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Target Vs Costco's Compensation Strategy

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Michelle Holman Course September 6, 2015 Compensation Strategy Analysis: Costco v. Target Costco’s compensation strategies offer greater benefits than companies like Target due to an “efficiency wage” (Lutz, 2015, ‘Why Wal-Mart’) a strategy that attempts to lower turnover ratios by paying employees a wage above the industry standard. In turn, this compensation strategy attempts to value employees higher, also implementing a standard of operation that promotes performance and identifies employees who excel. In comparison, Ungar (2013) notes that focusing on the internal workings of the company may have placed Costco at even greater advantage, considering that they reported an 8% rise in profits while Target “experienced [less than] …show more content…

Not only does this create significant problems internally, but also problems within the organization which will determine the organization’s ability to maintain sustainability or growth in external markets. The internal labor market, which is determined by employees and the “pressure” (Lazear & Oyer, 2004, p. 2) applied within the working environment itself, changes based on factors of compensation; most notably when the environment is competitive or employees feel they are being treated unfairly for work …show more content…

Further, Suttle (2010) separates consumers based on “psychographic, behavioralistic, and geographic characteristics” (‘Characteristics’). Consumers, based on these factors, will show preference to either Costco or Target depending on their nature, purpose for shopping, and items sought during the shopping process. As internal, external, and capital markets have all been defined in relation to how Costco or Target compensates their employees, the consumer market can be equally defined in that consumers intend to make their purchases quickly, with or without assistance, and without difficulty finding their preferred products. An organization that struggles internally, externally, or in retaining their human capital will likewise have difficulty satisfying and retaining their consumer

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