QUESTION
Assignment
Create a Quantitative Strategic Planning Matrix (QSPM) for Amazon’s new headquarter in Long Island, NY.
Based on the textbook, these are the six steps required to develop a QSPM:
The QSPM is a tool that allows strategists to evaluate alternative strategies objectively, based on previously identified external and internal key success factors.
Step 1: Make a list of the firm’s key external opportunities and threats and internal strengths and weaknesses in the left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix. (The Excel tem- plate at www.strategyclub.com can facilitate this process.)
Step 2: Assign weights to each key external and internal factor. These weights are identical to those in the EFE Matrix and IFE Matrix. The weights are presented in a straight column just to the right of the external and internal factors.
Step 3: Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing. Record these strategies in the top row of the QSPM. Group the strategies into mutually exclusive sets if possible.
Step 4: Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy considering a single external or internal factor. Attractiveness Scores (AS) are determined by examining each key external or internal factor, one at a time, and asking the question, “Does this factor affect the choice of strategies being made?” If the answer to this question is yes, then the strategies should be compared relative to that key factor. Specifically, AS should be assigned to each strategy to indicate the relative attractiveness of one strategy over others, considering the particular factor. The range for AS is 1 = not attractive, 2 = somewhat attractive, 3 = reason- ably attractive, and 4 = highly attractive. By “attractive,” we mean the extent that one strategy, compared to others, enables the firm to either capitalize on the strength, improve on the weakness, exploit the opportunity, or avoid the threat.
Work row by row in developing a QSPM. If the answer to the previous question is no, indicating that the respective key factor has no effect on the specific choice being made, then do not assign AS to the strategies in that set. Use a dash to indicate that the key factor does not affect the choice being made. Note: If you assign an AS score to one strategy, then assign an AS score(s) to the other—in other words, if one strategy receives a dash—then all others must receive a dash in a given row. Also, in the Excel template provided at www. strategyclub.com, zeros are used instead of dashes.
Step 5: Compute the Total Attractiveness Scores. Total Attractiveness Scores (TAS) are defined as the product of multiplying the weights (Step 2) by the AS (Step 4) in each row. The TAS indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher the TAS, the more attractive the strategic alternative (considering only the adjacent critical success factor).
Step 6: Compute the Sum Total Attractiveness Score. Add TAS in each strategy column of the QSPM. The Sum Total Attractiveness Scores (STAS) reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions. The magnitude of the difference between the STAS in a given set of strategic alternatives indicates the relative desirability of one strategy over another.
ANSWER
Table of Contents
Introduction
Internal Factor Evaluation Matrix (IFE)
Strengths
Weaknesses
External Factor Evaluation Matrix (EFE)
Opportunities
Threats
Available Strategies for Amazon with respect to its Long Island City Headquarter
Quantitative Strategic Planning Matrix (QSPM)
References
Introduction
From being an online book retailer once, Amazon has now gone on to become one of the leading multinational technology companies in the world. In fact, it is the world’s largest online retailer, which also provides Web Services and manufactures their own electronic equipment. It was founded by Jeff Bezos on July 5, 1994. Its main headquarter is in Seattle, Washington. Increasing number of employees, Diversified tech talent, and problems with existing headquarters have led Amazon to introduce new Headquarter for the company.
In the recent times, there have been several issues in Seattle, which have to be stopped as soon as possible. The sheer mass of Amazon employees in Seattle has led to the problems of income equality, housing shortages and traffic, which is why Bezos decided to introduce a new headquarter for those people who don’t want to stay in Seattle. It is very uncommon for a company to have two headquarters, because it can lead to certain miscommunications further causing a backlash to the company. But, Amazon has followed this approach very properly, and it has also provided them free publicity and data about those 238 cities which requested for proposal. After analyzing every condition and comparing all places, Amazon decided to place two headquarters, one in Long Island City, New York, and the other in Arlington, Virginia.
In this report, we would be creating a Quantitative Strategic Planning Matrix (QSPM) for Amazon’s new headquarter in Long Island City, NY. The report also consists of IFE and EFE Matrix for the place.
