Jay Samuel

University of Alaska Fairbanks – MBA 617

Organizational Description

History

Amazon.com, Inc., is a global retail company, and is headquartered in Seattle, Washington. Amazon was originally launched in 1995 as an online bookseller and became a publicly traded company in 1997. In the years since, the exponential growth of the internet and e-commerce has allowed Amazon significant expansion, to the point where it maintains a position as one of the largest retail companies worldwide. Amazon’s retail website lists a vast assortment of consumer goods, growing to over 500 million unique product listings in the United States alone (ScrapeHero, 2018). In addition to their online market of third-party goods, Amazon has added additional business functions from which it collects revenues. These include Amazon Prime subscriptions, the manufacturing and sale of Amazon branded products (Alexa, Echo, Kindle, etc.), Amazon Media productions, and the Amazon Web Services (AWS) business segment. In recent years, Amazon has also expanded to international e-commerce markets (11 online storefronts in total) and physical storefronts through Whole Foods and Amazon Go grocery stores.

Mission Statement and Organizational Goals

When Amazon was founded, it was with the mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online; and endeavors to offer its customers the lowest possible prices.” (Amazon, 2019). This mission is still listed on their corporate website, however the growth of their operative functions and customer base has necessitated expansion upon the original mission statement. In their most recent annual report, Amazon (2018) states, “We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.”

Organizational Structure

The organizational design of Amazon reflects that of a global matrix structure, with Amazon headquarters and center of operations located in America, and additional branches located globally to manage fulfillment centers and the online sites of each of the countries that Amazon operates in. Amazon utilizes a blended structure between mechanistic and organic, weighted towards the mechanistic side. There is a high level of centralization, and specialized tasks, a strict hierarchy of authority, and specialized tasks that employees are tasked with (Daft, 2016). Amazon employs over 560,000 people worldwide (Amazon, 2018), so it would be hard to imagine an organization of that scale operating with a pure organic design. Organic design is employed more practically within R&D/innovation teams working at Amazon’s corporate offices, or in the AWS segment to meet the unique needs of web service clients. Amazon’s organizational structure positions it as a symmetrically complex organization, with a weight towards horizontal differentiation given the massive number of employees. Within Miles and Snow’s strategy typology, Amazon is positioned as an analyzer: multiple levels of middle management ensure that stability is maintained in the core retail business, while smaller innovative groups are able to pursue expansion into other markets such as digital media and web services (Daft, 2016).

Organizational Culture

Amazon has a very strong commitment to their organizational goals, which manifests into the culture every employee is a part of. Amazon has a multi-step interview, hiring, and training process for new employees, to ensure that they will achieve a proper fit within the culture and work environment that Amazon upholds to maintain its dedication to customer excellence. Additionally, Amazon makes campus visits and offers internships to students to continually accumulate the brightest talent in their workforce. For the average fulfillment center employee, some of the rigors of order processing and Amazon leadership’s strong focus on customer excellence can lead to job dissatisfaction and burnout. While Amazon doesn’t utilize unions, recent steps have been made to improve employee satisfaction, including a $15 company-wide minimum wage, and the Career Choice program in which Amazon will pay for schooling or certifications for their employees pursuing higher education. Despite a challenging work environment, the strong culture that Amazon maintains landed them as the #1 business on LinkedIn’s Top U.S. Companies to Work for in 2018 (Amazon, 2019).

Organizational Environment

Amazon operates in a complex and highly turbulent environment: consumer retail and e-commerce. Amazon interacts with numerous external elements – competitors, suppliers (thousands of third-party merchants), and an ever-changing consumer focused industry. Together, these represent significant environmental complexity and this organization must continually evolve in order to be successful (Daft, 2016). Organizations unable to adapt to these factors are quick to be left behind by consumers – examples include Blockbuster, Sports Authority, and Toys-R-Us.

There is strong competition among retailers for consumer dollars, and since Amazon operates mostly online, they have had to develop a competitive niche in their low-price strategy and product offerings. This industry is also characterized by relatively low barriers to entry and government regulation – anyone can start a retail business that serves a consumer need. Retail companies are subject to federal and state laws, but do not experience strict regulation from the government like a chemical or aerospace manufacturing company would experience. Amazon’s main competitors include companies such as Walmart, Target, Costco, Best Buy, Office Max, etc. domestically; Tesco, Otto, Flipkart, Baidu, and Tencent represent a few international competitors. In addition to physical stores of traditional retailers, Amazon competes with the websites that they offer as well – Walmart has put significant pressure on Amazon through the development of their website in recent years. Other online-only retailers that compete with Amazon include Alibaba, Jet.com, Overstock.com, and eBay. The Amazon Media segment that is responsible for the creation and streaming of media content through Amazon’s Prime video app competes directly with Netflix, Google, Hulu, and Apple.

Amazon’s ability to sustain the turbulence of the retail industry is a direct result of their customer obsession – consistently high customer satisfaction and innovation to serve customers in new and more efficient ways will secure their place as an industry leader. Annual retail expenditures have grown from $22 to $28 trillion over the last 5 years, and if this trend continues, Amazon is in a prime position to reap the benefits of this industry growth (De Brabant, 2018).

Organizational Challenge – Profitability

Problem Statement

International expansion should be considered as one of the biggest changes Amazon will be facing over the next 5-10 years. While Amazon has experienced successful international growth so far, their initial success as an American company requires significant effort to adapt to unique foreign markets. Given Amazon’s success domestically, I see no reason for them not to continue international growth across Europe and Asia and predict that the company will be able to transfer their success abroad. For example, the Amazon.in mobile shopping app was the most downloaded shopping app in India for 2017 (Amazon, 2018). If Amazon is willing to commit to the investment required, both in time and monetarily, I believe they have the tools to further grow their brand to untapped markets.

Amazon is consistently regarded as one of the biggest (if not the biggest) global e-commerce companies, and to the average consumer, they may appear to be a pure success story with nothing but growth and market dominance on the horizon. However, the aforementioned international growth relates to what may be Amazon’s biggest problem: operational inefficiencies and low profitability. Amazon’s revenue dominance over the competition is often touted as a measure of their success, but this doesn’t consider the massive behind-the-scenes costs of those sales. While Amazon has made strong profitability strides in the last few years, as recently as 2014, they experienced a net operating loss of $241 million (Macrotrends, 2019). If Amazon is not able to operate efficiently and manage costs, it could severely hinder their ability to turn sales into profits in the future.

