Prepared below, by request, is a memo detailing 3 possible corporate strategies, that with implementation, could potentially raise profits at Costco. In an effort to increase profits we can maintain our present HR strategy of capitalization upon our employees or use these alternative corporate strategies as an alternative or these different strategies can be used in unification with our current HR strategy.
I. Relevant Facts
Most major retailers maintain the mentality of low prices along with low wages and minimal benefits to employees. Costco follows a different business model of paying employees more and treating them better attempting to make them more satisfied ergo, providing better customers service. Founder James Sinegal believed
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Employing the stability strategy will keep management steady and protect itself from environmental threats. Costco has had rapid growth in the past few years. The stability strategy would be used in combination with a pricing strategy of a slight markup in prices. Currently with a 15% markup, which is below average there is room to increase this even if only by a slight amount. Through Costco’s differentiations strategy of developing an image and reputation of quality in its products as evidence through the high volume of Kirkland brand toilet paper being sold and increase in wine sales that is setting itself apart from other retailers. Through this increase in quality Costco can charge higher prices for products. Increasing the markup to 18% from 15% would be small enough amount that customers will not be overly affected by the results, yet yielding an increase in profits for the …show more content…
Shareholders are concerned Costco does not have as high of profit margins as possible. Costco’ has minimized its costs by having the lowest overhead as possible through its warehouse styled operations. However, much of Costco’s expense is found in the treatment of its employees. By increasing the amount employees pay for insurance slightly such as only contributing 85% instead of 90% will create a large increase in profits for the company but still be a better offer than competitors. Also by not offering raises as often Costco will still be paying a high wage for a retailer by comparison, but not quite as drastically different from the competition. Attitude is critical in any implementation of a strategy people with positive attitudes toward the job and organization will be much more willing to contribute toward the effectives of the organization to achieve the goal of profit
Costco’s business strategy is different from their competitor’s in the wholesale retail industry because their purpose is to keep overhead down and pass the savings to their customers. They do this by choosing not to advertise, sell fewer brands and having an innovative approach by having their own manufacturing facilities for a variety of merchandise. Costco does not market their warehouses and their marketing is through word of mouth from current customers who also must have a membership to shop at Costco. When compared to Walmart Costco sells four brands of toothpaste and Walmart sells sixty brands of toothpaste. Costco can buy more for less from the manufacturer of the four brands of toothpaste and pass the savings on to their customers. Costco’s strategy is to sale a limited number of items because this strategy according to (Lutz, 2013) “increases sales volume and helps drive discounts.” Because of Costco’s profitability in the retail market they have managed to continue to be profitable even in an oppressed economy. Costco’s focus is on high-end customers indicated by some of the brands they carry such as Coach Handbags. Costco offers three different levels of membership and is only open to customers who have a membership. Costco’s philosophy is they do not advertise or markup items more than 15% in order to save their customer’s money. These practices lowers the overhead costs and continues passing the savings to the customer. Costco is an international company and has (Costco Wholesale Corporation, n.d.) “462 locations in 43 U.S. States & Puerto Rico; 87 locations in nine Canadian provinces; 25 locations in the United Kingdom; 10 locations in Taiwan; 9...
Costco Wholesale Corporation was an uncommon type of retailers called wholesale clubs. These clubs differentiated themselves from other retailer by requiring annual membership purchase. Especially in case of Costco, their target market is wealthier clientele of small business owners and middle class shoppers. They are now known as a low cost or discount retailer where they sell products in bulk with limited brands and their own brand. The company is competing with stores like Wal-Mart, SAM’s, BJ’s, and Sears. The case begins with an individual shareholder, Margarita Torres, who first purchased shares in 1997 and who is trying to evaluate the operational performance of the business in order to make a decision rather or not purchase more shares
During 1994, Costco suffered a partial break up due to internal discrepancies between owners James Sinegal and Robert Price (Chesley). This resulted in PriceCostco's commercial real estate properties and other assets being spun off as Price Enterprises, Inc., headed by Robert Price ("Costco Wholesale Corporation"). Costco then operated as PriceCostco until 1997, when the company changed its name to Costco Wholesale and all remaining Price Club locations were rebranded Costco, becoming the Costco known today (“Costco Wholesale Historical Highlights”).
