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Amazon Detroit Environmental Scan
Demographic:
The main demographic factor to consider is the population. The size, rate at which its
growing, income levels, ethnicities, ages, and educational levels. According to recent
censuses the population of Detroit Michigan is 672,829.
Their population density, or people per square mile is over 5,000, which is over 28 times the
population density of the state of Michigan as a whole. The median age of the city is 34 years
old, which is 5 years younger than that of the state as a whole, and 3 years younger than that
of the nation as a whole.
As far as education level goes, 80% of the population has a high school diploma or higher, but
only 14.9% have a bachelor’s degree or higher. The ethnicities the population is made up of
are mainly African American and Caucasians, and very close to even in the number of men
versus the number of women.
A large majority of the households in the city, 65%, have an income of $40,000 per year or
less, with the median income being $28,099. Those that live below the poverty line make up
35.7% of the population, this more than doubles that of the rest of the state of Michigan which
is at 15%.
Economic:
Detroit had been a brilliant period when the three U.S. top automobile manufacturers’
headquarters were in. Therefore, a large company can significantly improve a city’s economic
situation which includes its unemployment rate, people’ income, CPI, house price,
government tax, and government subsidies.
For the unemployment, according to the U.S. BLS report, the unemployment rates of America
was 4.5% on Aug-17, and the unemployment rates of Detroit area was 4.4%, which was lower
than the U.S. total average. (exhibit 1.1)
U.S. BLS showed that the average weekly wages for all industry of U.S. and Detroit area,
they were $1,111 in U.S. and $1,181 in Detroit area (exhibit 1.2). To combine the 12-month
percent change in CPI in 2017, which was 1.3%in Detroit area and 1.9% U.S. city average.
Hence, these two data indicated Detroit residents had a higher wage with lower consumer
price.
The Detroit home price was $47,700 on average, and the home market was trending to the
buyer’s market. The median home value in Detroit is $47,700. Detroit home values have gone
up 34.0% over the past year and Zillow predicts they will rise 9.0% within the next year. The
median rent price in Detroit is $775, which is lower than the Detroit Metro median of $1,100.
Government tax and government subsidies. Tax is the main income of the government. High
income of the government indicates government has more funds in urban infrastructure,
education, and other subsidies. A popular urban always can attract more large companies, and
more large companies will pay more tax to government, it will be a benign cycle.
The Phillips Curve claimed that there is an inverse relationship between the unemployment
and inflation in short term. But according to Detroit’ unemployment and CPI, Detroit
government well controlled the inflation, meanwhile it also keep the unemployment rate
under the U.S. average.
Socio-Cultural:
Detroit is a city that is found in the U.S state of Michigan. It is also the largest city along the
U.S Canada border and it’s also the most populous city in Michigan. In the year 2016, the
population of Detroit was 677, 166 even though a decline was reported (Buzzard et la 2014).
The metro Detroit is the cities metropolitan area and it is estimated to be home for close to 4.3
million people (Stone, 2017). According to the American Community Survey, a large
number of houses in Detroit are run by females; it has the highest percentage compared to
neighboring cities. The family sizes in Detroit are also large per household with each
household having an average of 2.5 persons. Since it is one of the poorest cities in the United
States, the median income per household is estimated to be $27,787 which is below the U.S
average by a big margin (Buzzard, Mccullers, King, & Clark, 2014).
The city also has a higher percentage of women 52% than that of men who are at 48%. There
is also a wide age distribution in Detroit that is affecting its population demographics. Close
to 31% of the population is under 18 years, 9 % are between the ages of 18 -24, 29% are
between the ages of 25-44, 19% are between the ages of 45- 64 while the remaining 10% are
65 years or older. The median age for Detroit is 31 years. According to the 2010 census,
the city of Detroit has several ethnic groups. People who are African American descent make
up 82.7% of the population, white people make up 10.6% of the population, other races make
up 3% of the population and the Asians make up 1.1% (Stone, 2017).
