon has designed North America and International geographical divisions.

Amazon’s rapid growth and new market penetrations are examples of the alignment in strategy and corporate efficiencies. For example, Amazon Fresh launch followed by Whole Foods acquisition demonstrate new market addition to the company after successful books, music, movies, clothes, etc. segments to gain more volume. The other aspect of the organizational alignment is in balancing the internet business with the brick-and-mortar stores that has been part of Amazon strategy unlike other internet companies such as Google. This physical exposure along with Amazon Web Services (AWS) creates synergy for the company and is an answer to follow the money strategy (Cusumano, 2017).

The diversification in the markets and physical create a complex dynamic for the Amazon organization. The technology, order fulfilment and running brick-and-mortar stores need trained professionals who can adapt to the business and environment characteristics. Any shortfalls in resource management would incur inefficiencies and losing competitive edge. Amazon is recommended to apply contingency effectiveness approaches (Daft & Armstrong, 2015, p. 70) in its business segments to ensure the organization effectiveness is maintained. The focus on resources, internal processes and goals optimization would minimize Amazon’s organizational ineffectiveness.

The concern I have about Amazon is more on the diversification strategies that may not necessarily create synergies for the company. I believe the company’s strength in AWS has to be maintained as the core of company’s competitive advantage. There is nothing is wrong with adding volume and tapping into new markets as long as the AWS is the centre of strategy.

References:

(2019). Retrieved from Amazon.com.

Cusumano, M. A. (2017). Amazon and Whole Foods: Follow the Strategy (and the Money). Communications of ACM, 24-26.

Daft, R. L., & Armstrong, A. (2015). In Organization Theory & Design. NELSON.

Meyer, P. (2019, Feb 2019). Amazon.com inc.’s Organizational Structure Characteristics (An Analysis). Retrieved from Panmore Institute: http://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

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