Costco Wholesale in 2012, Case Study Example

What is Costco’s business model? Is the company’s business model appealing?

Client centered and employee motivated model is the one taken into account by the company. Working from inwards towards an outward function of the development; this is what Costco was highly noted for. Relatively, client centered approach made it possible for the administrators to seek and discover new ways of serving the market’s needs and demands and therefore create a more workable environment where the organization itself could thrive amidst the emergent existence of competition.

What are the chief elements of Costco’s strategy? How good is the strategy?

While competition is tough, constant innovation of operational procedures was one among the most important tools that Costco was widely noted for. When something is wrong; that something is immediately addressed, therefore allowing for progress to happen constructively. Noticeably, accompanying this strategy was a constant concern for the demands of their target clients in the market.

Do you think Jim Sinegal has been an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? What support can you offer for these grades?

Yes, Sinegal, although he was young, had a knack for discount retailing; he knew how to push sales up through discounting them and letting the consumers have the best of what the company could offer, therefore improving the reputation of the organization in the market. The discounted products offered by the organization kept them within the customers’ radar therefore retaining their rate of popularity in the market amidst the emergence of new commerce and the condition of existence of their competitors.

What core values of business principles has Jim Sinegal stressed at Costco?

Sinegal followed the culture of development and innovation seriously. He stressed among his employees how important it was to work together with their colleagues and with the organization as well. He pointed out that growing together would not only be a business strategy to embrace, but a constant culture that the people ought to exist with as this would largely affect them personally as individuals aiming for the best results from their performance with the company.

What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why?

When it comes to wholesale distribution of products, the real competition is on the pricing of the products offered by the company in bulk to retailers. Relatively, the worth of the products they release in the market would be the deciding point on how many retailers would actually give attention to their business. Hence, in this case, it is the supplier’s deciding power which basically includes the condition by which the organization is able to create an agreement with its suppliers therefore controlling the prices of their products through relative balancing of expenses with their suppliers amidst constantly fluctuating prices in the market.

How well is Costco performing from a financial perspective? Do some number-crunching using the data in case exhibit 1 to support answer.

With regards its net sales, the company is faring well between the years 2005 to 2011. Increasing within at least 13% to 14% of revenue apart from expenses, the company was able to survive even the distinct drop of sales rate between the years 2008 and 2009 [which could have been affected by the financial crisis that was happening then].

Based on the data in case Exhibit 1,5,6 is Costco’s financial performance superior to that at Sam’s club and BJ’s wholesale?

The performance of the company is somewhat in par with that of its competitors. Nevertheless, it could be understood that the consideration over such matter ought to be fully defined as the different elements of company success in sales could be measured using different points of consideration. Pricing is what Costco uses as a tool for competition. The willingness of the business to offer the products at a much lower cost than its competitors through establishing programs and bulk offers for loyal customers makes it a better choice than the other companies especially for those who already know and trust their business system.

How well is Costco performing from a strategic perspective? Does Costco enjoy a competitive advantage over Sam’s club? Over BJ’s wholesale? If so, what is the nature of is competitive advantage? Does Costco have a winning strategy? Why or why not?

Besides pricing, Costco enjoys a good sense of control on the market because it has the capacity to listen to the customers. Although both BJ and Sam’s Club have their own ways of making it in the market and in the industry as separate entities, Costco retains the interest of its loyal customers thus making good connections not only with its present transactions but also ensures its future connections with the same loyalists of the company.

Are Costco’s prices too low? Why or why not?

No, they are within the price ceiling. The reason why their pricing could be considered practical is that they follow the rules of pricing in the industry and does not go lower than that. The only difference they have from their competitors is that they value the consideration over gaining higher profit from higher sales than in concentrated revenues from numbered clients only.

What do you think of Costco’s compensation practices? Does it surprise you that Costco employees apparently are rather well-compensated? Better compensated than employees at Sam’s club or BJ’s?

It is not a surprise that the company is able to compensate its employees well [perhaps even better than its competitors] especially because it is able to generate good profit from low-priced sell ups. The lower their price; the more they sell. The more they sell; the higher profit they get and the lesser waste of expense they incur; hence, the more capable they are in paying their employees the salary that they are due.

What recommendations would you make to Costco top executives regarding how best to sustain the company’s growth and improve its financial performance?

Keeping loyal customers within radar [as it does now] is a rather effective approach to retaining strong business relationships. Noticeably, it could be understood that when it comes to this part, top executives could also look into possible expansions in the future [perhaps even utilizing the internet] to gain new loyalists to the company .