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Environmental Complexity Analysis of , Inc.Joe ByrnesUniversity of Alaska FairbanksAuthor NoteJoe Byrnes is an MBA Student at the University of Alaska Fairbanks School of ManagementThis assignment is submitted towards completion of the F617 Organizational Theory course under Nichole Cundiff, Ph.D. Correspondence concerning this article should be addressed to Joe Byrnes, School of Management, University of Alaska, Fairbanks, AK 99712. ?Contact: jfbyrnes@alaska.edu. is a titan within the industries it operates in. Amazon is a global leader in e-commerce, online retail, and cloud-computing. This document analyzes the environmental complexity in which Amazon operates in.Keywords: e-commerce, online retail, organizational design, factors of the external complexity, complexityAbbreviations:AWSAmazon Web ServicesEnvironmental Complexity Analysis of Inc.Generally, how turbulent is your company's environment and how well do you believe that they adapt to it?, Inc. was first incorporated in 1994 in the state of Washington, reincorporated in 1996 in the state of Delaware, and completed its initial public offering in May 1997 and is listed on the NASDAQ Global Select Market. The company’s website began operation in July 1995 with the goal of being the Earth’s most customer-centric company CITATION Ama16 \l 1033 (, 2016). Though initially focused on book sales, it now is the 29th largest publicly traded company in the U.S. with a value of $423.1 billion and in May 2017 reported $136 billion in sales CITATION For17 \l 1033 (Forbes, 2017). Amazon survived the dot-com bubble at the end of the 2000s that swallowed up many other would be e-commerce websites and the company operates within a very dynamic and challenging environment that has claimed many of its competitors CITATION Bea17 \l 1033 (Beattie, n.d.). However, Amazon continues to be resilient, with the “Day 1” mentality of its CEO and founder, Jeff Bezos, Amazon has expanded internationally and into cloud computing and there is no reason to doubt their continued success. #1 Organizational EnvironmentIndustry (competitors, industry size, competitiveness, related industries):, Inc. operates within several industries. The company’s primary business is e-commerce, but Amazon also operates Amazon Web Services which has the largest market share of worldwide cloud computing infrastructure CITATION Gre17 \l 1033 (Greene & Stevens, 2017). CompetitorsAmazon current and potential competitors include (1) online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products they offer like Walmart and eBay; (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels such as Netflix and Hulu; (3) web search engines, comparison shopping websites, and related portals including Google; (4) companies that provide e-commerce services; (5) companies that provide fulfillment and logistics services for themselves or for third parties; (6) companies that provide information technology services and cloud-computing which would include Microsoft, Google, and Alibaba; and (7) companies that design, manufacture, market, or sell consumer electronics devices such as Apple and Samsung CITATION Ama16 \l 1033 (, 2016)Industry sizeAmazon operates within several industries like many tech companies. Online retail is a $1.9 trillion industry CITATION eMa16 \l 1033 (eMarketer, 2016) and accounts for 43% of all online retail sales in the U.S. CITATION BII17 \l 1033 (BI Intelligence, 2017). Additionally, offers cloud computing services through Amazon Web Services (AWS). Cloud computing $209.2 billion industry CITATION Col17 \l 1033 (Columbus, 2017), of which Amazon is the single largest provider CITATION Gre17 \l 1033 (Greene & Stevens, 2017).CompetitivenessAmazon is ranked as the third largest retailer in the world, behind Wal-Mart and CVS CITATION Gen17 \l 1033 (Gensler, 2017). Amazon is also ranked as the 29th largest publicly traded company in the world CITATION For17 \l 1033 (Forbes, 2017). Amazon’s principal competitive factors in their retail business are selection, price, and convenience along with fast and reliable fulfillment CITATION Ama16 \l 1033 (, 2016). For their seller and enterprise services, Amazon’s competitive factors include quality, speed, and reliability of their services and tools CITATION Ama16 \l 1033 (, 2016).Related industriesAmazon now operates within all major sectors of the retail industry, both online and brick-and-mortar. For their enterprise services, related industries include e-commerce support