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ORGANIZATIONAL DYNAMICS & HUMAN

RESOURCE MANAGEMENT

AUTHORED BY:

NIKHIL SARAF 124

PAARMI MODI 127

SAARINI BAGGA 139

SURABHI ANAND 152

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INTRODUCTION

AT A GLANCE

INDUSTRY BROADLINE RETAILERS

Sector Consumer Services

Fiscal Year-end Dec-13

Revenue $61.09B

Net Income $-39.00M

2012 Sales Growth 27.10%

Employees 88,400

COMPANY DESCRIPTION

Amazon.com, Inc. was founded by Jeffrey P. Bezos in July 1994 and is headquartered in

Seattle, Washington. It provides online retail shopping services. It provides services to four

primary customer sets: consumers, sellers, enterprises, and content creators. The company

also provides other marketing and promotional services, such as online advertising and co-

branded credit card agreements. It serves consumers through its retail websites with a focus

on selection, price, and convenience. It designs its websites to enable its products to be sold

by the company and by third parties across dozens of product categories. It also

manufactures and sells the ‘Kindle e-reader’ and strives to offer customers the lowest prices

possible through low every day product pricing and free shipping offers, including through

membership in Amazon Prime. It also serves developers and enterprises of all sizes through

Amazon Web Services, which provides access to technology infrastructure that enables

virtually any type of business. The Company also serves serve authors and independent

publishers with ‘Kindle Direct Publishing’. The company operates in two principal segments:

North America and International. The North America segment consists of retail sales of

consumer products and subscriptions through North America-focused websites such as

www.amazon.com and www.amazon.ca. The International segment consists of retail sales

of consumer products and subscriptions through internationally focused locations.

(Amazon.com Inc. Company Information)

GLOBAL PRESENCE

Amazon has separate retail websites for United States, United Kingdom, France, Canada,

Germany, Italy, Spain, Australia, Brazil, Japan, China, India, and Mexico, with international

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shipping to certain other countries for some of its products. In 2011, it had professed an

intention to launch its websites in Poland, Netherlands, and Sweden, as well.

PRODUCTS AND SERVICES

Retail goods

Amazon product lines include media - books, DVDs, music CDs, software, videotapes, and

software - apparel, baby products, consumer electronics, beauty products, gourmet food,

groceries, health and personal-care items, industrial & scientific supplies, kitchen

items, jewellery and watches, lawn and garden items, musical instruments, sporting goods,

tools, and toys & games. The company launched amazon.com Auctions, a fixed-

price marketplace business, zShops, and a now defunct partnership with Sotheby's,

called Sothebys.amazon.com. In August 2007, Amazon announced AmazonFresh, a grocery

service. While In 2012, launched of Vine.com for buying green products. Amazon also owns

other e-commerce sites like Shopbop.com, Woot.com, and Zappos.com.

Consumer electronics

In November 2007, Amazon launched Amazon Kindle, an e-book reader and the Kindle Fire

in 2011. Amazon MP3, its own online music store, launched in the US on September 25,

2007 and on March 22, 2011, Amazon launched the Amazon Appstore for Android devices.

In January 2013, Amazon launched AutoRip, a digital music service.

Amazon Art

In August 2013 Amazon launched Amazon Art as an online marketplace selling original and

limited edition fine art from selected galleries.

Amazon Prime

Amazon Prime is a service of free two-day shipping on all eligible purchases, for a flat annual

fee, as well as discounted one-day shipping rates.

Private labels and exclusive marketing arrangements

In August 2005, Amazon began selling products under its own private label, "Pinzon";

the trademark applications indicated that the label would be used for textiles, kitchen

utensils, and other household goods.

Computing services

Amazon launched Amazon Web Services (AWS) in 2002, which provides programmatic

access to latent features on its website. In March 2006, Amazon launched an online storage

service called Amazon Simple Storage Service (Amazon S3). In March 2013 Amazon

announced its Mobile Ads API for developers.

Content production

Amazon Publishing, Amazon's publishing unit, is AmazonEncore, AmazonCrossing, Montlake

Romance, Thomas & Mercer, 47 North, and Powered by Amazon.

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Donations

Amazon also created "channels" to benefit certain causes and crises like Hurricane Sandy,

Hurricane Katrina and the 2004 earthquake and tsunami in Indian Ocean.

Amazon Local

Amazon Local is a daily deal service that offers daily deals to over 100 regions in 36 US

states

Amazon Wireless

In July 2009, Amazon.com launched their AmazonWireless website, which offers cellular

devices and service plans for Verizon Wireless, AT&T, Sprint Nextel and T-Mobile in the US.