The income distribution of the city of Detroit is determined by several factors. In the year
2015, the median income per household was $25,980 compared to the $51, 8084 for the entire
state of Michigan. The number of households that had an income of $10,000 was 21.2% of
the population. The number of those households with an income of between $10,000 and
20,000 was 19.5 %. The rest of the households have an income of more than $ 20,000 while
an even fewer number has an income of more than $100,000. The total aggregate income of
all the households in the Detroit for the year 2015 was approximately $10 billion (Sugrue,
2014). The median family income for the year 2015 was $30, 209 compared to the states
$63, 893. A larger percentage of families have an income of less than $10, 000 while very
few households have an income of $100,000.
There are different attitudes that the people of Detroit have towards women in the workplace.
For a majority of them, their attitude is influenced by their gender and type of work being
done by the woman. A smaller section of the population places any restrictions to the kind of
work that a woman should do. In recent time, more and more women are able to go out and
look for work leading to an increase in the number of households that are being run by
women. There is a high possibility that the number of women in more than that of men in
some workplaces due to their high population.
Since the city is made up of several ethnic groups, the workplace is very diverse. In any place
you go, you will find staff from almost all the ethnic groups being represented. The city also
has companies like Global Alliance Solutions that train employers and employees on the
importance of embracing diversity. Employees and employers are also encouraged to be
champions and advocates of diversity in all areas. Discrimination of any kind is discouraged
both in the public and private sector. There are also means of communications that have been
set up that one can use to report cases of discrimination. Employers are encouraged to
assemble a workforce that is diverse while at the same time creating an environment that is
comfortable to all. Diversity at the workplace promotes a rich environment that encourages
the growth of the business.
The attitudes of the residents of Detroit has been changing for the better a majority of them
agree that the city is now better than it was two years ago. The city that whose municipal
council declared bankruptcy has started recovering from the decline. A larger percentage of
the population lives in poverty since there a few good paying jobs. Those who have the jobs
have a positive attitude and they gladly go to work. Even though the city has several issues
that face it, the residents are confident that the quality of life will improve in the coming years
(Smith, 2017).
Based on their incomes, the residents of Detroit have different spending powers. After the city
emerged from bankruptcy in 2015, the economy has been growing slowly. A large number
of its residents have bad credit score making detrain to be referred to as Americas Capital of
bad credit. The city does not have facilities that make it possible for its residents to recover
from their financial burden (Ledoux et al 2013). Most of the residents do not have any lose
income to spend on luxuries. Many are also struggling with the purchase of basic needs and
housing. There is also a shift in preferences to do with work and careers. Most people prefer
to go look for jobs in other cities since there aren’t many opportunities in Detroit.
Environmental:
One significant environmental factor that increases the chance Amazon will choose Detroit is
the price of water is considerably cheaper than in other areas of the country. According to
Brett Walton with Circle of Blue, water prices vary significantly based on regions where
water is scarce and has to be trucked in long distances versus regions where water is
abundant. He stated the average price per month for a family of four in Phoenix is $34.29
and it is even higher in Boston where it is $65.47. Detroit comes in considerably less with a
price range of $24.12 to $28.36 per month. The reason for this lower rate is the abundance of
water that surrounds Detroit in the Great Lakes. This environmental factor will result in
extreme cost savings since the headquarters will have around 50,000 employees and large
infrastructure.
Another significant environmental factor that will impact the chance Detroit has in winning
over Amazon is the cooler climate versus alternative options. The average temperature in
Detroit according to the U.S. Climate Data website is 48.7 °F. The average temperature in a
warmer climate like Dallas is 64.3°F. Temperatures in Dallas can soar well over 100°F
making electric bills considerably higher than Detroit which for a location with 50,000
employees and large infrastructure could result in significant savings. On the other hand,
Detroit’s temperatures can also hurt the chances Amazon will choose them. Detroit has an
annual low temperature of 40.7°F versus Dallas which has an annual low temperature of
51.5°F. There will be more natural gas used in Detroit versus Dallas. On the plus side,
natural gas is cheaper than electricity so there will be a cost savings in Detroit where the air
conditioner will be running less.
