Costco Case Study

Though I’ve only been with Costco for two years, I’ve had the opportunity to work with different leadership and management styles during my time here. Though this has helped me develop my

The strategic objective of Costco is based on the concept of offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories while producing high sales volumes and rapid inventory turnover. This rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self service warehouse facilities, enables Costco to operate profitably at significantly lower gross margins than traditional wholesalers, discount retailers and supermarkets. (1)

1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Lack of leadership has proven to be one of the leading causes of companies not meeting their targets, and that's where Welch's four principles of establishing Mission and Values, applying Candor, implementing Differentiation, hearing the Voice of the team and rewarding accordingly have become very useful in building a strong leadership foundation. In my recent work assignment, I didn't feel I had many good examples to follow. Therefore, to delve into options of how to affect my teams' culture and support, my company's goal has led me to understand the difference between managing and leading. In this paper, I will review my leadership attributes, including any weaknesses, and study the opportunities for improvements to building a platform for effective leadership.

Q1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

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.

No.4. Pertaining to the reading as well as to the specified questioner, (Apply Your Skills: Case of Critical Analysis Questioner, Costco: A Different Path), I’ve come to realize that not all companies become successful overnight. As read throughout the short yet informative chapter, Costco has indeed maintained a modestly competitive yet respectfully successfully growing environment through its low prices, bulk product, strategy. Craig Jelinek is the CEO and successor to founder and longtime CEO James Senegal. Craig believes that the secret to success lies in that of the way the company can overturn conventional wisdom.

What is Costco’s business model? Is the company’s business model appealing? Why or why not?

As a successful Fortune Fifty company, Lowe’s depends on great leaders to help the organization achieve its financial and organizational goals, motivate its extensive workforce, and build a culture where employees share and cultivate the purpose of the organization. While many great leaders, including Wheatley, Cashman, Peters, and others have written on the subject of leadership, the success of Lowe’s Companies has demonstrated that since 1946, it has been the home of many great leaders. By interviewing recognized leaders in key positions at Lowe’s, I hope to learn several valuable aspects of effective leadership, which I plan to incorporate in my personal leadership style.

The Costco strategy for getting into the wedding gown business is to have a set of touring trunk shows at its Western stores during the season where people are planning their weddings. Costco's typical pricing strategy is to undercut competition and make up for this with high volume sales. The company applies this strategy to the wedding gown business as well. Costco offers one of the lowest prices of any company on its wedding dresses. The company's business plan ensures that the details have been fleshed out, and that has led to the unique distribution strategy for wedding gowns.

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.

1. What is each company’s current competitive strategy (be specific)? Costco’s strategy is cost leadership, differentiation and focus. The company has an effective and efficient supply chain that enables it to keep the operational cost low in order to pass this benefits to its members.

Costco is one of the nation’s top three retailers and the world’s largest membership warehouse chain, Costco wholesale Canada operates about 80 membership warehouse clubs across Canada. The company never advertises, charges its 64 million members to shop there and doesn’t mark up any product more than 15 percent, even at this lowest profit margin, 15% for Kirkland private brand, the products were 20% lower than comparable to other brand products. Costco works with this business model and generating $93 billion in annual sales.

A Business week article makes an interesting statement that Costco belongs to the very short list of companies with a culture so favorable to employees that it gives the company a competitive advantage, and it’s most likely to keep on rising over many decades. Costco sees workers as an asset to invest in, rather than a cost that must be reduced. In the U.S. Costco pays workers an average of nearly $21 per hour, almost three times the minimum wage and about twice as much of what most competitors pay. They receive great benefits and are part of a safe and healthy working environment as well. At Costco they are committed to providing its employees with opportunities for personal and career growth. Costco has implemented a strategy for a competitive advantage by having a mix of low-cost providers and differentiation. Company differentiates itself by providing consumers with products in bulk at a low per unit cost. Costco offering two types of memberships- the regular and executive membership. With an executive membership, Costco gives a 2% reward on annual Costco purchases. A holder of the executive membership receives incentives for shopping there, which leads to more sales and higher customer visits. This is just one of the many reasons customers keep going back to Costco. It has made itself a highly successful company by offering quality products and excellent customer service.

Organizational culture has been described as shared values and beliefs that underline a company’s identity. A strong culture that encourages employees from the top to the bottom in adaptation and change can increase organizational performance by energizing and motivating employees, shape behaviors, unify personnel in the goals / objectives and align employee’s actions with the priorities of the company (Daft, R., 2013). Creating a constructive culture should be a manager’s top priority because the right culture will propel a company into a top performer in its industry.