STRATEGIC MANAGEMENT ASSIGNMENT

CASE FOR CRITICAL ANALYSIS – COSTCO COMPANY

Lecturer : Prof. Vu Thanh Hung

Student Name : Nguyen Thu Tra

ID : 11165265

Answer:

1. With respect to competitive/business strategies, identify and

evaluate Costco’s target customers, its core competence.

The main focus of Costco company remains on the small families and businesses. The
company offers bulk products at lower prices. The core competence of Costco can be
seen as better wages paid to manpower which are employees than its competing stores
and company has a good corporate culture. The manpower has a feeling of mutual
support, teamwork and also empowerment. As an organization, the manpower takes
pride in facilitating superior quality business and customer service.

Costco fortunately has an amazing CEO – Sinegal who is dedicated to the success of the
company and aligns himself with his corporate staff on all levels with the employees.
His action and strategy of keeping costs low by having a no frills office is impressive. He
also implements a very strong and powerful statement when he refuses to cut costs
when it comes to the salaries of the employees. This creates a loyalty from his
employees who are well compensated and thereby exhibit an amazing enthusiasm for
their job and company.

Most impressive of all is that he takes a cut in salary compared to the other CEO’s in his
industry and still achieves better results. While this is a unique approach and not one
which is industry standard. Because his employees are well compensated, he does not
use the expensive marketing plan and huge advertising budget which makes Costco a
very impressive company to work for and to become a regular retailer.

The entire package builds synergy because when employees are happy, enthusiastic and
they care as customers come into their store, then the client leaves happy and becomes a
loyal customer who will bring their repeat business to the store. The company produces
loyalty and generates a profit due to the strategies in order to help the employees. This
is a great strategy that I really respect.

2. Would you rate Costco’s business strategy as persuing

differentiation, cost-leadership, focus or some combination? Why?

In my own opinion, the company is having a combination of different strategies. The

company does not have any pure strategy, in fact, it utilizes the combination of all the
different strategies.

Differentiation strategy is adopted when it offers differentiated products than other

competitors. The company focuses on low price, better quality of products and higher
salary to the employees.

As Costco focuses on efficient facilities and has a low product cost, also it has a cost
leadership strategy. However, the company does not try to maintain low internal cost by
paying lower wages to its manpower. In fact, they are paying more than the average.

As the company is focusing on small families and business, thus it is having a focus
market but it does not have a sole focus strategy as they do not have a single target
market.

Costco has included a strategy which involves bulk discount buying for customers as
well as a membership fee. These strategies produce a loyal customer base on which will
increase the return of the customer. The competitive strategy is focus and cost
leadership. Both of these strategies are in motion as the focus of the store is to produce
sales. The focus of the employees are to produce a great result. The focus of Costco and
the CEO is to outperform all the large chain stores by focusing on the important factor of
selling more in quantity but offering less of a selection.

Overall Costco has impressed everyone in a great way because it seems that businesses
don’t care about anything but themselves. By proving to all the customers in the world
that they value employees and their salary is set to reinforce that message, customers
have a better option when they come to shopping for items.