services such as those provided by PayPal. Amazon is also a strong part of the tech industry providing both services and electronic devices like companies like Microsoft. Raw Materials (Suppliers, manufacturers, real estate, services):Amazon is primarily a service-based company, with little production of physical goods apart from their electronic devices. Amazon’s products primarily include merchandise and content they have purchased for resale from vendors. Amazon also provides third-party sellers marketing tools and logistics services, allowing them to sell online and deliver products CITATION Ama16 \l 1033 (, 2016). Amazon’s services include cloud-computing, publishing, digital content subscriptions, advertising, and co-branded credit cards CITATION Ama16 \l 1033 (, 2016).SuppliersAmazon does not have long-term contracts or arrangements with vendors to guarantee the availability of merchandise, payment terms, or the extension of credit and no vendor accounts for more than 10% of Amazon’s purchases CITATION Ama16 \p 57 \l 1033 (, 2016, p. 57). This does subject Amazon to a certain degree of supply risk since they may be unable to secure alternatives in a timely and efficient manner. ManufacturersAmazon produces several electronic devices including their Kindle line of e-readers and Echo Alexa-enabled voice-activated digital assistants. Manufacturing is conducted by contractors CITATION Ama16 \p 45 \l 1033 (, 2016, p. 45). Human Resources (Labor market, employment agencies, universities, unions):Amazon focuses on hiring and retaining versatile and talented employees and recognizes their success is largely affected by their ability to attract and retain a motivated employee base CITATION Ama16 \p vi \l 1033 (, 2016, p. vi). Amazon has 341,400 employees CITATION For17 \l 1033 (Forbes, 2017). Labor marketAmazon announced in July 2017 that they are looking to fill more than 50,000 positions across the United States CITATION Ass17 \l 1033 (Associated Press, 2017). Most of those positions will be full-time, but they were also looking for 10,000 part-time employees to work in their sorting centers. The U.S. unemployment rate is 4.4% which is near a 16-year low. Historically, competition for qualified personnel has been intense, particularly for software engineers, computer scientists, and technical staff CITATION Ama16 \l 1033 (, 2016). UniversitiesAmazon does engage in university recruiting with both internships and full-time positions for Graduate, MBA, and undergraduate students CITATION Ama1 \l 1033 (, n.d.). UnionsSo far, none of Amazon’s employees in the United States are represented by a union. The International Association of Machinists & Aerospace Workers has repeatedly attempted to organize Amazon fulfillment center workers. A union vote in 2014 was rejected 21 to 6 at a fulfillment center in Delaware CITATION Nic16 \l 1033 (Wingfield, 2016). Labor unions have organized strikes over pay and workplace conditions in Germany.Financial Resources (Stock markets, banks, private investors): is publicly traded on the NASDAQ Global Select Market under the ticker AMZN. As of September 29, 2017, the stock was trading at $961.35/share with a market cap of $461.81 billion. Institutional holdings accounted for 62.01% ownership of the company. The largest institutional holding owner is Vanguard Group Inc. with 26,863,386 shares CITATION Nas171 \l 1033 (Nasdaq, 2017). Market (Customers, clients, potential users):CustomersAmazon’s customers are primarily ordinary consumers. Amazon reportedly has a customer base of 244 million in 2014 CITATION Kli14 \l 1033 (Kline, 2014). ClientsAmazon has over a million users of Amazon Web Services. Small and mid-sized companies make-up the majority of that user base, but analysts suspect that enterprise-scale users account for 10% of the AWS users. Among AWS clients are Netflix, Intuit, Hertz, and Time, Inc CITATION Ben17 \l 1033 (Wootton, 2017).Potential usersAmazon is constantly trying to expand their customer base. They recently announced a discounted Amazon Prime membership for persons using government assistance CITATION Hor17 \l 1033 (Horowitz, 2017). Amazon’s recent acquisition of Whole Foods will give the company access to grocery shoppers. Amazon has the largest market share of companies that provide cloud-computing services with other online companies as potential users. Technology (Techniques of productions, computers, information technology, e-commerce):Techniques of productionAmazon strongly leverages the use of technology to improve efficiency