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Publish Date: 2024-11-03

Harvard Case - Amazon's Second Headquarters: (A) Choosing the City

"Amazon's Second Headquarters: (A) Choosing the City" Harvard business case study is written by Pengfei Li. It deals with the challenges in the field of International Business. The case study is 10 page(s) long and it was first published on : Oct 10, 2022

At Fern Fort University, we recommend Amazon choose a location for its second headquarters (HQ2) that prioritizes long-term strategic goals and sustainable growth, considering factors like talent pool, infrastructure, cost of living, and business-friendly environment. Our analysis suggests that a location in the Northeast corridor offers the most compelling combination of these factors, specifically focusing on New York City or Boston.

2. Background

Amazon, a global e-commerce giant, announced its search for a second headquarters in 2017, aiming to create a new hub for its operations and expand its reach. The company sought a location with a strong talent pool, robust infrastructure, and a supportive business environment. This decision faced intense competition from cities across North America, each vying for the economic benefits and prestige associated with hosting HQ2.

The main protagonists in this case are:

  • Amazon: The company seeking a new headquarters location to fuel its growth.
  • Jeff Bezos: Amazon's CEO, driving the HQ2 initiative.
  • Competing Cities: Numerous cities across North America, each offering incentives and showcasing their strengths.
  • Local Governments: Negotiating with Amazon and offering incentives to secure the headquarters.

3. Analysis of the Case Study

We analyzed the case study using a multi-criteria decision-making (MCDM) framework, considering the following key criteria:

1. Talent Pool:

  • Availability of skilled workforce: Amazon requires a large pool of highly skilled professionals in technology, logistics, and other related fields.
  • Educational institutions: Proximity to top universities and technical colleges ensures a steady supply of talent.
  • Cost of talent: Competitive salaries and benefits are crucial for attracting and retaining top talent.

2. Infrastructure:

  • Transportation infrastructure: Efficient transportation networks (airports, highways, public transit) are essential for seamless logistics and employee commuting.
  • Technology infrastructure: Access to high-speed internet, data centers, and other technological resources is vital for Amazon's operations.
  • Energy infrastructure: Reliable and sustainable energy sources are crucial for Amazon's environmental sustainability goals.

3. Cost of Living:

  • Cost of real estate: Affordable housing options are essential for attracting and retaining employees.
  • Cost of living expenses: Competitive living costs ensure employees can maintain a comfortable lifestyle.
  • Tax incentives: Favorable tax policies can significantly reduce operational costs and improve profitability.

4. Business-Friendly Environment:

  • Government support: A supportive government with streamlined regulations and incentives can foster a favorable business environment.
  • Quality of life: Factors like cultural amenities, recreational opportunities, and safety contribute to employee well-being and attract talent.
  • Economic growth: A thriving economy with diverse industries provides opportunities for growth and collaboration.

5. Sustainability:

  • Environmental regulations: Stringent environmental regulations ensure responsible operations and a sustainable future.
  • Renewable energy sources: Access to renewable energy sources aligns with Amazon's commitment to sustainability.
  • Community engagement: Amazon's commitment to social responsibility and community engagement is crucial for long-term success.

4. Recommendations

We recommend Amazon choose a location in the Northeast corridor, specifically New York City or Boston, based on the following factors:

  • Talent Pool: Both cities boast world-renowned universities, a highly skilled workforce, and a vibrant tech ecosystem.
  • Infrastructure: Excellent transportation infrastructure, including airports, highways, and public transit, facilitates logistics and employee commuting.
  • Cost of Living: While both cities have high costs of living, they offer a strong talent pool and a robust economy.
  • Business-Friendly Environment: Both cities have supportive governments, strong economic growth, and a diverse business landscape.
  • Sustainability: Both cities have strong environmental regulations, access to renewable energy sources, and a commitment to sustainability.

5. Basis of Recommendations

Our recommendations consider the following:

  • Core competencies and consistency with mission: The Northeast corridor offers a strong talent pool and a supportive business environment, aligning with Amazon's growth strategy and commitment to innovation.
  • External customers and internal clients: The Northeast corridor's location and infrastructure facilitate efficient logistics and access to a large customer base.
  • Competitors: The presence of other major tech companies in the Northeast corridor fosters a competitive environment and attracts top talent.
  • Attractiveness - quantitative measures: While the cost of living in the Northeast corridor is high, the region's economic growth, talent pool, and infrastructure provide a strong return on investment.
  • Assumptions: We assume that Amazon prioritizes long-term growth, talent acquisition, and a supportive business environment.

6. Conclusion

Choosing a location for HQ2 is a complex decision with significant implications for Amazon's future. Our analysis suggests that the Northeast corridor, specifically New York City or Boston, offers a compelling combination of factors that align with Amazon's strategic goals. These cities provide a strong talent pool, robust infrastructure, a business-friendly environment, and a commitment to sustainability.

7. Discussion

Other alternatives considered included locations in the Southeast and Midwest, offering lower costs of living and potential tax incentives. However, these locations lacked the same level of talent pool, infrastructure, and business environment compared to the Northeast corridor.

Risks and key assumptions:

  • Cost of living: The high cost of living in the Northeast corridor could impact employee recruitment and retention.
  • Competition: The presence of other tech giants in the Northeast corridor could create intense competition for talent and resources.
  • Political and regulatory environment: Changes in government policies and regulations could impact Amazon's operations and profitability.

8. Next Steps

Amazon should conduct a detailed feasibility study for each shortlisted location, considering the following:

  • Site selection and infrastructure: Identify specific sites and assess their suitability for HQ2.
  • Talent acquisition: Develop a plan to attract and retain top talent in the chosen location.
  • Business operations: Assess the impact of the new location on existing operations and develop strategies for integration.
  • Community engagement: Establish a plan for community outreach and engagement to foster a positive relationship with local residents.

By carefully considering these factors and implementing a well-defined plan, Amazon can ensure a successful launch of HQ2 and achieve its strategic goals for long-term growth and innovation.

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Case Description

Case A reviews Amazon's location choices from its founding in 1994 to 2017, explaining how it moved its offices from Bellevue, Washington, to various Seattle locations, eventually establishing campuses in South Lake Union in 2010 and then in downtown Seattle in 2016. The case then explores Amazon's strategic plan to establish a second headquarters in another North American city, illustrating the complex relationship between cities and major corporations. Case B describes Amazon's cancellation of its New York project, how the company was affected by local zoning laws and urban politics, and how various local interest groups responded to its plan. The subject of the case is business-government relations at the city level.

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