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

Amazon.com Inc. organizational structure characteristics advantages disadvantages online retail e-commerce recommendations case study and analysis
Defense Secretary Ash Carter (left) with Amazon CEO Jeff Bezos on March 3, 2016. Amazon.com Inc.’s organizational structure enables managerial control of the e-commerce business. (Photo: Public Domain)

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

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

Features of Amazon.com’s Organizational Structure

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

  1. Global function-based groups (most significant feature)
  2. Global hierarchy
  3. Geographic divisions

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

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

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

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

  1. North America
  2. International

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

Amazon’s corporate structure is effective in supporting international growth in the e-commerce market. The company’s continuing success in expanding its business is an indicator of the suitability of this organizational structure. An advantage of function-based groups and hierarchy is that they enable Amazon.com Inc. to rapidly and effectively implement managerial directives. Also, geographic divisions are advantageous in supporting focus on online retail market concerns and related economic conditions in certain regions, such as North America.

A disadvantage of this organizational structure is that it has limited flexibility and responsiveness. The dominance of the global function-based groups and global hierarchy characteristics reduces the capacity of Amazon to rapidly respond to new issues and problems encountered in the e-commerce business. Thus, a recommendation is for the company to consider reducing the dominance of these structural characteristics. Amazon could also establish higher flexibility and responsiveness by increasing the empowerment or degree of autonomy of regional or local offices.

References
  • Amazon.com, Inc. Form 10-K.
  • Liao, C., Chuang, S. H., & To, P. L. (2011). How knowledge management mediates the relationship between environment and organizational structure. Journal of Business Research64(7), 728-736.
  • Markides, C. C., & Williamson, P. J. (1996). Corporate diversification and organizational structure: A resource-based view. Academy of Management journal39(2), 340-367.
  • Menguc, B., & Auh, S. (2010). Development and return on execution of product innovation capabilities: The role of organizational structure. Industrial marketing management39(5), 820-831.
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