OWNERSHIP PATTERN

Institutional Ownership Insider Trades

Shares Outstanding

Buys/Sells/Total Trades

Total Number of Holders

946 Trade Type Last 3 Mo. Last 12 Mo.

% of Shares Outstanding

69.21% Number of Buys - -

Total Shares Held 316,777,037 Number of Sells 25 68

Total Value of Holdings

127,407,724,281 Total Insider Trades

25 68

Net Activity 5,339,879 Net Activity (1,106,413) (2,462,303) [Source: (Amazon.com Inc)]

FINANCIALS

Fiscal year is January-December. All values USD millions.

2008 2009 2010 2011 2012 5-year trend

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[Source: (Amazon.com Inc)]

COMPETITORS

- Overstock.com (OSTK)

- Ebay (EBAY)

- Wal-Mart Stores (WMT)

- Barnes & Noble (BKS)

- Apple Inc.

RECENT MILESTONES

- NRF’s Retailer of the year 2013

- AMZN Stock Price tops $400 For first time

- Amazon Web Services Announces Upcoming China Region for its Cloud Computing

Platform

- Amazon Bought GoPago’s Mobile Payment Tech And Product/Engineering Team

- Amazon Introduces Personalized Kindle Accessories, Amazon Appstream, and

Amazon Workspaces

(Key Developments: Amazon.com Inc (AMZN.OQ))

Sales/Revenue

19.17B 24.51B 34.2B 48.08B 61.09B

Cost of Goods Sold (COGS) incl. D&A

15.07B 19.2B 26.56B 37.44B 46.13B

Gross Income

4.1B 5.31B 7.64B 10.64B 14.96B

SG&A Expense

3.31B 4.13B 6.13B 9.77B 14.29B

Interest Expense

71M 34M 39M 65M 92M

Pretax Income

901M 1.16B 1.5B 934M 544M

Net Income

645M 902M 1.15B 631M (39M)

EPS (Basic)

1.52 2.08 2.58 1.39 -0.09

EPS (Diluted)

1.49 2.04 2.53 1.37 -0.09

EBITDA

1.13B 1.61B 2.06B 2.1B 2.99B

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COMPANY ANALYSIS

JEFF BEZOS AS ENTREPRENEUR

From the start, Jeff Bezos wanted to “get big fast.” He was never a “small is beautiful” kind

of person. Bezos understood two things. One was the way the Internet made it possible to

banish geography, enabling anyone with an Internet connection and a computer to browse

a seemingly limitless universe of goods with a precision never previously known and then

buy them directly from the comfort of their homes. The second was how the Internet

allowed merchants to gather vast amounts of personal information on individual customers.

Bezos was convinced of a few things in the mid 1990s – that he saw a big opportunity in the

Internet industry, that it would reap rewards only in the long haul, that long-term market

share was more important than short term profit, that timidity would get them nowhere,

that it paid to be the first mover in a big market and that a customer service “obsession”

was essential to make Amazon the market leader in online bookselling. In 1995, Bezos

started Amazon.com as a book-selling website that provided customers with a unique

shopping experience and continually lowest prices that only the Internet could offer.

Amazon.com allowed customers to browse a large selection of books in one sitting without

having to go to a bookstore. It started with a bang, shipping orders to customers in 50 states

and 45 countries within the first 30 days of business.

Figure 1

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The birth of Amazon makes it fall in the Entrepreneurial Stage (as shown in Figure 1), where

the service of online book-selling was just being created, people were working late hours,

email executives would help pack books to deliver them on time and all activities were

centered on technical. Bezos, his wife MacKenzie and the other employees were working

out of a three-bedroom house in Seattle, to exploit the Internet boom and the books

warehousing facilities available. The Collectivity Stage can be either be identified as missing

or amalgamated with the Entrepreneurial Stage in the case of Amazon as the goal(s) of the

organization were clear from the very outset, the division of labor highly organized with a

very clear mission from Bezos’ side – the “Customer” focus. The Formalization for Amazon

has happened gradually, over the years, as the number of employees and the scope of

operations have increased. The obsessive need of the CEO to control the working and

leadership style of the people has found shape in the Leadership Principles the company

espouses

Customer Obsession

Invent and Simplify

Insist on High Standards

Think Big

Bias for Action

Frugality

Dive Deep

Bezos has been occasionally criticized for his unusual management style, but more

frequently been applauded for the success and degree of growth he has exhibited through

his company. He's not always a "nice" CEO. He can inspire and cajole but also irritate and

berate. He can see the big picture—and micromanage to distraction. He's quirky, brilliant

and demanding. At an offsite retreat, some managers suggested that employees should

start communicating more with each other, to which Bezos stood up and declared, "No,

communication is terrible!"