Internal Factor Evaluation Matrix (IFE)
Strengths
|
Strengths |
Weight |
Rating |
Weighted Scores |
|
|
1 |
Amazon is world’s largest online retailer and a very famous brand. |
0.08 |
4 |
0.32 |
|
2 |
Creation of thousands of jobs at the place of their offices. |
0.05 |
3 |
0.15 |
|
3 |
Availability of 8.1 million square feet of real estate that Amazon needed. |
0.09 |
4 |
0.36 |
|
4 |
Purchased a 161400-square foot distribution hub for food last year in the same location. |
0.04 |
2 |
0.08 |
|
5 |
The location has one of the fastest growing neighborhoods. |
0.10 |
4 |
0.40 |
|
6 |
Amazon is healthy and growing in future, which guarantees more expansion. |
0.07 |
3 |
0.21 |
|
7 |
Most of the cities participating in auction provided tax leverage for the company. |
0.07 |
3 |
0.21 |
|
8 |
The place has best access to labors and services, along with better transportation availability. |
0.10 |
4 |
0.40 |
Weaknesses
|
Weaknesses |
Weight |
Rating |
Weighted Scores |
|
|
1 |
Existing employees have issued safety concerns, inadequate pay, and high working hours. |
0.08 |
2 |
0.16 |
|
2 |
Negative image being perceived in the country because of the auction process publicly. |
0.10 |
2 |
0.20 |
|
3 |
Long-history of the chosen location being an industrial belt could get affected. |
0.04 |
1 |
0.04 |
|
4 |
More than 1 headquarter could lead to organizational disparity for employees. |
0.07 |
2 |
0.14 |
|
5 |
Complexities of Subway system could pose a problem to the operational functioning of Amazon at Long Island. |
0.07 |
2 |
0.14 |
|
6 |
Lower margins for the first few years, due to contribution towards promised economic development. |
0.04 |
2 |
0.08 |
|
TOTALS |
1.00 |
2.89 |
||
External Factor Evaluation Matrix (EFE)
Opportunities
|
Opportunities |
Weight |
Rating |
Weighted Scores |
|
|
1 |
New York, on its way of becoming a major technology hub. |
0.04 |
4 |
0.16 |
|
2 |
Proposal request from 238 major cities and regions, giving their exclusive details to Amazon. |
0.10 |
4 |
0.40 |
|
3 |
Local and national media and news creating a free PR stunt for Amazon. |
0.08 |
3 |
0.24 |
|
4 |
Around 1.5 billion dollars in tax breaks by New York City and State for attracting Amazon. |
0.11 |
4 |
0.44 |
|
5 |
Long Island City is going to receive $180 million to boost infrastructure. |
0.08 |
3 |
0.24 |
|
6 |
Partner companies will also open their offices around the place. |
0.06 |
3 |
0.18 |
|
7 |
Providing options for the employees and reducing the pressure from Seattle office. |
0.08 |
3 |
0.24 |
Threats
|
Threats |
Weight |
Rating |
Weighted Scores |
|
|
1 |
PILOT (Payment in Lieu of Tax) scheme for jobs needed to be fulfilled. |
0.08 |
1 |
0.08 |
|
2 |
New York city looking for expansion as headquarters for other competitors too. |
0.05 |
2 |
0.10 |
|
3 |
City is expecting Economic Development in terms of health care, tech hubs, public schools. |
0.07 |
1 |
0.07 |
|
4 |
New employees can drive city’s housing cost, which can backfire the support. |
0.08 |
2 |
0.16 |
|
5 |
New Headquarter can affect the stock price and existing performance of the company. |
0.05 |
2 |
0.10 |
|
6 |
Rising opposition from the politicians of Long Island City. |
0.12 |
1 |
0.12 |
|
TOTALS |
1.00 |
2.53 |
||
Available Strategies for Amazon with respect to its Long Island City Headquarter
- Continue with Long Island city as the 2nd headquarter
- Consider options for alternative location as the headquarter
Quantitative Strategic Planning Matrix (QSPM)
|
Continue as 2nd headquarter |
Consider for alternative location |
|||||
|
Strengths |
Weight |
AS |
TAS |
AS |
TAS |
|
|
1 |
Amazon is world’s largest online retailer and a very famous brand. |
0.08 |
2 |
0.16 |
4 |
0.32 |
|
2 |
Creation of thousands of jobs at the place of their offices. |
0.05 |
2 |
0.10 |
4 |
0.20 |
|
3 |
Availability of 8.1 million square feet of real estate that Amazon needed. |
0.09 |
4 |
0.36 |
1 |
0.09 |
|
4 |
Purchased a 161400-square foot distribution hub for food last year in the same location. |
0.04 |
3 |
0.12 |
1 |
0.04 |
|
5 |
The location has one of the fastest growing neighborhoods. |
0.10 |
4 |
0.40 |
2 |
