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Costco Case Essay

1216 words - 5 pages

1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

- Costco’s business model is all about generating high sales and rapid inventory turnover by offering the customers that pay fees to have attractively low prices on many products that have a big named brand labels on them spreading through a wide variety of merchandise categories. A second element of their business model allowed it to sell and receive cash for their inventory all before having to pay most of its merchandise venders.

- I feel that the company’s business model is very appealing to many customers seeing the fact that in January of 2012, they had a total of 598 warehouses spread ...view middle of the document...

The strategy for this overall is to entice the shoppers into buying more than they would by offering irresistible deals on big ticket or name brand products.

3. 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? Refer to Figure 2.1 in Chapter 2 in developing your answers.

- I believe that Jim Sinegal has been a very effective CEO. His strategy was to have the lowest prices that there is, and he has done that. This strategy has lead them to be a very successful company and to become the third largest retailer in the United States.


4. What core values or business principles has Jim Sinegal stressed at Costco?

- Jim Sinegal ingrained five very simple business principles into the corporate culture and the manner in which the company is operated. The first is to obey the law. He enforces that the business must comply with the laws of the community where they do business. The second is to take care of their members. He states that their members are their reason for being and also key to success. There are many other alternatives to shop for their members, so if they do not show up, we as a company will not survive. The third is to take care of their employees. The employees are the most important assets to the company. He believes they have the best employees and are committed to providing them with rewarding challenges and ample opportunities for personal and career growth. The fourth is to respect their suppliers. The suppliers are their partners in business and for Costco to prosper as a company, the suppliers must prosper with Costco. The final principle is to reward their shareholders. Since they are a company with stock that is traded on the NASDAQ stock exchange, their shareholders are also their business partners. Costco can only be successful as long as they provide them with a good return on the money that they have invested in the company.

5. What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related discussions in Chapter 3) to do a complete five-forces analysis of competition in the North American wholesale club industry.

6. How well is Costco performing from a financial perspective?

- From a financial perspective,...

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