Business Case Study: Costco Wholesale's Business Strategy

1. Does the company’s strategy reflect the company’s mission? Explain.

In order to compare Costco Wholesale’s mission to its strategy, it is essential to determine exactly what Costco’s mission is and how they plan to accomplish it through their business strategy. Costco’s mission is:

The company will continue to pursue its mission of bringing the highest quality goods and services to market at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethics that includes taking care of our employees and our members, respecting our suppliers, rewarding our shareholders, and seeking to be responsible corporate citizens and environmental stewards in our operations around the world. (Thompson, Peteraf,

C–9). Each of these elements focuses in on an important aspect of Costco’s mission. Therefore, it is reasonable to conclude that Costco Wholesale’s business strategy is indeed following their mission.

2. What is Costco Wholesale’s business model?

Costco Wholesale’s business model is focused on generating high sales volumes and rapid inventory turnover (Thompson, Peteraf, Gamble, Strickland III, & McGraw-Hill, 2013, pp. C–9). Which provides Costco with the opportunity to sell and receive cash for inventory allowing them to make payments to vendors before they are due. Consequentially Costco is able to take advantage of the early payment discounts vendors provide as incentive to complete payments earlier. These two aspects of Costco’s business model has allowed them the flexibility of needing a smaller working capital as they conduct their business.

3. Analyzing the financial results in Exhibits 1 and 4, give an assessment of how well the company is executing its strategy. How has the company’s stock price performed over the past four

In order for a business to have a good fit, it must fit internally, externally and dynamically with their environment. Costco’s strategy of treating their employees and customers well seems to be working with some success as there is only a slight fall in 2009’s net income. As evident by their bounce back in 2010, it appears that they have developed a dynamic strategy that will adapt to changes in their environment in an effective manner.

A competitive advantage is essential to an effective strategy (Thompson, Peteraf, Gamble, Strickland III, & McGraw-Hill, 2013, pp. 12). Without a competitive advantage, Costco would soon be struggling to make ends meet. Based on Costco’s growth between 2000 and 2011, it appears that Costco has been building a competitive advantage, one that focuses on meeting the customer and employee needs before making a profit. Although this means that profits will be slightly lower, it does seem to be working as there is an almost continual growth in the