0.20 |
|
6 |
Amazon is healthy and growing in future, which guarantees more expansion. |
0.07 |
2 |
0.14 |
4 |
0.28 |
|
7 |
Most of the cities participating in auction provided tax leverage for the company. |
0.07 |
2 |
0.14 |
4 |
0.28 |
|
8 |
The place has best access to labors and services, along with better transportation availability. |
0.10 |
4 |
0.40 |
2 |
0.20 |
|
Continue as 2nd headquarter |
Consider for alternative location |
|||||
|
Weaknesses |
Weight |
AS |
TAS |
AS |
TAS |
|
|
1 |
Existing employees have issued safety concerns, inadequate pay, and high working hours. |
0.08 |
2 |
0.16 |
2 |
0.16 |
|
2 |
Negative image being perceived in the country because of the auction process publicly. |
0.10 |
2 |
0.20 |
1 |
0.10 |
|
3 |
Long-history of the chosen location being an industrial belt could get affected. |
0.04 |
1 |
0.04 |
3 |
0.12 |
|
4 |
More than 1 headquarter could lead to organizational disparity for employees. |
0.07 |
1 |
0.07 |
1 |
0.07 |
|
5 |
Complexities of Subway system could pose a problem to the operational functioning of Amazon at Long Island. |
0.07 |
1 |
0.07 |
4 |
0.28 |
|
6 |
Lower margins for the first few years, due to contribution towards promised economic development. |
0.04 |
2 |
0.08 |
2 |
0.08 |
|
TOTALS |
2.44 |
2.42 |
||||
|
Continue as 2nd headquarter |
Consider for alternative location |
|||||
|
Opportunities |
Weight |
AS |
TAS |
AS |
TAS |
|
|
1 |
New York, on its way of becoming a major technology hub. |
0.04 |
3 |
0.12 |
1 |
0.04 |
|
2 |
Proposal request from 238 major cities and regions, giving their exclusive details to Amazon. |
0.10 |
1 |
0.10 |
4 |
0.40 |
|
3 |
Local and national media and news creating a free PR stunt for Amazon. |
0.08 |
2 |
0.16 |
4 |
0.32 |
|
4 |
Around 1.5 billion dollars in tax breaks by New York City and State for attracting Amazon. |
0.11 |
4 |
0.44 |
1 |
0.11 |
|
5 |
Long Island City is going to receive $180 million to boost infrastructure. |
0.08 |
2 |
0.16 |
2 |
0.16 |
|
6 |
Partner companies will also open their offices around the place. |
0.06 |
2 |
0.12 |
3 |
0.18 |
|
7 |
Providing options for the employees and reducing the pressure from Seattle office. |
0.08 |
2 |
0.16 |
2 |
0.16 |
|
Continue as 2nd headquarter |
Consider for alternative location |
|||||
|
Threats |
Weight |
AS |
TAS |
AS |
TAS |
|
|
1 |
PILOT (Payment in Lieu of Tax) scheme for jobs needed to be fulfilled. |
0.08 |
1 |
0.08 |
4 |
0.32 |
|
2 |
New York city looking for expansion as headquarters for other competitors too. |
0.05 |
1 |
0.05 |
4 |
0.20 |
|
3 |
City is expecting Economic Development in terms of health care, tech hubs, public schools. |
0.07 |
2 |
0.14 |
3 |
0.21 |
|
4 |
New employees can drive city’s housing cost, which can backfire the support. |
0.08 |
2 |
0.16 |
2 |
0.16 |
|
5 |
New Headquarter can affect the stock price and existing performance of the company. |
0.05 |
2 |
0.10 |
2 |
0.10 |
|
6 |
Rising opposition from local politicians of Long Island City |
0.12 |
1 |
0.12 |
4 |
0.48 |
|
TOTALS |
1.91 |
2.84 |
||||
|
Sum Total Attractiveness Score (STAS) |
4.35 |
5.26 |
||||
After looking at both the alternatives, Amazon should go for the 2nd strategy i.e. Consider any other location for Headquarter.
References
1. Will Burns, 2017 Oct 27, Amazon’s New HQ Creates A Massive Ripple In The Marketing Cosmos, Forbes
2. Anand Giridharadas, 2018 Nov 17, The New York Hustle of Amazon’s Second Headquarters, The New Yorker
3. Natasha Frost, 2018 Nov 14, Jeff Bezos will be able to helicopter to Amazon’s New York headquarters, Quartz
4. Casey Newton, 2018 Dec 13, Amazon’s plans for a New York office are under new scrutiny, The Verge
5. Yen Nee Lee, 2018 Nov 13, Amazon picks New York City and Northern Virginia for additional headquarters: WSJ, CNBC
6. Karen Weise, 2018 Nov 05, Amazon Plans to Split HQ2 Between Long Island City, N.Y., and Arlington, Va., The New York Times
7. Elizabeth Weise, 2018 Oct 09, Amazon’s two new headquarters: What you need to know, USA Today
8. Jonathan Mahler, 2018 Jan 03, The Case for the Subway, The New York Times Magazine
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