Amazon revolutionized e-commerce since its founding in 1994, making it the world's largest online retailer, cloud infrastructure provider, and AI assistant provider. It boasts a market cap value of over $1 trillion (as of Apr 2023), with its founder Jeff Bezos being one of the world's wealthiest people for many years. Millions of people have grown accustomed to making purchases on Amazon, and many companies now use Amazon Web Services to offer reliable web hosting solutions. So, what makes big businesses like Amazon so successful?
Amazon has a strong focus on building a corporate structure to align and drive strategy. Amazon's strategy emphasizes its sources of competitive advantage, which includes a strong focus on technology and a commitment to realizing the benefits of economies of scale. It aims to meet every customer's needs with a superior experience, so Amazon becomes a part of their lives. By successfully executing this strategy, Amazon has become the one-stop-shop for retail we know today.
However, for Amazon's corporate strategy to work effectively, it's essential to have a well-structured organization. In the following sections, we'll delve deeper into Amazon's organization structure to explain how it's supported the company's great success. Leaders of growing businesses can apply the principles of Amazon's corporate structure to improve the success of their own companies. Get ready to learn the secrets of Amazon's corporate strategy!
Image by StockSnap from Pixabay
Overview of Amazon's Organizational Structure
Amazon's organizational structure is predominantly hierarchical, with a global hierarchy in place. At the top of the company's hierarchy chart sits its senior management team, which includes three CEOs and three senior vice presidents. Each major business function has its own dedicated group headed by one of these executive-level CEOs or SVPs. Additionally, Amazon's global groups are based on functions and geographical regions to represent target markets for its international business. The company also uses an annual strategic and operational planning process for teams to define critical investments and goals for the upcoming year.
Advantages Amazon has gained from its organizational structure
Amazon's structure has been a key factor in its ability to innovate and remain successful in a highly competitive market.
As business owners, the structure of our organization can make all the difference in our ability to succeed...or not. Amazon's organizational structure serves as a prime example of what works. Here are some reasons why Amazon's structure matters:
- Clear Communication and Accountability: Amazon's hierarchical structure allows for clear lines of communication and accountability throughout the organization, which helps ensure everyone is working together towards the same goals.
- Focus on Specific Target Markets: Function-based and geographical groupings enable Amazon to focus on specific target markets. For example, their geographic divisions oversee e-commerce operations in specific regions.
- Agile Response to Market Shifts: Amazon's annual planning process helps the company stay agile by allowing the organization to quickly respond to market shifts while staying on track with its long-term goals.
- Customer-Centric Culture: Amazon's structure is designed to put the customer first in every decision they make. As a result, they are seen as the most customer-centric company in the world.
Amazon Organization Chart
View Amazon's senior leadership team in this interactive org chart. Note, roles and responsibilities in this chart are indicative only (using Functionly's default role templates).
What was Amazon's original organizational structure?
Amazon didn't always have a hierarchical organizational structure. In its early years, when it was founded by Jeff Bezos in 1994 as an online bookstore, Amazon had a lean and flat organizational structure, with few managerial roles and levels. This structure allowed for faster communication and decision-making and more flexibility and innovation among employees. Bezos recognized that the only way to succeed online was to grow big and fast, and he encouraged his employees to experiment with new products and services.
As Amazon grew and diversified its business, adopting a more formal and structured organizational design became necessary. The flat organizational structure was no longer sufficient to manage the complexity and scale of the company’s operations. Therefore, Amazon transitioned into a hierarchical organizational structure, with its global function-based groups, geographic divisions, and subsidiaries.
The Benefits of Amazon's Hierarchical Corporate Structure
Amazon has over a million employees and operations in various business areas across many regions. To manage its diverse and rapidly expanding market reach, Amazon follows a hierarchical structure that enables extensive top-down control over global e-commerce operations.
The structure consists of six main levels of hierarchy, starting with interns and ending with the CEO, Andy Jassy. Jassy, plus the three CEOs and 3 SVPs, also known as the "S Team," work together to disseminate ideas, solve problems, set high-level goals, and shape company culture.
Three key benefits to Amazon from this hierarchical organizational structure have been:
1. Division of tasks and responsibilities: The hierarchical structure provides a clear division of tasks and responsibilities across different function-based groups and geographic divisions. Each group has its own leader who reports to a higher-level manager, creating a chain of command that ensures accountability, efficiency, and effective alignment of resources. For instance, Amazon Web Services (AWS) is a function-based group that provides cloud computing solutions to various customers, while Amazon India is a geographic division that oversees the e-commerce operations in India.
2. Facilitates coordination and communication: The hierarchical structure enables the senior management team to convey their vision and strategy to lower-level managers and employees, who then execute them according to their roles and functions. The hierarchical structure also allows for feedback and information flow from the bottom up, enabling the senior management team to monitor the performance and progress of different groups and divisions. As a result, the communication channels are comprehensive and fluid, promoting coordination, alignment, and clear directives.