In addition to previously stated, snow will play a significant role in Amazon’s choice for its
headquarters. Since its first headquarters is in Seattle, they have seen what snow can do to
efficiency of a workforce. According to bestplaces.net and Current Results, the average
snowfall in Detroit is 42.7 inches versus the average across the country 26 inches. During the
winter, efficiency will decrease as employees will have difficulty getting to work when the
roads are snow covered. One of the factors Amazon is looking at is the mass transportation
system in the city. Snow can create hiccups in mass transportation. Warmer cities like
Dallas will not have these issues or inefficiencies.
A final environmental factor that will impact the chance Detroit has to secure the second
headquarters is the lack of sunlight Detroit receives each year. According to Current Results,
Detroit sees an annual average of 180 days of sun/partial sun each year. This is significantly
less than other states like Florida which have averages across the state in the mid 200’s. This
impacts Detroit because Amazon is geared toward sustainability and one way they are saving
energy is by using solar panels on the roofs of their facilities. According to their website,
they plan to have 50 fulfillment centers with rooftop panels by 2020. Detroit does not get
ample sunshine for the company to continue with its goal. This could negatively impact
Detroit’s chances of winning Amazon.
Technology:
More than being a virtual or online shopping destination, Amazon needs to be viewed as a huge
supply chain company managing a mostly vertical orientation. They have their own brands in
almost every product category they offer. Newer technologies to manage supply chains are
introduced almost every year. Amazon needs to keep an eye out for all the potential solutions
for better managing supply chains and decide which method I suitable for them considering the
location of the warehouse.
Amazon has been making advancement in how they deliver shipment to customers who order
from their site. One of the newer introduction from Amazon is the drone deliveries. They have
been experimenting with drone deliveries in a few cities. If Detroit is finalized as the second
headquarters for Amazon, they would want to implement drone deliveries in the Metro Detroit
region. Although drone technology has been in existence for a few years, its ability to deliver
in snow has not been tested enough. Newer technologies for delivering products to customers
need to be monitored.
Political-Legal
For a city that was on the brink of bankruptcy a decade ago, Detroit has made remarkable
progress to bounce back and generate jobs for its residents. Much of the credit for such a
remarkable comeback has to be attributed to the political leadership in the state of Michigan.
Bipartisan efforts to see that the city of Detroit gets back to its glory days has helped businesses
expand and new businesses to set up shop.
The City of Detroit had its share of lawsuits during the great recession a decade ago. Most of
those lawsuits were about tax dues from companies that had gone out of business. With aid
from the federal government, most of the lawsuits have been settled.
SWOT Analysis
Strengths:
One of Detroit’s strengths is the legacy that the city has in the automobile
industry. The Big Three have left lasting impressions on the city with top universities and
research centers that develop top candidates for new positions within Amazon. One of
Amazon’s criteria for choosing a location is easy access to universities. The University of
Michigan, Michigan State University and Wayne State University are three of the best schools
in the nation and they will be in Amazon’s second headquarters back door preparing Amazon’s
future employees for a successful career. The University of Michigan has one of the best
computer science programs that far outrank other options across the country and according to
the Detroit Free Press is ranked number three in their graduate entrepreneurship program in the
country. The Big Three universities have had more than 1.2 million graduates worldwide with
about 651,000 graduates living in Michigan accounting for 9.5% of the state’s population that
is older than age 24. According to NBC News, 19% of the population is made up of 25 to 34
year olds which are perfect targets for Amazon to grow its employee base.
Another strength for Detroit is the low cost of living and doing business. The struggling
economy in the city has led to cheaper real-estate and tax breaks in order to draw businesses
into the area. According to the Forbes website, the cost of living in Detroit is 10% below the
national average. Leasing rates are also far less expensive than other areas like Silicon Valley
or New York. According to NBC News, leasing rates are $19.29 per square foot in Detroit
which is far lower than alternative options like New York which is $65.46 per square foot.