“Culture is not the most important thing. It’s the only thing.” (Gabler, The Magic in the Warehouse, 2016). It has been said that “Costco acts more like a cheerful cult than a hard-driving business.” (Gabler, The Magic in the Warehouse, 2016). Costco hasn’t wavered from their founder’s strategy of promoting within; over 98% of their management started their careers with Costco. This strategy clearly works; the environment is one of family not just coworkers. They are loyal to the brand and motivated to work hard and climb the corporate ladder. Costco sees this as ensuring the future of their values which in turn ensures their
Their ability to distribute the cut rate from their operating proficiencies in supply chain management and cash flow, permits them to offers items at discounted rate and a lower price than their competitors. For Costco the meaning of being the low-cost provider while also differentiating from the competitors is ambiguous at best. Costco’s CEO, Jim Sinegal, is certain that low priced, and the high value merchandises are exactly what is needed maintain and achieve a staying power in the industry. Costco also entices their customers with low prices on designated set apart products available only at their stores. Within these designated products, Costco provides a limited selection of nationwide brand-named merchandises in some wide categories. Their approach comprises of selling a limited number of items, keep their costs down, maintain a high volume, compensate employees well, ensure that customers buy their memberships, and target upscale small-business owners through their business only
You have asked me to prepare a memo outlining at least 3 viable corporate strategies Costco could pursue to increase profits. The alternative corporate strategies discussed below are intended to be either an alternative to our current HR strategy of investing in employees or could be undertaken in conjunction with our current HR strategy, while still leading to increased profits.
Key Issues: At the end of 2012, Costco was a successful business; however, 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.
The second thing that Costco needs to know how to pay employees so that they are satisfied with their salary. Costco will want to check on the employees. Costco will have to develop a disciplinary system, if employees get mistaken. Costco encourages employees or employers to become friendlier. They engage with customers fairly, so that they will be satisfied with Costco’s services. If the employees’ attitudes are not good, customers will avoid ...
Being a stocker for Costco Wholesale is a straightforward job. The stocker comes in each morning and presented with the day 's’ tasks. The stocker is monitored throughout the day by the department manager to make sure all tasks are being met in a timely manner. Costco Wholesale works less like a business and more like a well tuned machine. If one cog in a machine is faulty or rusty then the whole system will run inefficiently. Managers need to work with subordinates to further improve productivity. To avoid ineffective managers, managerial candidates should be democratically elected by future subordinates.
Overall, how satisfied are you , with [PRODUCT/SERVICE]? Please answer using the rating scale where (5) means "extremely satisfied" and (1) means "very unsatisfied."
Costco is one of the companies that have started from humble beginnings to become one of the most recognized institutions in the wholesale industry. Based on the Costco case, there are valuable lessons I have learned and the look of things is that Costco is here to stay. One of the insights I have gained from the Costco case is that organizations should understand their value chains and focus on their strengths to drive competitiveness. Another lesson that I have learned is that information technology can be used by organizations to improve their levels of competitiveness. Also, the Costco case study has enabled me to realize that the management of organizations should constantly evaluate the impacts of the strategies they employ because it is through such evaluations that the best practices can be adopted to improve the performances. Costco has applied these aspects in its different areas of operations, and they have advanced the organization since its inception days to present. From the strategic management practices, the organization has grown from strength to
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Starbucks has many business-level strategies, such as cost leadership strategy. Starbucks focused on increasing its profits and compete with other competitors (Starbucks,n.d). According to Starbucks (n.d), “a cost leadership business strategy focuses on gaining advantage by reducing its economic costs below all of its competitors. Although Starbucks targets product differentiation as their main business strategy, they have also implemented cost savings strategies in an effort to maximize profitability. An example of Starbucks cost saving strategy can be identified between 2007 and 2008 when their operational expenses increased by more than $125 million while sales for the same time period were beginning to dip. As outsourcing for distribution contributed to 70% of Starbucks operational expenses, they began targeting these outsourcing agreements for renegotiations in an effort to bring down costs.” Starbucks intended to reduce their
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...s in the corporate world by setting new standards to promote and better satisfy their employees. We chose four leading companies in four different industries. The above analysis definitely reveals that perhaps one of the reasons why these companies are the leaders in their industry is because they are well aware of the importance of the work force. They mention in their mission statements as well that yes in deed customers are important but in order to make the customer happy they first need to motivate and satisfy the employee as well. According to Citibank, the general belief is that a happy worker is a motivated and loyal one. So keeping employees' spirits high is a sure-fire way of maintaining a productive workforce. A productive work force would ultimately lead to a healthy organization which would not only promote the society its working for but also itself.