Critical Evaluation

The relationship that Amazon maintains with “customer obsession” acts as a sort of double-edged sword. There are obvious positives – Amazon has enjoyed massive growth in sales over the last 20 years, expanded far beyond the original scope of the organization to many other business segments, and consistently hold a position at or near the top of the American Customer Satisfaction Index for retail companies (ASCI, 2018). 13 years after launching, Amazon Prime has crested 100 million paid global subscriptions, and this service has expanded from free shipping to music, television, movies, and more (Amazon, 2018). Consumers are loyal Amazon because of the excellent customer service, competitive pricing, and ability to find almost anything they would want to order on Amazon’s website, and this is their biggest strength as a company. However, it isn’t cheap to maintain this high level of excellence, and as mentioned above, cost management is something Amazon continues to struggle with. The massive number of products listed on Amazon’s website require hundreds of shipping and fulfillment centers to hold, and enormous inventory storage costs are the inevitable result.

In addition to storage costs, Amazon’s dedication to fast order fulfillment – in certain U.S. cities consumers are offered two, one, or even same day delivery – necessitates large employee numbers at each of the fulfillment centers, and high costs associated with the contracts of fulfillment partners such as UPS and USPS. Amazon wants to ensure that products listed on their website are able to be quickly delivered to customers, but the enormous back-end costs that result seems to be an inevitable weakness of this system. Additionally, legal implications regarding tax avoidance and negative public perceptions of the company due to reports of unfair working conditions could lead to some consumer being unwilling to continue shopping on Amazon. Given the recent announcement by Amazon to incorporate a $15 minimum wage for “250,000 full- and part-time employees, as well as 100,000 seasonal workers”, this PR issue was quickly addressed, but this will result in significant wage costs for the organization as well (Cain, 2018).

Amazon’s continued progress in technological innovation, whether in data analytics, machine learning, and enterprise solutions through its AWS segment, or Amazon consumer technologies such as Alexa or drone delivery represent a positive opportunity for Amazon’s growth but are not without their associated costs. Additionally, acquisitions of other companies allow Amazon to capitalize on new trends and technologies developed outside of their company, and while there are up-front costs, the potential for long-term profitability is important to consider. Competition in the retail industry is fierce, and while Amazon can be considered a leader in sales revenue or market capitalization (value of publicly traded shares), they are not always a leader in cost management. Pursuing these opportunities or developing segments such as the Amazon Go grocery stores will help to diversify Amazon’s usefulness to the average consumer and secure a competitive advantage, translating to higher long-term revenues. Since Amazon’s website is its core competency (its “stable” segment in the analyzer strategy), and that has proven to have high operational costs, it is of key importance that the peripheral segments of Amazon are dedicated to exploring new opportunities for low-cost revenues to offset fulfillment costs.

Recommendations

While Amazon is making great strides in profitability in the late 2010s, I do believe that their cost management approach and struggles with profitability in the past can still be cause for worry. I have listed below three recommendations that I believe could be utilized by Amazon to increase revenues or decrease costs, leading to better profitability in the future.

1. Modify organizational goals to reflect effectiveness and efficiency

It is apparent given Amazon’s operational goals that their focus is and has been on customer service and satisfaction above all else. This translates to a much higher concern being given to effectiveness, over efficiency. Amazon should take steps to give equal weight to efficiency and effectiveness; the customer service can be maintained, but lower costs need to be achieved within the fulfillment centers. A greater focus on lean practices within the fulfillment centers could result in lower costs of inventory storage, with Kaizen groups focusing on continuous improvement in incremental steps. (Daft, 2016). Amazon could also utilize algorithms to determine products on their website that are selling below a certain frequency, and those products could be ordered only when the customer orders them, rather than having them cost money by being stored in a fulfillment center unnecessarily. Pursuing increased automation to fulfill customer orders is another step in the right direction.

 2. Further develop supplemental revenue streams

While the majority of Amazon revenues come from their consumer sites, fulfilling customer orders has proven to be costly, and oftentimes Amazon net profits are supplemented by other segments. Further development of the Amazon Web Services segment could prove to be a boon to Amazon’s overall margins. In 2018 alone, Amazon experienced $30 million higher operating income from AWS than from their North American consumer site, with less than one-fifth of the total sales (Amazon, 2019). This segment appears to be a very profitable venture and should be expanded significantly. Additionally, lower-cost segments like Amazon Prime that cost less to operate should be expanded upon and heavily marketed to increase the number of subscriptions worldwide. The creation of a venture or skunkworks team within the research and development division should be established to provide Amazon with new product and technology ideas for future revenue gain (Daft, 2016).

3. Expand into untapped markets through collaborations

Amazon’s strategy reflects a balance of stability and growth, but their international expansions can be costly ventures. The last three years have resulted in over $6 billion in net losses for Amazon in their international segment, and I don’t see them reducing their international presence anytime soon. My recommendation for this profitability issue is to enter into joint ventures or strategic alliances with foreign competitors, rather than trying to steal market share from them. In the domestic market, Amazon has enough experience and competitive advantage to diversify from other retailers. Daft gives the examples of HULU as a formal joint venture between multiple television networks to compete in the streaming market, with a strategic alliance being a less formal collaborative agreement (Daft, 2016). If Amazon was able to make one of these collaborative partnerships with a foreign competitor, the combination of their competitive advantages could better serve the foreign markets and provide Amazon a way to gain more of an international footing at a lower risk to their profits.

Implementation by Management

Changes in organizational goals to result in better efficiency will likely be difficult for Amazon to implement, given their 24-year history of doing everything for the customer, but it is important for leadership to understand that efficiency is of equal importance if they want to maintain profitability. I am of the belief that higher efficiency can be achieved without sacrificing customer satisfaction and loyalty. With the exception of the fast-shipping items (same day, one-day, two-day shipping), Amazon could keep less on hand in their fulfillment centers to reduce inventory storage costs. Especially since over half of the units sold on Amazon are from third party sellers rather than Amazon itself, systems could be implemented that would allow third party sellers to utilize Amazon’s website but fulfill the order themselves (Amazon, 2018). This would allow Amazon to collect revenue for “selling” the product at a lower cost since they wouldn’t have to store it in their own fulfillment centers. Another opportunity would be to increase the usage of robotics and automation within the fulfillment centers, to reduce employment costs, and promote lean operations/kaizen improvements. Lastly, increasing the Amazon delivery fleet potential (trucks, vans, drones, etc.) could reduce costs that Amazon pays to fulfillment partners such as UPS or the postal service.