Although some might see this unusual behavior as the reason for the high rate of manager

turnover at Amazon, Bezos justifies it with the vision of a decentralized, even disorganized

company where independent ideas would prevail over groupthink. He has instituted, as a

company-wide rule, the concept of the "two-pizza team"—that is, any team should be small

enough that it could be fed with two pizzas.

From the beginning, Bezos was fanatical about squeezing from Amazon.com every

incremental degree of usefulness. He created a frugal culture. Amazon used doors for desks,

for example. Another example was the 2 pizza teams which were no bigger than you could

feed with 2 pizzas, so usually 3-12 people. 1 TPM, 1 designer (could be shared with other

2PTs), and the rest were developers. The team was managed by someone who was both

capable of managing developers and someone who could drive the business forward

through metrics, analysis, and product vision. Even the new features were often simple

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things, like 1-Click ordering forbids any other online retailer from using a one-click

purchasing option without paying a royalty to Amazon.

Amazon never rests on its laurels, nor do they fall prey to the age-old idea that everything

has been invented already. Bezos always has his eye on the future and sees an ever-

expanding path ahead. Whenever asked where Amazon is, or where the industry is, or how

far any of it has left to go, he replies: "It's still day one." (See Exhibit 1)

AMAZON: THE BIG SHIFTS

COMPETITIVE ADVANTAGE AND STRATEGY

LOW PRICES

The consistent aim of the management to provide Low Prices, Large Selection and

Convenience to the customers put Amazon in the Low Cost Leadership Strategy in the

Porter’s Competitive Strategies. Amazon’s aim was to maintain low prices to be able to gain

the trust of their customers. Bezos himself claimed in an interview about the possibility of

increasing prices but the choice to not do the same. “…We’ve done a price elasticity studies,

and the answer is always we should raise prices. And we don’t do that because we believe–

and again, we have to take this as an article of faith– we believe by keeping our prices very,

very low, we earn trust with customers over time, and that that actually does maximize free

cash flow over the long term.”

In its SEC (2005) filing Amazon describes the environment for our products and services as

‘intensely competitive’. It views its main current and potential competitors as:

1. Physical-world retailers, catalog retailers, publishers, vendors, distributors and

manufacturers of our products, many of which possess significant brand awareness,

sales volume, and customer bases, and some of which currently sell, or may sell,

products or services through the Internet, mail order, or direct marketing;

2. Other online E-commerce sites;

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3. A number of indirect competitors, including media companies, Web portals,

comparison shopping websites, and Web search engines, either directly or in

collaboration with other retailers; and

4. Companies that provide e-commerce services, including website development; third-

party fulfillment and customer-service.

Considering the success of their Low Cost Leadership Approach, one can easily identify the

Porter’s Five Competitive Forces as follows:

1. Threat of New Entrants: High and Unpredictable

2. Power of Suppliers: High, but Amazon controlled the same by becoming the seller

instead of ‘broker’. Suppliers also Customer in Amazon’s Business Model

3. Power of Buyer: High, variety of option available

4. Threat of Substitutes: Internet Industry new and not evolved enough for substitutes,

but Brick-and-Mortar stores convenient substitutes for customers

5. Rivalry among Existing Competitors: Not very intense, but not applicable for all

industries

THE CULTURE OF METRICS

‘Data is king’ at Amazon. Bezos was from the very start an undaunted devotee of the Culture

of Metrics. He was sure that the algorithms of computerized search and access would

provide the keys to a consumer kingdom whose riches were as yet undiscovered. With

Amazon, he set out to construct a 21st century ordering mechanism that would deliver

goods. Data reigns supreme at Amazon, particularly head-to-head tests of customers’

reactions to different features or site designs. With dozens of these gladiator-style

showdowns under way each week, there isn’t much time for soothing words or elaborate

rituals of social cohesion.

FROM HUMAN TO SOFTWARE BASED RECOMMENDATIONS

Amazon has developed internal tools to support this ‘Culture of Metrics’. The ‘Creator

Metrics’ tool shows content creators how well their product listings and product copy are

working. For each content editor, it retrieves all recently posted documents including

articles, interviews, booklists and features. For each one it then gives a conversion rate to

sale plus the number of page views, adds (added to basket) and repels (content requested,

but the back button then used). In time, the work of editorial reviewers was marginalized

since Amazon found that the majority of visitors used the search tools rather than read

editorial and they responded to the personalized recommendations as the matching

technology improved.