and reliability of its operations. Amazon is a pioneer in the use of automation and robots within its fulfillment centers CITATION Kni15 \l 1033 (Knight, 2015). Amazon is also experimenting with the use of commercial drone delivery to increase the speed of its last-mile logistics chain operations CITATION Wel16 \l 1033 (Wells & Stevens, 2016). Information technologyAmong Amazon’s core business segments is cloud-computing which involves providing information technology services CITATION Ama16 \l 1033 (, 2016). Amazon has the largest market share of cloud-computing providers CITATION Gre17 \l 1033 (Greene & Stevens, 2017). e-commerceAmazon’s primary expertise is e-commerce and online retail. accounts for 43% of all online retail sales in the U.S. CITATION BII17 \l 1033 (BI Intelligence, 2017). Economic Conditions (Recession, unemployment rate, inflation rate, growth):Amazon’s business is significantly affected by seasonality. A third of the company’s annual revenue is recognized in the fourth quarter, which ends December 31 CITATION Ama16 \p 4 \l 1033 (, 2016, p. 4). Seasonality also affects employment numbers, which fluctuate during the year. Government (City, state, and federal laws, regulations, taxes):RegulationAmazon is subject to a number of government regulation risks that cover areas such as taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic device certifications, environmental regulation, among others CITATION Ama16 \l 1033 (, 2016). There have been calls by members of Congress to investigate the competitive impacts of Amazon’s acquisitions CITATION Bre17 \l 1033 (Breland, 2017). TaxationIn 2017, Amazon began expanding its sales-tax collection to all 45 states that impose sales-taxes CITATION Ste172 \l 1033 (Stevens, 2017). In 2016, Amazon paid $1.4 billion in income taxes between U.S. Federal, U.S. State and International taxes CITATION Ama16 \p 63 \l 1033 (, 2016, p. 63). Sociocultural (Age, values, beliefs, education, religion, work ethic, consumer and green movements):ValuesAmong Amazon’s core values is a customer-centric approach to business and a “Day 1” mentality when it comes to approaching operations. CEO Jeff Bezos defines a Day 1 mentality as being customer obsessed, skeptical of proxies, eager in the adoption of external trends, and high-velocity decision making CITATION Ama16 \l 1033 (, 2016).Green movementsLike many of its contemporaries in the industry, Amazon shows a strong commitment to environmental sustainability. Amazon has solar energy systems on 15 of its fulfillment facility rooftops and is set to increase that number to 50 by 2020. In 2016, Amazon announced plans to open a 253 MW wind farm in Texas, their largest one to date CITATION Ama17 \l 1033 (, 2017).International (Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate):Competition from and acquisition by foreign firmsAmazon operates internationally and competes with a number international firms in the form of international retail. Amazon’s primarily international competition is from the Chinese company Alibaba which provides e-commerce/online retail services as well as banking and cloud-computing CITATION Wri14 \l 1033 (Wright, 2014). In 2017, Alibaba’s stock has gained more than 80% this year, compared to Amazon’s 28% growth CITATION Lin17 \l 1033 (Lin, 2017). Entry into overseas marketsAmazon has international websites for 15 countries, including the United States. Amazon has websites in China, India, Japan, Singapore, France, Germany, Italy, Netherlands, Spain, United Kingdom, Canada, Mexico, Australia, and Brazil. RegulationsAmazon’s international operations must contend with a number of government regulations regarding e-commerce, electronic devices, and the distribution of digital media CITATION Ama16 \l 1033 (, 2016).Exchange rateAmazon faces exposure to foreign exchange rate fluctuations due to their international operations. Amazon holds cash equivalents in several foreign currencies including British Pounds, Euros, and Japanese Yen CITATION Ama16 \l 1033 (, 2016). #2 Is the organization internationally diversified? If yes, where are they currently (regional or by country, could be broken down by product distribution or brick and mortar locations, etc...? Who are their major competitors? What markets should they expand to?International is an international company with international net sales accounting for $ 43,983,000 in 2016 and representing a 24% increase over the year prior CITATION Ama16 \p 23 \l 1033 (, 2016, p. 23). Amazon has internationally-focused