For top management, the focus should be on increasing the capabilities offered to businesses or organizations through AWS, and especially increase marketing efforts to gain more clients. This is likely the most feasible recommendation and the one that Amazon will be continually implementing and improving. Web services and advertising are dominated by Facebook, Google, and Amazon, and if Amazon is able to market these services better to reach a larger clientele, this could support the costs of their retail side. Additionally, the sale of products that Amazon manufactures rather than purchases, such as Alexa, Kindle, and Fire TV, contribute better margins to the bottom line, so the continued improvement and marketing of these products is important in further bolstering the customer loyalty that contributes to overall sales. Lastly, continued development of Amazon Prime, adding more perks, development of more Amazon media content, will have a direct impact on the number of Prime subscriptions worldwide, which is another higher-margin segment than Amazon consumer. The key takeaway is this: if Amazon is unable to reduce costs associated with fulfillment centers, the development of higher-margin revenue streams is a must.  

This recommendation does seem somewhat unfeasible, since Amazon has typically employed a lone-wolf approach to a lot of their expansion, but the potential for benefit is very high. If they are willing to collaborate with the key players in foreign markets, it would allow Amazon to build a bigger presence in new countries, with less initial startup cost and associated risk. Top management of companies such as Alibaba, JD.com, or Otto could meet with Amazon leaders to discuss potential collaboration, and what benefits or advantages they could bring to the table by working together. If joint ventures or strategic alliances were formed, this would provide Amazon a great way to strengthen its positions in the Chinese or European markets. China is a market which Amazon has struggled to gain a foothold in, due to established competitors, so a partnership of this kind is something that management should seriously consider.

Conclusion

Amazon has enjoyed massive sales growth from a small bookseller to the retail giant it is today. The increases in profitability in recent years are a good sign for Amazon, but if it wants to maintain this upward trend, much effort will need to be made to reduce costs or further develop high-margin revenue streams that can offset any costs that can not be reduced. While their customer obsession is admirable, Amazon has a lot of opportunity looking forward over the next few years, which they will only be able to explore if profits are high enough. I believe that they can develop innovative strategies to increase organizational efficiency and profit margins while still maintaining customer satisfaction and loyalty. The retail market is constantly changing, and Amazon needs to maintain profitability to adapt to the needs of the customers they are so eager to please.

Appendix A – Organizational Chart

Appendix B – Organizational Complexity and Strategy

References

Amazon.com, Inc. (2019). Amazon Jobs: Our DNA. Retrieved from https://www.amazon.jobs/en/working/working-amazon/#our-dna

Amazon.com, Inc. (2019). Amazon Tops LinkedIn Ranking. Retrieved from https://blog.aboutamazon.com/working-at-amazon/amazon-tops-linkedin-ranking

Amazon.com, Inc. (2019, January 31). 2018 10-K Form. Retrieved from https://ir.aboutamazon.com/static-files/ce3b13a9-4bf1-4388-89a0-e4bd4abd07b8

Amazon.com, Inc. (2018, February 2). 2017 Annual Report. Retrieved from 

https://ir.aboutamazon.com/static-files/917130c5-e6bf-4790-a7bc-cc43ac7fb30a

American Customer Satisfaction Index. Benchmarks By Industry. (n.d.). Retrieved from https://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=212&i=Internet+Retail

Cain, Á. (2018, October 02). Amazon will raise its minimum wage to $15 an hour – here’s what it’s really like to work there, according to employees. Retrieved from https://www.businessinsider.com/what-its-like-to-work-at-amazon-2018-2

Daft, R. L. (2016). Organization Theory & Design (12th ed.). Boston, MA: Cengage Learning.

Macrotrends LLC. (n.d.). Amazon Net Income 2006-2018 | AMZN. Retrieved from https://www.macrotrends.net/stocks/charts/AMZN/amazon/net-income

ScrapeHero. (2018, January 15). How Many Products Does Amazon Sell Worldwide – January 2018. Retrieved from https://www.scrapehero.com/how-many-products-amazon-sell-worldwide-january-2018/

How complex is your organization internally? Place your organization on the following chart.

Due to the unavailability of an official organizational chart for Amazon, some inferences will have to be made regarding the complexity of the organization. Amazon’s website lists the top leadership and board of directors for the company, and some third-party research will be utilized to further judge its complexity. At first glance, one would assume that Amazon has the highest level of organizational complexity, given that the company employs over 560,000 people (Amazon, 2018). While it is evident that this massive quantity of employees necessitates complex management, it needs to be broken down further, with each level of the organizational structure being analyzed. At the top of the organization, CEO Jeff Bezos directs the company with a board made up of 9 other members, with 6 top officers reporting underneath the board (Amazon, 2019). These officers are dictated by function, and while I do not have information on the specifics of middle management, we can use a few examples to examine the differentiation underneath. Jeffrey Wilke is the CEO of Worldwide Consumer, which means that every aspect of Amazon’s global consumer website falls under him – shipping and fulfillment centers, and all the management and employees that entails. Jeffrey Blackburn is the Senior Vice President of Business Development, which would include a notable example such as Amazon Studios – responsible for the creation and distribution of television and movie content available to customers through Amazon Prime. Andrew Jassy is the CEO of Amazon Web Services, and every aspect of client service and product development under that function reports to him. (Amazon, 2019). Jeff Bezos is credited with the “two pizza rule”, where teams should be small enough to be fed with two pizzas during meetings (Dudovskiy, 2018). We can speculate on the exact number that meets this criterion, but this indicates more horizontal differentiation than vertical. The top management of the company is more horizontally diverse than vertically, as all officers report to Jeff Bezos, but more vertical differentiation is added outside of the corporate headquarters. For example, a typical Amazon fulfillment center will have senior management, 4 lead managers for 4 departments (Receiving/Picking, Sorting, Packing, and Shipping), and the individual associates that make up each of those 4 departments, the number of which is determined by the physical size and order processing frequency of that fulfillment center (Rumel, 2016). Using this information, it can be concluded that Amazon does experience high levels of organizational complexity, with higher levels of horizontal differentiation than vertical, given the number of employees and grouping by function which Amazon utilizes.

