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Harvard Case - The Challenges of Siting a New Headquarters: Amazon Courts New York City

"The Challenges of Siting a New Headquarters: Amazon Courts New York City" Harvard business case study is written by Andrew Hoffman. It deals with the challenges in the field of Business & Government Relations. The case study is 18 page(s) long and it was first published on : Jun 12, 2020

At Fern Fort University, we recommend that Amazon carefully consider the following factors before making a final decision on its new headquarters location: economic growth potential, infrastructure and urban development, government incentives, and public-private partnerships. Amazon should prioritize locations that offer a strong talent pool, robust infrastructure, and a supportive business environment.

2. Background

This case study focuses on Amazon's search for a second headquarters, dubbed 'HQ2,' in 2017. The company launched a highly publicized competition, attracting bids from over 200 cities across North America. New York City emerged as a frontrunner, offering significant financial incentives and a prime location. However, the deal faced intense public scrutiny and ultimately fell apart due to concerns about Amazon's impact on the city's economy, infrastructure, and local communities.

The main protagonists in this case are:

  • Amazon: A global e-commerce giant seeking to expand its operations and secure a strategic location for future growth.
  • New York City: A major metropolitan area with a strong economy, diverse talent pool, and a desire to attract large corporations.
  • Local residents and community groups: Concerned about the potential negative impacts of Amazon's arrival, including displacement, gentrification, and increased traffic.
  • Politicians and government officials: Seeking to leverage Amazon's investment for economic growth and job creation, while also addressing public concerns.

3. Analysis of the Case Study

This case study highlights the complex interplay of various factors influencing corporate location decisions, including:

  • Economic Growth: Amazon's decision was driven by a desire to expand its operations and secure a strategic location for future growth. The company sought a city with a strong economy, a skilled workforce, and a supportive business environment.
  • Infrastructure and Urban Development: Amazon's HQ2 required significant infrastructure investment, including transportation, housing, and public services. New York City's existing infrastructure and potential for urban development were key factors in its bid.
  • Government Incentives: Cities offered substantial financial incentives to attract Amazon, including tax breaks, subsidies, and infrastructure improvements. These incentives were intended to offset the costs of Amazon's operations and create jobs.
  • Public-Private Partnerships: The success of the HQ2 project hinged on collaboration between the private sector (Amazon) and the public sector (local governments). This required navigating complex issues of land use, zoning, and public infrastructure.
  • Corporate Social Responsibility (CSR): Amazon's decision was subject to scrutiny regarding its impact on local communities, including potential displacement, gentrification, and increased traffic.
  • Political Risk: The public backlash against Amazon's HQ2 proposal highlights the political risks associated with large-scale corporate investments. The company's decision-making process must consider the potential for political opposition and regulatory challenges.

4. Recommendations

Amazon should adopt a more strategic and nuanced approach to selecting its future headquarters locations.

  1. Prioritize Economic Growth Potential: Amazon should focus on cities with a strong economic base, a diverse talent pool, and a supportive business environment. This includes cities with a thriving technology sector, a robust infrastructure, and a commitment to innovation.
  2. Assess Infrastructure and Urban Development: Amazon should carefully evaluate a city's existing infrastructure and its potential for future development. This includes transportation, housing, and public services. The company should prioritize locations that can accommodate its growth and minimize negative externalities.
  3. Negotiate Government Incentives: Amazon should leverage its bargaining power to secure favorable government incentives, but also consider the long-term implications of these incentives. The company should prioritize incentives that support sustainable growth and benefit the local community.
  4. Foster Public-Private Partnerships: Amazon should work collaboratively with local governments and community groups to address concerns about its impact on the city. This includes engaging in transparent dialogue, addressing issues of affordability and displacement, and investing in community development initiatives.
  5. Embrace Corporate Social Responsibility: Amazon should integrate CSR into its decision-making process, considering the potential environmental, social, and economic impacts of its operations. The company should prioritize locations where it can contribute to sustainable development and community well-being.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core Competencies and Consistency with Mission: Amazon's core competencies lie in technology, logistics, and customer service. The company's mission is to be Earth's most customer-centric company. These recommendations align with these core competencies and mission by prioritizing locations that offer a strong talent pool, robust infrastructure, and a supportive business environment.
  • External Customers and Internal Clients: Amazon's external customers are consumers and businesses. Its internal clients are employees. These recommendations prioritize locations that offer a high quality of life, a diverse talent pool, and a strong economy, which are important factors for attracting and retaining both customers and employees.
  • Competitors: Amazon's competitors include other e-commerce giants, such as Walmart and Alibaba. These recommendations help Amazon stay ahead of the competition by prioritizing locations that offer a competitive advantage in terms of talent, infrastructure, and government support.
  • Attractiveness ' Quantitative Measures: Amazon should consider quantitative measures such as cost of living, tax rates, and infrastructure investment when evaluating potential locations. These recommendations prioritize locations that offer a strong return on investment and a favorable business environment.

6. Conclusion

Amazon's search for HQ2 highlights the complex challenges and opportunities associated with large-scale corporate investments. By carefully considering economic growth potential, infrastructure and urban development, government incentives, and public-private partnerships, Amazon can make informed decisions that benefit both the company and the communities where it operates.

7. Discussion

Other alternatives not selected include:

  • Expanding existing facilities: Amazon could have chosen to expand its existing headquarters in Seattle. However, this option would have limited its ability to grow and attract new talent.
  • Building a new headquarters in a smaller city: Amazon could have chosen to build a new headquarters in a smaller city with lower costs of living and a less competitive job market. However, this option would have limited its access to a diverse talent pool and a robust infrastructure.

Risks and Key Assumptions:

  • Economic downturns: A significant economic downturn could negatively impact Amazon's operations and investment plans.
  • Political instability: Political instability could create uncertainty and disrupt Amazon's operations.
  • Regulatory changes: Changes in regulations could increase Amazon's costs and limit its ability to operate.
  • Community opposition: Amazon's investments could face opposition from local communities, which could delay or derail projects.

8. Next Steps

Amazon should implement the following steps to move forward with its headquarters strategy:

  • Develop a comprehensive evaluation framework: Amazon should develop a comprehensive framework for evaluating potential headquarters locations, taking into account economic growth potential, infrastructure and urban development, government incentives, and public-private partnerships.
  • Identify potential locations: Amazon should identify a shortlist of potential headquarters locations based on its evaluation framework.
  • Conduct due diligence: Amazon should conduct due diligence on each potential location, including site visits, economic analysis, and community engagement.
  • Negotiate with local governments: Amazon should negotiate with local governments to secure favorable incentives and partnerships.
  • Communicate with stakeholders: Amazon should communicate its plans and engage with stakeholders, including local residents, businesses, and community groups.
  • Make a final decision: Amazon should make a final decision on its new headquarters location based on its evaluation framework and stakeholder engagement.

By following these steps, Amazon can ensure that its headquarters strategy is both strategically sound and socially responsible.

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Case Description

In 2017, Amazon began its search for a second headquarters location. From 20 finalists, after a bidding process that lasted nearly a year, Amazon selected two locations: Long Island City in the borough of Queens, New York City; and Arlington, Virginia. There were many stakeholders with varied opinions about the location, especially in New York. Progressive politicians, led by Congresswoman Alexandria Ocasio-Cortez, argued against the New York City location, as did most City Council members. But New York City Mayor Bill de Blasio and New York State Governor Andrew Cuomo were in support of the deal, which they brokered. The case asks students to put themselves in the shoes of Amazon's director of economic development, as she and her team make a final recommendation to move forward with the New York deal or pull out.

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