Costco: Weakness of Three Aspects, a Company, Diversity, and Globalization
INTRODUCTION
The history of Costco “We are a membership warehouse club, dedicated to bringing our members the best possible prices on quality brand-name merchandise.” Costco Wholesale Corporation is one of biggest wholesale corporations in the United States and several other countries. The story of Costco’s rise from a single Seattle store in 1983 to a multinational chain of enormously profitable warehouses is a tale of perfect leadership in a rapidly-changing retail world. The company’s first location was in 1976 under the name Price Club which was established by Sol Price. Jim Sinegal launched a competing company with an idea of a wholesale business,
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Managers know which goals they wish to achieve, but their selection may not be high-quality and for the sake of the company’s future.
Problem 2: weakness of the diversity . Costco displays the same pro-worker mindset with the recruitment of top management. Sinegal has claimed that up to 98 percent of managerial positions are filled from within the company, which is two percent of positions filled from external. This means most upper-level managers started from the bottom in jobs and positions at the warehouse. The advantage of this is that these managers already have a systematic knowledge of their jobs and therefore, they may bring the best and fast solutions when they see problems. The high level promotion from within may make a conflict of the diversity. Diversity is about recognizing, respecting and valuing differences based on ethnicity, gender, color, age, race, religion, disability, national origin and sexual orientation. In this case, diversity includes a balance of employees hired externally. When Costco does not have a balance of employees mixed with internal and external in an organizational environment, it may be able to confront with lacks of understanding about an external environment and narrow visions of managers in decision making. Costco must realize the diversity of workforces needs to be issued in order to build up strengths and opportunities and prevent weaknesses and threats internally and externally. Otherwise, it can be a
This report completed by observation of how management works and what type of leadership in the costa coffee shops in the UK, the establishment based on chain of coffee shops around the country and has many employees who comes from different background and walks of life which represent Cost company as a rich culture to attract many customers to increase their revenue.
Costco’s former CEO Jim Sinegal designed the Wholesale Club Notion in 1983. Stores were quickly spread throughout the United States, Canada, and Mexico. According to Michaud (2012), “By the end of 2008, there were 550 stores in 40 states and 7 countries, with 54 million members” (Para. 3). The company creates a global chain of warehouses that carry value products as per their slogan. Michaud further discussed that “Costco is also one of the largest corporation in the world with 663 stores
Renee McDonald (“Plaintiff”) allegedly sustained personal injuries on October 8, 2015 while shopping at a store owned and operated by Costco (“Defendant”) in Brooklyn Park, Maryland. According to the plaintiff, while walking through the store, she tripped on mop water which caused her to fall to the ground and suffer “severe bodily injuries.” The Plaintiff claims that her fall was caused by the mop water. The mopped area had been secured with a yellow caution sign that warned customers of the wet floor. At the time of the Plaintiff’s fall, however, the sign had fallen down and was lying on the floor. Plaintiff alleges that the store did not have proper signage to warn of the hazardous condition.
It was in the twentieth century that the world was first introduced to a now well-known household name, Costco. In 1976 that the first Costco was opened, formerly known as Price Club, in San Diego. The philosophy of this company is simply stated, “Keep costs down and pass the savings on to our members.” (Costco.com) It has held onto its philosophy of keeping prices low for almost half a century. Costco is self defined as a “membership warehouse club.” (Costco.com) It provides a wide variety of brand name products in their warehouse-style store, and strives to provide all members with the lowest prices that they can offer. Today, Costco is a well known and loved company by consumers.
Costco as a company began operations in 1983 with its headquarters in Issaquah, Washington (Costo 1). It was founded in Washington, United States by James Sinegal and Jeffrey Brotman. Brotman comes from a family that had been involved in retail business before the establishment of Costco. Therefore assuming that his background may have prepared him for running Costco
Next, the threat of new entrants which I believe is weak. Since Costco is a large warehouse store they have aggressive pricing that is difficult for smaller retailers to duplicate. Costco has their private Kirkland brand that makes entering this market more difficult and hard to duplicate unless new entrants have sufficient capital that is needed. As well marketing and advertising is very costly to gain new customers and keep current customers. Another factor making the threat of entry weak is the unappealing market growth in the industry which is small and as well as the
In September 1983 Costco's first warehouse opened in Seattle, Washington. At this time, warehouse outlets had long existed, but the concept of a wholesale club was relatively new and promising. Dubbed "buyers' clubs" and begun in 1976, these warehouses were wholesalers that required shoppers to become members and pay an annual membership fee. The membership fee helped reduce already-low overhead, so that items could be sold at an average of 9 percent over cost from the manufacturer. At the time Costco was formed, membership warehouses were primarily a West Coast phenomenon; however, since then, their popularity has spread throughout the United States, across the borders to Canada and Mexico, and beyond to many other countries.
On September 15,1983 the world had witness the opening of Costco the first warehouse on Seattle, Washington by James Senegal and Jeffrey H. Brotman. The owners had started in distribution their wholesale by working for Price at both FedMart and Price Club and Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age.
According to Deloitte’s 2014 Global Powers of Retailing Report, it identifies the 250 largest retailers around the world based on publicly available data for fiscal 2012 encompassing companies’ fiscal years ended through to June 2013; however, here mainly focuses on the Top 10 retailers’ analysis.
What is Costco’s business model? Is the company’s business model appealing? Why or why not?
Costco’s business model is to generate high-volume sales and rapid inventory turnover by offering low prices on a limited set selection of brands and a few selected privately labeled products. This model does not turn a profit on its own with the company operating slightly below its break-even cost. However, to make up for this Costco charges a membership fee and this is a simple way of padding their profit but also enabling them to provide a customer experience that emphasizes value.
Costco is the best cost provider in the wholesale club category and the strategy is associated with Costco’s capabilities and resources, which includes; a streamlined supply chain, good supplier relationships, purchasing power, high sales volumes, quick inventory turnover, and excellent customer service. The three vital components of the company strategy are low pricing, limited product selection and high-end products acquired in closeouts and liquidations. While Costco strives to beat the competitors pricing, it also delivers exceptional value in its high-end offerings and customer service, giving consumers more for their money. Given its customers are the most affluent of all the warehouse clubs, with average incomes around $75,000 and this strategy works well for Costco. However, these customers are conscious not only about money but also value for the product, this fact is supported by the members who choose for executive
In 1983, Costco Wholesale Corporation, the fourth-largest retailer in the United States, was founded by former Price Club executive, Jim Sinegal, and lawyer Jeffrey Brotman. Costco focuses on selling products at low prices in bulk packaging and focuses mostly to large families and small businesses. They sell products like flat-screen TVs, gallon jugs of mayonnaise, and coffins. Costco operates 556 stores worldwide: 405 in the United States, 77 in Canada, 31 in Mexico, 21 in the United Kingdom, 9 in Japan, 7 in South Korea, 6 in Taiwan, and 1 in Australia. Costco employs 140,000 employees and accumulates $70 billion in annual sales. It became the first company to rise from zero to $3 billion in sales in less than six years, and reached
Costco Wholesale Corporation, which began operations in 1983 in Seattle, originated the membership wholesale club retail concept. By providing low prices on consumables like fresh foods, health and beauty care items, high-quality apparel, electronics, jewelry and other general merchandise, the company pioneered the retail concept that encourages members to visit regularly to achieve savings. In the meantime, the retailer has been successful in encouraging members to spend the savings on impulse big-ticket, discretionary purchases.
At the end of 2012, Costco was a successful business, but there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is that their finances are too reliant on acquiring new members and not on selling their products. If they cannot keep acquiring new members at a steady rate, their financial infrastructure could suffer.