Locate your organization on the figure, what is the complexity?

Amazon is positioned as a Symmetrically complex organization, weighted towards horizontal differentiation. The high number of workers Amazon employs necessitates significant horizontal differentiation, because teams/units are separated by business function and work independently of each other. Each of the 175 global fulfillment centers operates with autonomy from the rest, as do the AWS facilities, Amazon Studios, Customer Service centers, and the legal department at Amazon Headquarters, just to give a few examples. If a full organization chart was to be mapped, (or if a more complete one was publicly available through Amazon’s website), it would look like a wide pyramid, due to the high horizontal differentiation with a centralized chain of command working up each of the vertical levels. There are certainly more than the 2 or 3 listed vertical levels of differentiation, but without more information on middle management, it is hard to tell how they might exactly be grouped and by what function. The high horizontal differentiation is a bit more obvious to infer, given the enormous number of employees to be accounted for and the fact that the majority of them work at the lower levels of the organization.

Does your organization’s complexity fit its structural configuration?

Given the information above, and the massive size of Amazon, the matrix configuration only seems fitting. From the top leadership of the organization, tasks are assigned divisionally, to suit the needs of Amazon as a global company. Fulfillment centers and the supporting website/infrastructure required to maintain operations are divided by region/country, along with AWS and the other ventures that Amazon pursues. Within each of the fulfillment centers, data centers, corporate offices, etc., tasks are divided functionally by skills required to complete them. In essence, the first “level” (from the top down) of Amazon’s structure follows a divisional configuration, and the levels below follow a functional configuration, to suit the needs of specialized tasks across a multitude of different business functions. The combination of these dictates the matrix configuration for the organization as a whole, which does line up with its classification as a Symmetric type in organizational complexity.

Is there “fit” across the organization’s components? What would make them more effective? Should the organization change its structure based on its complexity?

Comparison between the results of this analysis and the results of the Environmental Complexity assignment shows that there is fit across all of the organization’s components except for organizational goals. The classification as a Symmetric type aligns with the Matrix configuration, Turbulent environment, and Analyzer with Innovation strategy type, but this organization is not positioned to focus equally on Efficiency and Effectiveness. The discussion in previous assignments detailed the reasoning for Amazon’s position focused on effectiveness over efficiency; it is a result of their dedication to the customer in all aspects of business, at the cost of operational efficiencies and high costs of goods sold. Given the goal of “being Earth’s most customer-centric company”, it is unlikely that significant change will be implemented to shift the organization from Effectiveness goals to Effectiveness and Efficiency (Amazon, 2018). Implementing better inventory management systems to reduce costs of goods sold and increase profit margins is the most logical step to achieving more organizational efficiency. While it is uncertain whether steps in this direction will be implemented, it could provide significant value for the organization. Given the current level of success that Amazon enjoys, and progress made in turning out better margins over recent years, the organization does not need to change its structure. Complexity is managed effectively by Amazon, and further efforts in increasing efficiency would be the only recommendations I have.

References:

Amazon.com, Inc. (2019, January 31). 2018 10-K Form. Retrieved from https://ir.aboutamazon.com/static-files/ce3b13a9-4bf1-4388-89a0-e4bd4abd07b8

Amazon.com, Inc. (2018, February 2). 2017 Annual Report. Retrieved from 
https://ir.aboutamazon.com/static-files/917130c5-e6bf-4790-a7bc-cc43ac7fb30a

Amazon.com, Inc. (n.d.). Officers and Directors. Retrieved from https://ir.aboutamazon.com/board-of-directors

Dudovskiy, J. (2018, August 01). Amazon Organizational Structure. Retrieved from https://research-methodology.net/amazon-organizational-structure-2/

Mercer, T. (2016, June 5). What is the organizational structure of Amazon fulfillment centers? Retrieved from https://www.quora.com/What-is-the-organizational-structure-of-Amazon-fulfillment-centers

Strengths	Weaknesses
Commitment to Customers	Financial Management and Profitability
Product Selection and Pricing	Maintaining Favorable Public Perception
Opportunities	Threats
Technological Innovation	Intensely Competitive Market
Acquisitions and Expansion	Security and IT Concerns

Strengths

What does your company do well?

Commitment to Customers

One of Amazon’s biggest strengths, and competitive advantages, is its dedication to customers and maintaining loyal relationships with them. When Amazon was founded in 1995, their mission statement was “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” (Amazon, 2019). It is this mission statement that guides their operations and the growth that has resulted over the last 20+ years from a bookseller to the retail giant they are today. Amazon knows that customers drive success above all else and being customer-centric is a core competency of their business. Their customer service is unrivaled in the retail industry, and their agents are always extremely pleasant and easy to work with to achieve the desired results. Any time I have had to work with an Amazon Customer Service Representative, I have always left the interaction feeling satisfied, which reinforces my brand loyalty to Amazon. Additionally, the implementation of Amazon Prime memberships in 2005 was a tool that further strengthened the relationships that Amazon held with customers. Along with the better shipping options offered through Amazon Prime, features such as music and video streaming services, cloud storage, reading materials, and exclusive product deals are all offered to attract new customers and enhance current customer relationships. In a shareholder letter released early 2018, Amazon CEO Jeff Bezos stated “13 years after launching the service, Prime now has more than 100 million members globally” (Mogg, 2018). Amazon is consistently finding ways to improve the features and benefits offered to Prime members and non-Prime site users.

Product Selection and Pricing

Even without considering Prime-specific deals and shipping options, Amazon continues to offer free shipping to a U.S. delivery address on all orders of $25 or more of eligible items (Amazon, 2019). Amazon continually operates as a price-leader in the retail markets, with their dedication to offering the lowest price on products described in the second part of their mission statement. Amazon maintains low pricing with algorithms and updates pricing on millions of items every day to reflect this commitment. Comparison shopping between retailers will almost always place Amazon at the best or equivalent pricing for their products. Another strength that Amazon demonstrates is the sheer volume of products offered on their retail site, either sold directly from Amazon warehouses or third-party merchants then fulfilled by Amazon. According to ScrapeHero, “Amazon lists more than 3 billion products across 11 marketplaces worldwide…Amazon U.S. has the highest number of products at 564 million.” (ScrapeHero, 2018). The fact that a consumer can order almost anything they could think of to search on Amazon is a strong contributing factor to their massive global sales numbers that continue to grow every year. Mark Onetto, a former head of global operations at Amazon, explained that third-party merchants are given a “three-strike packing process for products fulfilled by Amazon, and after three strikes, their relationship with Amazon is terminated.” (Onetto, 2014). These steps to ensure that the millions of products listed on their website meet acceptable quality standards and are appropriate for retail sale.

