Business Analysis Part Iii: Costco Wholesale Corporation

2019 words - 9 pages

Business Analysis Part III: Costco Wholesale Corporation
MGT/521
June 14, 2012

Business Analysis Part III: Costco Wholesale Corporation
Jim Sinegal, Costco Wholesale cofounder and CEO summed up Costco Wholesale Corporations strategic planning and operations in a nutshell according to the Retail Industry website, “Wall Street is in the business of making money between now and next Tuesday. We’re in the business of building an organization, an institution that we hope will be here 50 years from the now. Strategic planning is an important part of running any business and the more so for businesses that operating in multiple states and countries.” On May 27, 2012, Costco Wholesale ...view middle of the document...

John Matthews, Costco Wholesale Corporation Senior Vice President of Human Resources and Risk Management has played an integral part in the corporation building its empire. This paper will further discuss how John Matthews has played an important role in the corporation achieving their business goals. A smart investor will do the necessary research and understand why it is a great idea to invest in Costco Wholesale Corporation.
In order to understand Costco Wholesale Corporations’ strategic initiatives, one must understand their strategies for pricing, product selection, what the company deem as “Treasure-Hunt Merchandising,” marketing and advertising, and the importance of website sales. Costco Wholesale Corporation strategic initiatives help them understand how they will adapt to organizational and operational changes in the market. These are important aspects that help the corporation consistently reach their goals. Through research, an investor will formulate a good idea in order to have a basic understanding of why it is a great choice to invest in this corporation. Lets’ take a look at Costco Wholesale Corporation strategic initiative of pricing to understand why competitors have such a hard time keeping up.
Costco Wholesale Corporation believes in low pricing of top-quality brands which attracts customers, “The company stocked only those items that could be priced at bargain levels and thus provide members with significant cost savings; this was true even if an item was often requested by customers” (Thompson, 2009). One of the key components of Costco Wholesale Corporation pricing factors is to limit their mark-up on brand-name merchandise at 14% which is a major difference from their competitors who mark-up their prices on brand names at about 20 to 50%. Brands such as their own “Kirkland Signature” are capped at 15%. The customer is consistently satisfied and the mark-up is so low, “that Wall Street analysts had criticized Costco management for going all out to please customers at the expense of increasing profits for shareholders” (Thompson, 2009). The strategic initiative of pricing has competitors adapting to Costco Wholesale Corporation organizational and operational procedures rather than the corporation adapting and trying to keep up with them.
Product selection is another strategic initiative that sets the corporation apart from the competitors in the same market. Competitors such as Wal-Mart may stock up to 40,000 items while places like Wal-Mart Supercenter or a Super Target may stock up to 150,000 items in order for the customer to have overwhelming selections to choose from. “Costco merchandising strategy was to provide members with a selection of only about 4,000 items” (Thompson, 2009). Without research, any investor would assume that this product strategy would put the corporation at a disadvantage. Through research, an investor would understand why this product put Costco Wholesale Corporation at a significant...

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