3. Innovation and adaptation: The hierarchical structure at Amazon enables quick and effective decision-making in response to customer needs and preferences. By promoting innovation and creativity among different groups and divisions, Amazon leverages the expertise of its employees to develop new products and services. This approach allows the company to stay ahead of the competition, adapt to the agile and shifting market demands, and innovate at a rapid pace.
Is Amazon's Organizational Structure Centralized or Decentralized?
Amazon's organizational structure is often a topic of discussion and debate. Some argue that it is predominantly centralized, while others believe it has some elements of decentralization. In reality, it is a hybrid structure with centralized and decentralized features, depending on the level and area of the organization.
Elements of centralized structure
Amazon's hierarchical structure, led by CEO Andy Jassy and the S Team, gives the company extensive top-down control over global operations. This means that major decisions and strategies are made at the top, while lower-level managers and employees execute tasks and functions assigned to them. At Amazon, this centralization is evident in its strong and efficient logistics and customer service, which require quick and decisive action from the senior management team.
Elements of decentralized structure
At the same time, Amazon's function-based groups and geographic divisions have a degree of autonomy and flexibility to innovate and experiment with new products and services. This means these groups and divisions have some level of decentralization, promoting employee innovation and creativity. Decentralization gives Amazon the ability to respond quickly to changing market conditions and customer needs.
Balancing centralization and decentralization for success
Amazon's hybrid organizational structure allows it to achieve a balance of both centralization and decentralization. This means that the benefits of both structures are leveraged, such as efficiency, coordination, innovation, and adaptation. Even so, the challenge for Amazon's leaders is to strike this balance against different business areas and situations to leverage opportunities and achieve growth and market superiority.
Photo by Nataliya Vaitkevich | Pexels
The three tiers to Amazon's global corporate business structure
Amazon's corporate business structure is a functional one that focuses on different business functions and components as bases for defining interactions and reporting relationships. As a business leader looking to learn from Amazon's success, it is essential to understand the three main components that make up its corporate structure: global function-based groups, geographic divisions, and subsidiaries.
Global Function-Based Groups
Amazon's function-based groups are the strongest part of its corporate structure. Each group is responsible for different business areas, such as finance, human resources, legal, advertising, web services, devices, operations, and e-commerce services. The key takeaway here is to leverage your core competencies and expertise across different markets and regions. If you have strengths in specific areas, you can use function-based groups to tap into those strengths and unleash their potential in different contexts.
Geographic Divisions
Amazon's geographic divisions are responsible for overseeing e-commerce operations in different countries and regions. Each division is headed by a country or regional manager who reports to the senior vice president of worldwide operations. The key to leveraging geographic divisions is to adapt to local market conditions and customer preferences in different countries or regions. This allows Amazon to tap into the unique opportunities and challenges presented by local markets, creating tailored strategies that fit the specific needs of its target market.
Subsidiaries
Amazon's subsidiaries are independent companies that operate in various business areas that complement or diversify its core e-commerce business. These businesses include cloud computing, digital content distribution, online grocery delivery, online pharmacy, artificial intelligence, robotics, and aerospace. By diversifying its business, Amazon has created new revenue streams, tapped into new customer bases and invested in emerging technologies or growth markets.
How Amazon stays agile within this global structure
To remain agile and foster collaboration across its global and regional operations, Amazon adopts several practices and principles that shape its organizational culture and structure.
One of the key practices that Amazon uses to remain agile is the “two-pizza team” structure. This is the idea that each team should be small enough to be fed by two pizzas, which is usually between eight to ten people. These teams are cross-functional and multidisciplinary, meaning they have employees from different functions and domains who can work together to solve complex problems and deliver solutions. These teams are also autonomous and empowered, meaning they have the authority and flexibility to make decisions and experiment with new ideas without waiting for approval from higher levels.
Another key practice that Amazon uses to foster collaboration is the “API culture”. This is the idea that each team should design its products and services as application programming interfaces (APIs), which are standardized ways of communicating and exchanging data with other teams or systems. This practice enables teams to interact and integrate with each other easily and efficiently, without creating dependencies or bottlenecks. This practice also enables teams to reuse and leverage existing products and services from other teams, rather than reinventing the wheel.
A third key practice that Amazon uses to remain agile and foster collaboration is the “working backwards” method. This is the idea that each team should start with the customer needs and preferences and then work backwards to define the features, benefits, and metrics of the product or service they want to create. This practice ensures that teams are customer-centric and focused on delivering value to the end users. This practice also ensures that teams are aligned on the vision and goals of the product or service and can communicate them clearly to other stakeholders.
These practices and principles enable Amazon to adapt to changing customer needs and preferences in different business areas, despite its global business structure.