Weaknesses

What could your company improve?

Financial Management and Profitability

Amazon’s commitment to customers above all else, manifests as both a strength and a weakness, for different reasons. As a weakness, cost of operations can be considered negligible when considered for the purpose of meeting customer needs. The massive amounts of products available at any given time on Amazon sites necessitate massive inventory storage costs, along with salaries for all of Amazon’s 600,000-plus employees to run their massive operation. While Amazon is regarded as an industry giant currently, and a leader in retail sales numbers, their inability to maintain high profit margins is a major weakness. According to Amazon’s annual 10-K report for 2018, net global sales of $232 billion resulted in operating income of $7.2 billion in North America, operating losses of $2.1 billion in international markets, and $7.2 billion of operating income generated by Amazon Web Services outside of their retail sites, resulting in a net operating income of $12 billion. (Amazon, 2019). Amazon’s management of costs relating to operations is an area much in need of improvement, and although it is getting better (5.3% margin in 2018 compared to 2.3% and 3% in 2017 and 2016, respectively), this is a major weakness in Amazon’s operations. Thomas Kee estimates that without profits Amazon Web Services and Prime Memberships (which are relatively low-cost to operate), Amazon lost about $2 billion on retail sales in the first quarter of 2018 (Kee, 2018). Regardless of sales dominance, continued struggles with profitability will plague Amazon if not properly addressed.

Maintaining Favorable Public Perception

Although Amazon maintains positive favor with its customers, it has experienced numerous public criticisms and controversies over the years, some of which are addressed better than others. While these issues don’t always have a direct impact on finance and operations, public perception can shape the willingness of consumers to maintain relationships with Amazon, and government intervention could result in costly fines and legal expenses. A few of the controversies worth mentioning are Amazon’s penchant for tax avoidance, and questionable employee treatment/management practices, both of which have been the focus of media and political criticisms in recent years. According to Hickman, Amazon paid no UK corporate tax on sales of more than 3 billion for the year of 2011, by registering sales to a separate company in Luxembourg, which resulted in an investigation by UK tax authorities (Hickman, 2012). Gardner states that “The online retail giant has built its business model on tax avoidance” and paid no taxes on $5.6 billion of U.S. profits for 2017. (Gardner, 2018). While this is a positive as seen in the eyes of investors, as it results in better bottom-line for Amazon’s financials, it can negatively impact the image the company maintains with consumers and government officials. Along with their decision to create a second headquarters in New York, for which they will receive a massive tax subsidy, these behaviors have garnered much criticism from elected officials. Additionally, reports of Amazon employees working in intense environments, with long and uncomfortable hours, derived from the focus on constant operation and fast order fulfillment, have resulted in increasing criticism of Amazon corporate practices within the last few years. Fortunately, this issue was addressed more directly, with Amazon pledging to take steps to improve worker conditions and benefits, and establishing a minimum wage of $15 an hour, affecting “250,000 full- and part-time employees, as well as 100,000 seasonal workers.” (Cain, 2018). While the public perception of a company is a more abstract factor, Amazon has shown weakness in proactively addressing PR issues before they are able to reach mass public concern, and for a company of this size the effects have the potential to be drastic.

Opportunities

What opportunities are open to your company?

Technological Innovation

One of the opportunities that Amazon has aggressively pursued over the years and will continue to provide an avenue to increased revenues is innovation with technology. While Amazon has always utilized different software and warehouse technologies within their retail operations, the advancements in more recent years to include “smart home products” and devices manufactured and sold by Amazon represent a significant opportunity. Their seamless integration of Amazon.com into a mobile app, and technologies such as their Amazon Alexa, increases the ease of use for customers and thus translates to better sales numbers. According to Amazon, in addition to listing product offerings through their sites, “We also manufacture and sell electronic devices, including Kindle e-readers, Fire tablets, Fire TVs, and Echo devices, and we develop and produce media content.” (Amazon, 2019). Each of the products offered by Amazon meets a different consumer need, and they are all designed in a way to easily integrate with each other in a customer’s home or work environment. Expansion to media content through Prime video will prove to be especially viable as streaming services continue to gain footing as a substitute to traditional media and will be a continued revenue stream for the company. Engineers at Amazon are always chasing the next innovation, and additions to the Amazon device product lines, drone delivery expansion into new cities, and Amazon Web Services software improvements will provide an excellent opportunity for growth and competitiveness into the future.

Acquisitions and Expansion

As Amazon has grown in sales and profitability, they have taken to expansion through acquisition, with notable examples being Whole Foods, Zappos.com, and Ring (home security products). These acquisitions provide an enormous opportunity for Amazon, not only in revenue potential, but in the case of Whole Foods, having physical storefronts that represent the Amazon brand and provide customers with a tangible tie to the business outside of simply being an e-commerce website. Continued acquisitions will allow Amazon the opportunity to capitalize on increased market share and higher sales to consumers looking to purchase products that are typically considered different segments of retail. Another method that Amazon is using to drive growth is the implementation of Amazon Go stores, described by Cheng as “the tech giant’s convenience store concept” and “While retailers including 7-Eleven, Kroger and Walmart’s Sam’s Club have introduced their own checkout-free scan-and-go services, Amazon Go’s ‘Just Walk Out Shopping’ technology has taken that convenience experience up several notches.” (Cheng, 2019). These stores utilize sensors and cameras on shelving to track items, and scan a QR code on the Amazon Go app on customers phones when they leave to track items they take with them, as a way for them to shop for items without the traditional checkout process. While there are currently only 9 of these stores open in 3 cities, it is safe to say this represents a massive opportunity for growth in cities across the country. Additionally, expansion of more fulfillment centers, or stores such as Amazon Go or Whole Foods into the global markets where Amazon doesn’t operate as heavily as the United States, is an opportunity for Amazon to increase international revenues.

Threats

What threats could harm your company?

