Today, Amazon announced it had chosen New York City and Northern Virginia as the new location for its second headquarters. The company plans to invest $2.5 billion in both locations, and hire as many as 25,000 employees in each location.
Julie Niederhoff is an associate professor of supply chain management at Syracuse University. She answers five top questions related to the Amazon headquarters announcement.
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Amazon chose locations closest to New York City and Washington D.C. – why?
Niederhoff says: “These new locations are managerial headquarters and so the main goal is talent acquisition that will be focused on development and growth. Both of these places are known for attracting top talent in start-ups, software, business, and more. In addition, they are multi-cultural cities that are attractive for people all over the world, allowing them to attract and retain top talent of many nationalities.”
Both of the new headquarters will be located outside of the city center – why would Amazon make that decision?
Niederhoff says: “These are large facilities – 25,000 employees each – with plans for green space and other amenities so creating a space that uniquely represents Amazon’s culture requires some space. Also, much of their talent may not live directly in the city, either, making it more attractive to have a work location that puts them near the diverse city area but with an opportunity to live close by and commute more easily.”
Why does Amazon need an East Coast headquarters?
Niederhoff says: “I can only speculate, but I imagine their ability to grow physically and from talent are becoming constrained on the West Coast as real estate is becoming impossible to afford and recruitment is so competitive. But mostly, I’d say that Amazon’s primary goals for the future are in finding new start-ups and other ideas that they can use to continue to grow, and these two new cities attract a lot of creative developers. In addition to new start-up ventures, finding opportunities to partner with or create new services for other businesses is a way to keep growing and they can more easily access these other companies all along the eastern US from their two new headquarter locations. Access to household customers is less of a concern since these new locations aren’t fulfilment centers that are shipping out Amazon products. There are over 100 fulfillment centers for Amazon scattered all throughout the US which provide those fulfillment services and a new location in Nashville will be managing the operations – another big part of today’s announcement. They were really looking for a headquarter location—or now locations—that can help them create new opportunities for growth.”
What is the main role of the new Operations Center of Excellence in Nashville?
Niederhoff says: “The team in Nashville – and this is another rapidly growing geographic area that’s known for attracting top talent – is the supply chain, logistics, and operations teams. They’re the ones tasked with finding creative and reliable ways to increase speed and availability of product while keeping costs in check. They will likely be figuring out how to implement all of the creative new opportunities that the New York City and Washington D.C. employees create. It’s a different kind of talent and a different sized team, but a really important part of the Amazon system.”
What kind of benefits might the company have gotten in these locations in terms of tax exemptions and such?
Niederhoff says: “They certainly got some! The press release details quite a few of the benefits. When Amazon announced the bidding competition for locations, many analysts wonder how what their real strategic goal was. Was it to really consider other options or just to play the field enough to get a better package at their already planned locations? In the end, all of the locations offered attractive options for taxes and other benefits and resources, including the locations that were chosen.”
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