The stability and challenges in Amazon's management
Although the stability of Amazon's top management has been relatively high, there have been some changes and challenges in recent years. Jeff Bezos, the founder and former CEO, stepped down and was replaced by Andy Jassy, who has been with the company since 1997 and a member of the S Team since 2006. Jassy is expected to continue Bezos's legacy and vision while leading the S Team as they strive towards growth and development.
However, there have been some departures from the team, which has created some gaps and uncertainties in the leadership structure. Jassy tackled this by announcing in December 2022 that he was promoting some existing SVPs and adding new members to the team.
In recent years, the S Team has faced increased public scrutiny and criticism over Amazon's treatment of workers, environmental impact, market dominance, tax practices, and social responsibility. To tackle these challenges, Amazon has added two new leadership principles to its existing 14 principles: striving to be Earth's best employer and understanding that success and scale bring broad responsibility. The goal is to help balance the interests of all stakeholders, from customers to employees, shareholders to regulators, and society at large.
The stability of the S Team has been a key factor in Amazon’s success and growth as the world’s largest online retailer and cloud computing company.
Photo: Created by author | Generative AI
Amazon's Leadership Principles
Amazon's Leadership Principles are a set of 16 guiding values that shape the company's culture, decision-making processes, and employee evaluations. These principles are deeply ingrained in Amazon's DNA and serve as a foundation for its management style. Some of the key leadership principles include:
- Customer Obsession: Amazon's primary focus is on satisfying customers, often going above and beyond to meet their needs and expectations.
- Ownership: Employees at Amazon are encouraged to take responsibility for their work and to think long-term, considering the broader implications of their decisions.
- Invent and Simplify: Amazon fosters a culture of innovation and is always on the lookout for ways to simplify processes and improve customer experiences.
- Learn and Be Curious: Employees are encouraged to continuously learn, explore new ideas, and challenge the status quo.
- Dive Deep: Amazon managers are expected to delve deep into the details of their respective areas, ensuring that they have a thorough understanding of the underlying data and facts.
The future of Amazon's corporate structure
As Amazon grows larger and more diverse, it may encounter some difficulties and inefficiencies in managing its global operations. For example, it may face cultural differences, language barriers, time zone differences, conflicting priorities, misaligned incentives, information silos, duplication of efforts, or lack of standardization among its different units. These factors could hamper Amazon’s agility and innovation and create conflicts and confusion within its corporate structure.
On the other hand, one of the possible opportunities that Amazon may pursue is the further diversification of its business portfolio. Amazon has already diversified its business beyond its core e-commerce segment and may continue to explore other opportunities to enter new markets and industries that align with its vision of being Earth’s most customer-centric company. For example, it may venture into new areas such as healthcare, education, entertainment, finance, or transportation. These opportunities could enhance Amazon’s competitive advantage and value proposition and require some changes in its corporate structure to support them.
What business owners can learn from Amazon's business structure
Amazon is widely regarded as one of the most successful and innovative companies in the world, and much of this success can be attributed to its unique corporate structure. Business owners can learn a lot from Amazon's decentralized, customer-centric approach to management.\
Here are three takeaways:
1. Leveraging core competencies and expertise across different markets and regions. Amazon's global function-based groups are responsible for critical aspects of the business, such as finance, human resources, and advertising. Each group is headed by a senior executive reporting directly to CEO Andy Jassy. By leveraging core competencies and expertise across different markets and regions, business owners can identify and develop their own strengths, applying them strategically to new contexts and opportunities.
2. Adapting to local market conditions and customer preferences in different countries or regions. Amazon's geographic divisions oversee e-commerce operations in specific regions, such as North America, Europe, and Asia-Pacific. Each division has a local manager reporting to the senior vice president of worldwide consumers. By adapting to local market conditions and customer preferences in different markets, business owners can tailor their products and services accordingly.
3. Expanding market reach and product offerings in different industries and sectors. Amazon's subsidiaries operate in various business areas that complement or diversify its core e-commerce business, such as cloud computing, online grocery delivery, and robotics. Examples of Amazon's subsidiaries include Audible, Kiva Systems, and Whole Foods Market. By diversifying their business, business owners can explore new opportunities, create new revenue streams, and expand their market reach with new products and services.
Amazon’s structure is a great example of how companies can effectively manage their operations on a global scale. By leveraging core competencies and expertise, adapting to local market conditions, and diversifying into new industries, businesses can increase their reach with customers around the world while still maintaining profitability. With the right strategies
Amazon has been able to succeed due to its focus on collaboration between departments, agility, and a well-defined hierarchy. If you want clarity like Amazon, you can quickly make a difference by implementing easy organizational design and org charting systems like Functionly. This can help leaders build awesome teams so that they can win together. Take your organization, efficiency, and productivity all up a notch with Functionly today!
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Header image: Created by author | Generative AI