In addition to what has been stated above, the Detroit Metropolitan area meets another one of
Amazon’s criteria with a population of 4.275 million people in the Detroit-Metro area. Even
though the population in the Detroit city limits is and has been declining for many years the
Amazon second headquarters will have a large population to work with from the Detroit
metropolitan area. Amazon can also add to its image by restoring a city in distress. The
population has been declining for years, but if Amazon comes in more people will flock back
to the city and Amazon can be credited with helping to restore the local economy. Detroit has
had a rebirth after its bankruptcy and there is a very positive vision for what Detroit will
be. According to NBC News, $12 billion has been invested in commercial, industrial and
residential properties in Detroit since 2006.
Detroit is also becoming a hub for tech companies of which Amazon fits
perfectly. GalaxESolutions is a company that provides products and software to help move
data in industries like healthcare and financial services. It was one of the first outside
companies to establish significant operation in Detroit. The owner was able to use former
autoworkers and retrain them into successful software company employees. The city is
becoming one of the best areas in the world in innovation and technology with Techtown
Detroit as a business support network that is one of the best in the country.
Detroit also has one of the best airports in the world. According to NBC News, the
Detroit Metropolitan Airport is consistently ranked as one of the top international airports in
the world offering 280 international flights weekly. This is a vital asset for Amazon to get
their employees from one location to another effectively and efficiently. If Amazon chooses
Detroit, they will have immediate access to one of the best airports in the world. In addition to
this, Detroit does not have anywhere near the same traffic congestion as other options like San
Francisco resulting in a more efficient operation.
A
final
strength
that
Detroit
has
over
other
options
is
its
proximity
to
entertainment. Companies typically want the surrounding area of the headquarters to be full
of entertainment for clients that come to visit. Detroit has all of the sports arenas in proximity
to each other with the Detroit Red Wings, Detroit Pistons, Detroit Lions and Detroit Tigers;
there is something to do all year round. The new Little Caesars Arena is an impressive
complex which is like a small town itself. Detroit has a lot to offer for Amazon’s clientele and
has all the beginning necessities to again become a flourishing city.
Weaknesses:
One weakness that Detroit has is their incredible crime rate. According to the FBI Detroit is the
most dangerous city in America again in 2017. The rate of violent crime is 2,137 per 100,000
residents. This high crime rate makes the city undesirable for many people to live or work in,
and this makes it difficult to know if people would be willing to move to the area for job changes.
Detroit also has a very low overall education level. Only 14.9% of its occupants have a
bachelor’s level education or higher. According to the requirements they have listed online
looking for RFPs, Amazon will be looking to hire 50,000 new employees for high paying jobs
at their second headquarters. The average pay will be about $100,000 per year, which is about
six times the current per capita income. With an average salary that high they likely will be
looking for many well-educated people to hire, and this is not something they’ll find in the
Detroit area.
Amazon is also looking for a stable market to open their second headquarters. It could
be argued that Detroit does not fit that description. In 2017 there is a very large number of stores
in Detroit that will be closing, or have already closed, their doors. This includes companies
such as Payless Shoe Store, Family Dollar, Radio Shack, Kmart, Sears, JCPenny, and Rue 21.
Some of these companies are closing multiple locations in the Detroit area, and this is just in
one calendar years’ time.
School Districts are a major deciding factor for parents when they’re finding a place
to live. The poor K-12 education systems in Detroit may deter potential employees from
moving their families to the area. According to SchoolDigger.com, a commonly used website
to rank the quality of school districts, the Detroit area has no five star schools, one four-star
school, one three-star school, and all remaining schools receive two stars and below.
Opportunities:
Amazon’s requirements for cities to qualify as the second headquarters are:
Offer 8 million square foot area of office space
Have at least 1 million population
Have a well-established mass transit system
Have access to good universities
Our team is advocating for the City …
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