Intensely Competitive Market

As stated by Amazon, “Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries.” These industries include physical brick-and-mortar retail, e-commerce retail, digital content, electronic devices, web services, and transportation and logistics services. (Amazon, 2019). Not only does Amazon experience competition in the U.S. where most of its sales occur, but in global markets, where local retailers or e-tailers have a strong presence and history. Amazon is a relatively new entrant to the industry when compared to some of the more traditional retailers, such as Walmart. Recently, due to the massive growth of Amazon, companies such as Walmart and Costco have invested significant resources in developing their own sites to better compete with Amazon in the e-commerce market. Other e-commerce sites such as Newegg, Alibaba, and Jet.com operate in direct competition with Amazon as online retailers with no traditional storefronts. According to Amazon, “The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.” (Amazon, 2019). While there are many factors that motivate customers of Amazon to maintain their loyalty, price-comparison shopping and competitors’ adoption of “Amazon price-matching” strategies mean that Amazon will have to be persistent and intentional in their efforts to maintain a competitive advantage in the coming years.

Security and IT Concerns

Since Amazon operates mostly as an e-commerce website, a persistent threat to their operations is concern regarding data security. As more consumer data is tracked, stored, and utilized on Amazon’s websites, the probability that breaches will be attempted only becomes more and more likely. Amazon states in the Risk Factors section of their annual 10-K report that “Because we process, store, and transmit large amounts of data, including personal information, failure to prevent or mitigate data loss or other security breaches, including breaches of our vendors’ or customers’ technology and systems, could expose us or our customers to a risk of loss or misuse of such information” (Amazon, 2019). Not only would this damage the reputation and credibility of Amazon in the eyes of their customers, but legal liability could have a significant financial impact on the company as well. They state this as a reason for using third-party technology and encryption, and that some of their systems have experienced breaches in the past, without any material adverse effects, but there is no promise that this will be the case in the future, and absolute security can not be guaranteed (Amazon, 2019). In addition to security concerns, due to the online nature of Amazon’s business model, failures in software, hardware systems (servers, data centers), or any other factors affecting the availability and usability of their website at any given time can have significant financial repercussions.

References

Amazon.com, Inc. (2019). Amazon Jobs: Our DNA. Retrieved from https://www.amazon.jobs/en/working/working-amazon/#our-dna

Amazon.com, Inc. (2019, January 31). 2018 10-K Form. Retrieved from https://ir.aboutamazon.com/static-files/ce3b13a9-4bf1-4388-89a0-e4bd4abd07b8

Amazon.com, Inc. (2019). About Free Shipping by Amazon. Retrieved from https://www.amazon.com/gp/help/customer/display.html/?nodeId=201117690&ref=nslp_at_3098479056320293444_0

Cain, Á. (2018, October 02). Amazon will raise its minimum wage to $15 an hour – here’s what it’s really like to work there, according to employees. Retrieved from https://www.businessinsider.com/what-its-like-to-work-at-amazon-2018-2

Cheng, A. (2019, January 13). Why Amazon Go May Soon Change The Way We Shop. Retrieved from https://www.forbes.com/sites/andriacheng/2019/01/13/why-amazon-go-may-soon-change-the-way-we-want-to-shop/#1afb95d16709

Gardner, M. (2018, February 13). Amazon Inc. Paid Zero in Federal Taxes in 2017, Gets $789 Million Windfall from New Tax Law. Retrieved from https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-2017-gets-789-million-windfall-from-new-tax-law/

Hickman, M. (2012, April 05). Amazon investigated by UK authorities over tax avoidance. Retrieved from https://www.independent.co.uk/news/uk/home-news/amazon-investigated-by-uk-authorities-over-tax-avoidance-7622019.html

Kee, T. (2018, April 27). Amazon Is Losing Billions From Its Retail Business and Rivals Should Be Scared. Retrieved from https://www.thestreet.com/opinion/amazon-is-losing-money-from-retail-operations-14571703

Mogg, T. (2018, April 18). Amazon reveals there are over 100 million Prime members. Retrieved from https://www.digitaltrends.com/web/amazon-prime-membership-count/

Onetto, M. (2014, February). When Toyota met e-commerce: Lean at Amazon. Retrieved from https://www.mckinsey.com/business-functions/operations/our-insights/when-toyota-met-e-commerce-lean-at-amazon ScrapeHero. (2018, January 15). How Many Products Does Amazon Sell Worldwide – January 2018. Retrieved from https://www.scrapehero.com/how-many-products-amazon-sell-worldwide-january-2018/

What does the organization do? What is its major work activity?

Amazon.com, Inc., is one of the largest global retailers, headquartered in Seattle, Washington, and responsible for over 600,000 employees worldwide. Amazon’s business model would classify it as a service organization, due to the large online retail site, Amazon Prime membership service, and their AWS (Amazon Web Services) business segment, although they do manufacture Amazon-branded tech products and media as well. Originally launched in 1995 as an online bookseller, their mission was “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” (Amazon, 2019). While they still maintain this mission, their operative functions and customer base have grown significantly over the years, and in their most recent annual report, Amazon (2018) states, ” We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.” In addition to its global online retail website, Amazon acquired Whole Foods in 2017, and operate Whole Foods Market stores and Amazon Go stores in select cities.

Based on your research, how does the organization score on efficiency?

In analyzing Amazon’s efficiency, there are multiple factors that must be taken into account. Although Amazon is a continuously growing company, and a force to be reckoned with in the eyes of traditional/big box retail companies, they have historically had slim operating margins, or even operated at net losses in previous years. Even when Amazon has reported equal or higher revenues that competitors, their net operating income as a percentage of that revenue is often much smaller – in 2015, Amazon reported higher revenue than 8 of its closest competitors, but high operating costs kept the company from translating that into a competitive net income (Krantz, 2016). Their most recent operating income (2018) was just over $10 billion, compared to ~$3 billion and ~$2.3 billion in 2017 and 2016, respectively, so they have made advances in efficiency and cost management over the last few years (Macrotrends.com, 2019). However, much of Amazon’s revenue is generated through Prime memberships, and this offsets the high costs of operating their retail site and stores. Amazon’s commitment to low-price selling will continue to contribute to their high operating costs, and thus detract from a higher potential efficiency than they currently observe.

