Costco Memo

MEMO

TO: Elizabeth McIntyre, CEO Costco DATE: Jan. 31st 2018

FROM: Caden Burrows VP HR Costco SUBJECT: Alternative Corporate Strategies

_____________________________________________________________________________________ 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.

I. Relevant Facts

Costco as an organization has created a well-known brand for treating and paying

Problem/Issue The Board of Directors recognizes that our current business strategy, that includes “investment in employees” has historically been successful. However, it wishes to explore other options for improving profits that the corporation should consider for the future. The following are 3 alternative strategies for increasing profits and a discussion of their costs, challenges and opportunities.

III. Alternative Courses A. Close the gap on how well we treat employees. Cutback on total workers, and limit full time worker’s benefits, lower the wage at which all new hires receive. B. Increase item pricing on items that we charge very low on. For example, our hot dogs and pop combo that we off at our concession stand is at a very low price, $1.50. Might want to add to the amount we charge for our hot dog and pop combo. C. Increase the cost of each member’s membership type by 5 dollars. Our membership expenses begin at 60 dollars for gold members and would like to increase membership prices to 65 dollars, also our executive membership prices begin at 120 dollars and would like to increase these prices to 125 dollars.

IV Evaluation of

Our notably cheap hot dog and soda combo has made a name for its self for how inexpensive and how much you get for paying just a $1.50. We create alone just from selling the hot dog and soda combo, over 100 million dollars in income. We created the combo from the very first days of Costco’s method to lower prices. We have tried and tried to not raise the price of the combo, but instead find the cheapest way to sell the combo while still creating profit. What I am suggesting is the opposite; instead we increase the price of the combo by a quarter and try to sell the combo for $1.75. We have built a loyal customer satisfaction with our company and how low our prices are. An increase in 25 cents to the combo is not going to steer away our loyal customer base as it is only a 25 cent raise. It increases our profits for every combo we sell and it is still that low price that we shoot for in a company. Many customers will over look the fact that we raised the price 25 cents and still be happy that the combo is lower than two dollars. Though it would not create a substantial gain in profit, every few millions of dollars goes a long