websites Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Spain, and the United Kingdom CITATION Ama16 \p 48 \l 1033 (, 2016, p. 48).Major Competitors Among Amazon's major international competitors, the greatest are Wal-Mart and Alibaba. Wal-Mart is the largest global retailer by revenue and competes with Amazon primarily in the U.S. market. The Chinese company Alibaba, has greater overlap with Amazon’s business, providing online retail and e-commerce, cloud-computing, and digital content. Possible areas for expansionPossible areas for expansion include the Russian Federation, the only one of the so-called BRIC countries without an internationally-focused website. Amazon also does not have an internationally-focused website in the Middle-East including countries such as Israel, Saudi Arabia, and the United Arab Emirates which also could be future expansion opportunities.#3: How complex and unpredictable is the organization's environment?, Inc.’s environment is characterized as simple and unstable. Amazon is subject to relatively few eternal elements which are subject to rapid change CITATION Ric16 \l 1033 (Daft, 2016). Amazon does operate globally in many different sectors on top of their core competency of online retail, but the external elements that affect those sectors are largely the same such as government regulations, competitors, and suppliers. Unpredictability , Inc. is subject to many different risks from the rapidly evolving competitors it has in retail, e-commerce services, digital content and electronic devices, and web and infrastructure computing services industries to the seasonality of its revenues to international risks. Amazon operates within a somewhat unpredictable environment simply because of the array of industries it is in. Amazon’s core business of online retail is only unpredictable in that it is very competitive with relatively narrow margins. However, many of the trends in online retail were led by Amazon and the environmental factors that would damage its success would also apply to its retail competitors like Walmart. Within the cloud-computing sector, Amazon possesses the largest market share, largely due to first-mover advantage in the industry. #4: Does your organization’s strategies and goals fit their environment?Type 1Type 2Type 3Type 4EnvironmentCalmVaried489840515560Locally stormy-329565-12192000TurbulentStrategy typesReactorDefenderProspectorAnalyzer with/without innovationOrganizational goalsNeitherEfficiencyEffectiveness-406400-5524500Efficiency and operates within the tech industry which is characterized by rapidly changing circumstances. The uncertain factors within its environment are relatively few, but as demonstrated by the demise of companies following the bursting of the dot-com bubble, success is not guaranteed, but contingent on a company’s ability to adapt and innovate. Amazon utilizes an analyzer with innovation strategy, being a dominant force in the sectors it operates in and always innovating to find more efficient and effective ways of serving its customers. Amazon’s organizational goals are efficiency and effectiveness, demonstrated by its heavy leveraging of cutting-edge technology and strong presence within the industry. #5: Did your organization align across environment, strategy type, and organizational goals (i.e., all goals, if not then the correct response is NO)? Yes/No. If yes, where do you think the organization should go now? Do you predict changes in their environment? If no, should the organization align on these factors? If so, how should they do it?, Inc. does align across the environment, strategy type, and organizational goals. From their present position, further innovation is the correct course of action. Amazon’s competitors like Wal-Mart and Alibaba are not standing still and are attempting to capture its market-share. Without further expansion and innovation, it will be overtaken by its competitors. However, Amazon has demonstrated its ability to continue to innovate and find new ways to serve customers’ needs and wants. References BIBLIOGRAPHY . (2016). 2016 Annual Report. Seattle: .. (2017). Energy and Environment. Retrieved from Amazon - Sustainability: . (n.d.). University Recruiting. Retrieved from Amazon Jobs: Press. (2017, July 26). Amazon announces U.S. hiring spree as labor market tightens. Los Angeles Times. Retrieved from , A. (n.d.). Market Crashes: The Dotcom Crash. Retrieved October 2017, from Investopedia: Intelligence. (2017, Feburary 3). 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