Another factor contributing to their efficiency score is inventory turnover, or the lack thereof. Inventory turnover refers to the amount of times per year that a retailer sells through its inventory, with a higher number being better because it indicates that there are lower costs related to storage space needed at any one time. According to Green (2016), “Amazon turned over its inventory 16 times in 2004. That’s a quick pace for any retailer. Last year, Amazon’s inventory turnover rate was just 8, the result of a decade-long decline.” The massive selection of products Amazon offers at any given time, in an attempt to further bolster customer satisfaction, results in fulfillment center full of products that don’t sell quickly enough to justify their storage costs. When inventory turnover is low, and capital is tied up in products that aren’t quickly generating revenue, operating costs are higher than they need to be and profitability is affected.

Given that Amazon has struggled with cost management in the past, and their focus on the customer indicates that this may not see massive improvement, I would rate their efficiency at a 2. There is definitely room for improvement and I hope to see Amazon make steps in the right direction.

Based on your research, how does the organization score on  effectiveness?

Effectiveness is a metric which aligns much more clearly with the goals of Amazon as a company, and it is apparent that they value effectiveness over efficiency. Amazon consistently operates as an innovator in the retail space, and their efforts to maintain the “most customer-centric company” are easily observed. On Amazon’s website, they describe their 110-building logistics network in 6 different types of buildings, all working in tandem to ensure that consumers receive their products as quickly as possible, with two-day, next-day, or even same day delivery in certain parts of the country. Sortable and non-sortable facilities pack customer orders depending on size, and sortation and receive centers process customer orders and inventory management all to ensure faster delivery once orders are placed (Amazon, 2019). According to Kessler, Amazon utilizes “random warehouse organization”, wherein items are stored throughout fulfillment centers wherever there is space available. Having quantities of a certain item scattered throughout a warehouse, better utilizes free space, ensures that any one item ordered may be in closer proximity to an employee, rather than them having to cross to the other side of the warehouse to fill an order, and allows Amazon to carry a large variety of items without stocking large quantities of one item in a specific section. In addition to fast shipping, Amazon utilizes software to increase customer satisfaction and retention. AI and software algorithms are used when customers place orders to make recommendations for similar or complementary products. Amazon Prime increases the incentives for customers of Amazon.com to continue making orders by offering better prices and free shipping. Products such as Prime video, Amazon Alexa, and Fire TV only sweeten the deal and build loyalty and retention for customers of Amazon. The American Customer Satisfaction Index ranks Amazon among their highest in customer satisfaction for internet retail companies (ASCI, 2018).

In addition to consumers who make orders on their retail site, sellers on Amazon and organizations who use their Amazon Web Services (cloud services, business/enterprise storage and software), are also customers who Amazon works to maintain loyalty with. Their innovation into new software and technologies such as drone delivery or Amazon Go stores connected to the Amazon app with no checkout lines, demonstrate Amazon’s commitment to their goals of “customer obsession” and constant innovation. The only thing that detracts from their score is their commitment to offering low prices to customers, which can suppress potential revenues. Based on my research, I would rate Amazon’s effectiveness at a 4.

Where would the organization like to be on the graph?

I believe Amazon values effectiveness in achieving their goals and technological innovation over operational efficiency. This is reflected in their mission statement and how they continue to operate. Amazon knows that customer retention and effectiveness at delivering products quickly and at low cost will be more beneficial to future growth than trying to cut costs or increase per-customer revenue. As my rating puts their position in Quadrant C, I believe they are operating where they belong, but some increases in efficiency could be to their benefit. This organization would love to accomplish a 4.5 or 5 rating on effectiveness, and increase their efficiency to at least a 3 so as to reside in the D Quadrant.

Does the current positioning of the organization correspond to its  vision and mission statements?

While companies should create their mission statements to reflect continuous improvement, and a direction that they can use to drive growth, Amazon stands out to me as an example of achieving exactly what they set out to do. I believe the current positioning of this company reflects their mission statement goal of “being Earth’s most customer-centric company”, and while they could make improvements in efficiency, it may come at the cost of effectiveness, due to what their goals are. Implementing forward-moving strategies such as a $15 minimum employee wage, while it may continue to hinder their cost efficiencies, will promote employee effectiveness, and a more positive image regarding corporate responsibility can contribute to consumer satisfaction as well (Fisman & Luca, 2018).
Amazon is operating with intent, to uphold their mission.

References:

Amazon.com, Inc. (2019). Amazon Jobs: Our DNA. Retrieved from https://www.amazon.jobs/en/working/working-amazon/#our-dna

Amazon. (2019, January 02). Fulfillment in our buildings. Retrieved from https://www.aboutamazon.com/amazon-fulfillment/our-fulfillment-centers/fulfillment-in-our-buildings

Amazon.com, Inc. (2019, January 31). 2018 10-K Form. Retrieved from https://ir.aboutamazon.com/static-files/ce3b13a9-4bf1-4388-89a0-e4bd4abd07b8

American Customer Satisfaction Index. Benchmarks By Industry. (n.d.). Retrieved from https://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=212&i=Internet+Retail

Fisman, R. & Luca, M. (2018, October 10). How Amazon’s Higher Wages Could Increase Productivity. Retrieved from https://hbr.org/2018/10/how-amazons-higher-wages-could-increase-productivity?autocomplete=true

Kessler, S. (n.d.). Amazon: This company built one of the world’s most efficient warehouses by embracing chaos. Retrieved from https://classic.qz.com/perfect-company-2/1172282/this-company-built-one-of-the-worlds-most-efficient-warehouses-by-embracing-chaos/

Krantz, M. (2016, August 10). 10 retailers make more money than Amazon. Retrieved from https://www.usatoday.com/story/money/markets/2016/08/10/10-retailers-make-more-money-than-amazon/88431094/

Macrotrends LLC. (n.d.). Amazon Net Income 2006-2018 | AMZN. Retrieved from https://www.macrotrends.net/stocks/charts/AMZN/amazon/net-income

In my previous post, I described the organization of Atta-Boy Awards, and detailed some of the ways in which the company might expand, along with some of the operative goals and how they might be achieved. The goal of this post is to describe and show how the organization’s structure would change relative to three hypothetical changes being implemented. The assumption is being made that the expansion from one storefront to two (North Pole and Fairbanks) was incorporated before any of these changes took place. The changes are:

• A new product line was added
• An international branch/capacity was added
• A merger with another organization took place