INFORMATION AND CONTROL PROCESSES

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Infrastructure for Amazon is a huge competitive advantage. They can build very complex

applications out of primitive services that are by themselves relatively simple. It follows that

the Amazon technology infrastructure must readily support its culture of experimentation

and this can be difficult to achieve with standardized content management. Amazon has

achieved its competitive advantage through developing its technology internally and with a

significant investment in this which may not be available to other organizations without the

right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well

as technology licensed from third parties, we have implemented numerous features and

functionality that simplify and improve the customer shopping experience, enable third

parties to sell on our platform, and facilitate our fulfillment and customer service

operations. Our current strategy is to focus our development efforts on continuous

innovation by creating and enhancing the specialized, proprietary software that is unique to

our business, and to license or acquire commercially-developed technology for other

applications where available and appropriate.

The big architectural change that Amazon made was to move from a two-tier monolith to a

fully-distributed, decentralized, services platform serving many different applications. At the

moment, they can scale their operation independently, maintain unparalleled system

availability, and introduce new services quickly without the need for massive

reconfiguration

Amazon pioneered A/B testing using technology in 1997 and by 2001 they had software in

place to measure the cost of each product shipped.

RELATIONSHIP BETWEEN BUSINESS/PARTNERS

As Amazon grew, its share price growth enabled partnership or acquisition with a range of

companies in different sectors. Marcus describes how Amazon partnered with

Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies),

Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and

Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in

these partners, so that it would share in their prosperity. It also charged them fees for

placements on the Amazon site to promote and drive traffic to their sites. Similarly, Amazon

charged publishers for prime-position to promote books on its site which caused an initial

hue-and-cry. Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company

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becomes dominant in an online sector such as book retail such that it becomes very difficult

for others to achieve market share. Some partnership arrangements include the Amazon

retail platform which enables other retailers to sell products online using the Amazon user

interface and infrastructure through their ‘Syndicated Stores’ program.

Another example is the Amazon Marketplace which enables Amazon customers and other

retailers to sell their new and used books and other goods alongside the regular retail

listings. A similar partnership approach is the Amazon ‘Merchants@’ program which enables

third party merchants (typically larger than those who sell via the Amazon Marketplace) to

sell their products via Amazon. Amazon earns fees either through fixed fees or sales

commissions per-unit. It also facilitated formation of partnerships with smaller companies

through its affiliates program. See Exhibit 2 for the list of companies acquired by Amazon

over the course of the years in order to expand or cut out competition.

INDESPENSABILITY OF TECHNOLOGY AND INNOVATION

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INNOVATION

Innovation has been the key to Amazon’s unprecedented growth over the year which

focuses on the long term keeping the customer in mind. Two key areas, where Amazon

innovated is the birth of the Kindle and the ebook industry and the second being Amazon

Web Services that powers half of the online business today.

Kindle

Kindle is the perfect example of Innovation in forwarding it’s agenda of reading being taken

digital. The product is more a service than a product, as it was built only to increase the

purchases online and to keep the customers locked in. It’s a platform meant to create an

exclusive user experience and an innovative new ecosystem. The vision was that of the

CEO, but the engineers took their own time to bring the product to the market finally.

AMAZON WEB SERVICES

Amazon attempts to capture the market by providing a B2C cloud market as well by

encouraging usage of Amazon Cloud Service, thereby profiting the business. (See Exhibit 3)

SWOT ANALYSIS

Strengths Weaknesses

Global brand

Focus on research and development

Strategic location

Customer-centric vision

No physical presence

Low profit margins

Low cash flows

Weak performance in China

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Diverse products

Applied advanced technology

Amazon.com’s Merchant Program

Skilled workforce

Strong logistics

Opportunities Threats Growth in movie downloads

Social networking

Growth of online shopping in China

Expansion through acquisitions

Growing e-commerce sales

Growth in digital media

Increased consumer spending in India

Dependent on vendors

Strong competition

Patent infringement

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EXHIBIT 1

Amazon.com Inc. Organizational Structure (Guillaume)

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EXHIBIT 2

Companies acquired by Amazon.com Inc (Distinguin, 2011)

EXHIBIT 3

Companies that run on Amazon Web Services (Distinguin, 2011)

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https://stonybrook.digication.com/fguillaume/Organizational_Structure1

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