amazon-organizational-structure

Amazon Organizational Structure In A Nutshell

The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.

Understanding the Amazon organizational structure

Amazon is the largest eCommerce company in the world, employing over a million people spread across many different countries.

The Amazon organizational structure favors a vertical hierarchical approach with global, function-based groups and geographic divisions. This gives the company extensive top-down control over global operations, allowing it to increase market share and maintain market leadership status.

At the top of this chain is a senior management team reporting directly to CEO Jeff Bezos. Dubbed the S Team, this small team of Amazon senior executives works with Bezos to disseminate his ideas, solve problems, set high-level goals, and shape company culture.

The S Team has senior executives in charge of several function-based groups, including:

  1. Finance.
  2. Human resources.
  3. Corporate affairs.
  4. Amazon Web Services (AWS).
  5. Worldwide consumers.
  6. Amazon devices and digital management.
  7. Worldwide operations.
  8. Legal and secretariat.

Geographic divisions

Despite the vast geographical reach of Amazon, the company only has two geographic divisions: North America and International.

The company also utilizes groups according to physical location and related business goals. For instance, Amazon.com Inc. is the eCommerce arm of the company. It uses groups to manage eCommerce operations according to geographic regions and their associated regulatory frameworks and logistical challenges. Ultimately, this allows Amazon to address country or region-specific issues proactively and efficiently. 

How has Amazon used organizational structure to its advantage?

Many would assume that a large, hierarchical organization would be rigid and resistant to change.

However, this is not the case at Amazon. The company is a flexible and adaptive market leader in eCommerce. Indeed, Amazon has caused disruptive innovation in online marketplaces and also in global logistics.

How is this status maintained in the face of centralized decision-making and top-down control?

One key contributing factor is the Two Pizza Rule. Instituted by Bezos, the Two Pizza Rule states that no meeting should be so large that two pizzas cannot feed the entire group.

The goal here is efficiency and scalability. Smaller teams spend less time managing timetables or keeping others in the loop and more time doing what needs to be done. In turn, each team has access to company resources to meet short and long-term goals. A product team, for example, can add new product lines without having to meet with the project, process, or logistics teams. 

In purely theoretical terms, these teams are given more autonomy than say a worker in an Amazon warehouse. But they are very much marching to the beat of Bezos’ drum.

Stability

Stability is also a notable feature of the Amazon organizational structure – particularly in senior management.

Although there are frequent new additions to the S Team, many members have been in the same position for years or in some cases, decades. The long-term success of the hierarchical model has resulted in a highly experienced senior management team. 

Ultimately, this has allowed Amazon to grow and expand into new markets without sacrificing competitiveness.

Key takeaways:

  • Amazon is a predominantly hierarchical organization incorporating function-based groups and geographic divisions.
  • Reportable to CEO Jeff Bezos is a group of senior executives called the S Team. Each member of the S Team is responsible for leading a functional or business unit. Many of these units are in fact large organizations in themselves.
  • Amazon has maintained its position as a flexible and adaptable market leader despite a rigid hierarchical structure. To some extent, this has been facilitated by small product teams having autonomous access to company resources and stable, experienced leadership.

Connected to Amazon Business Model

Amazon Business Model

amazon-business-model
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues, and Physical Stores.

Amazon Mission Statement

amazon-vision-statement-mission-statement (1)
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “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.” 

Customer Obsession

customer-obsession
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!

Amazon Revenues

amazon-revenue-model
Amazon has a business model with many moving parts. With the e-commerce platform which generated over $222 billion in 2021, followed by third-party stores services which generated over $103 billion, Amazon AWS, which generated over $62 billion, Amazon advertising which generated over $31 billion and Amazon Prime which also generated over $31 billion, and physical stores which generated over $17 billion.

Amazon Cash Conversion

cash-conversion-cycle-amazon

Working Backwards

working-backwards
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”

Amazon Flywheel

amazon-flywheel
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.

Jeff Bezos Day One

jeff-bezos-day-1
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”

Amazon Competitors

amazon-competitors

Read Next: Business AnalysisCompetitor Analysis, Continuous

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Read Next: Organizational Structure, Amazon Business Model, Amazon Mission.

Organizational Structure Case Studies

Airbnb Organizational Structure

airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

eBay Organizational Structure

ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

IBM Organizational Structure

ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

Sony Organizational Structure

sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Facebook Organizational Structure

facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).

Google Organizational Structure

google-organizational-structure
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

McDonald’s Organizational Structure

mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

Walmart Organizational Structure

walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

Microsoft Organizational Structure

microsoft-organizational-structure
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Read Next: Organizational Structure

Read Also: Business Model

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