1. A new product line was added to existing products

Given that this company currently focuses on customization of awards, using products that are provided by vendors and modifying them to suit the needs of the customers, the most logical step to add a new product line would be to come up with something that can be produced in house. Given the location, many customers look for products that are representative of Alaska or will remind the person that receives the award of their time here (since many of the products are completed for military PCS transfers, for servicemen and women stationed at Fort Wainwright or Eielson Air Force Base). Currently, the company offers engrave-able ulus, Alaska-shaped wooden plaques, and plaques with mini-snowshoes attached. Rather than starting with these pre-made awards and just engraving any designs and wording into them, the capability to manufacture custom wood products which could be designed and then engraved upon would allow for more customization options for customers. However, this is not without its drawbacks, as one of the major benefits of operating “customization-only” allows for all employees to easily learn the machines and processes. Adding custom wood products would necessitate a new employee, a specialist, who has experience with woodworking/production and could be trained to use any additional machinery required for creating these new products. Initially, they would be a part-time employee, with a contract established to complete work as needed. If demand for the new style of awards was high enough after a testing phase, the new employee could be brought in-house or changed to full-time to allow for reasonable completion time on customer orders. Besides the additional capacity to meet customer needs, another benefit would be the reduction in outside expenses – some of the plaques that are currently obtained from local woodworking vendors, could be designed and made in house at better profit margins. Additionally, another future expansion could be for the specialist to be trained with 3D printing machines (only of course, if they are adequately managing their current workload). If implemented, this would allow unique and new materials to be incorporated into awards to further diversity of products. This change is reflected in the second page of the attached document.

2. International capacity is added to this organization

Since this is currently a small family owned business, a significant amount of growth would be necessary to justify any kind of international business. However, given the location of the business, the most logical choice for an international partner would be Canada. Ideally, the initial steps would be to form a partnership with a preexisting awards company in Victoria or Vancouver, forming an arrangement where products manufactured by Atta-Boy Awards could be shipped to this business for sale or further customization for Canadian customers. This arrangement would allow entry for Atta-Boy into a new foreign market, but limit the entry costs associated with starting another location that is very distant from current business locations. This change assumes a large amount of future growth and expansion for the business, so it is not something that would be incorporated for quite some time. The growth plan that would be the most realistic would be as follows: assuming the expansion into two local stores was successful (the original North Pole store, and a Fairbanks location), the next store would be opened in Anchorage to cater to their military population, and establish Atta-Boy as an “Alaskan” company rather than just a local business. An Anchorage location would also act as a closer shipping point to British Columbia, and would be where any Canadian business partnerships/contracts would originate from. If the businesses were successful enough to justify opening a location in Vancouver, for example, to provide a direct storefront to Canadian customers rather than working with another business, this would be the next logical growth step. These changes are reflected in the third page of the document attached.

3. A merger with another business occurs

The smaller size of this family business means that a merger would probably occur before any international business took place. Ideally, some product line expansion would provide the revenues needed to finance a merger, and that additional expansion in product offerings and business locations could be used to finance future international business. The merger that makes the most sense would be with the Great Alaskan Shirt Company. This company just merged with Trademark, and they offer much more event-based and branded products than Atta-Boy offers. The merger of these two businesses would allow Atta-Boy to offer garments, office supplies, and many other branded products that are outside the capabilities and scope of what the business is currently able to offer (awards). This merger would give Atta-Boy a further competitive advantage in Fairbanks and North Pole, as expanding the products offered would increase the number of customers who utilize this business. While a significant amount of current business is derived from the two local military bases, adding products that are more catered towards marketing and advertising would significantly increase the appeal of Atta-Boy to other local businesses, which in turn would increase revenues and future growth potential. This change is shown on the last page of the attached document.

The finest awards store in the interior of Alaska – located in North Pole, off the Richardson Highway

At Atta-Boy Awards we fulfill custom orders for trophies, wall plaques, medallions, and more to suit any occasion or recognition. We emphasize timely completion, competitive pricing, and exceptional customer service. 
What can we make for you?

Operative Goals

Improve product offerings over the next year

• Source additional Alaskan-themed and Alaskan made items
• Increase the percentage of American-made products offered by replacing less popular or lower quality items for more standard style awards

Increase market share and customer base within surrounding area

• Implement customer referral program (small discount)
• Purchase advertising, such as mailed flyers
• Cold-calling/personal marketing (business owner meets with customers) to expand customers in Fairbanks and North Pole
• Secondary goal – utilize sales and market increases to open a second location in Fairbanks within 5 years

Increase employee effectiveness and satisfaction

• Develop and implement a formal training program for current and new employees to promote job skill confidence and competency
• Schedule monthly employee meetings to allow for reflection and feedback, used to improve business practices and operations

Increase business productivity and capacity

• Modify business hours from 9:30-5:30, Monday through Friday to 9-6, Monday through Saturday to be more flexible for customers
• Utilize employee training to reflect more efficiency in completing projects, and individual autonomy so dependence between employees isn’t an issue
• Add delivery capabilities to increase flexibility for customers not in close proximity to North Pole store

Increase business usage of technology in innovative applications

• Incorporate smart payment processing (Square, smartphone payments, credit card chip readers) to allow for flexibility in customer payment options – especially with delivered orders
• Add machines and fabrication capabilities to promote more customization of products (custom wood projects, 3D-printed awards)

The organizational structure for this business would follow a fairly standard hierarchy, but be more organic in operation due to the autonomy with which employees work. Formalization would be moderate, with employee manuals and procedures detailing operation of the tools and machinery used within the business. Specialization would be low as the business operates with semi-skilled employees, and all would need to be trained to carry out any necessary functions to produce awards and other products for the customers. The hierarchy would begin with the business owner, followed by a store manager, and then a mix of full and part-time employees that operate below them. Vertical complexity is small and is more of a formality, as this is a smaller size business, and all employees essentially work on the same playing field, with some holding slightly more responsibility or being available to address difficult tasks/questions. In essence, any employee would be able to step in and complete another employee’s work if needed. This organization would operate with little horizontal complexity and low centralization. All employees will be trained to be capable and confident to make decisions. If/when a second location is able to be opened for the business, the training would ensure that some employees could be moved to run the new store, and additional part-time employees could be hired to fill any gaps in order to continue to meet customer orders within a reasonable time frame.

The chart attached shows the organizational structure for this business.

Thanks for joining me!

Good company in a journey makes the way seem shorter. — Izaak Walton