1. How does Costco differ from other warehouses clubs like Sam’s clus?

Costco differs from other warehouse clubs in following ways-

 Wide numbers in terms of membership i.e. 672 membership warehouses which is

generating $150 million sales figures
 Membership cost is as low as $50/ year for an individual & businesses
 They have rock bottom prices which is very affordable for people
 They have name-brand products in a merchandise category
 They have around 4000 products ranging from alcoholic beverages to fresh food,
pharma & tires
 They also offers members insurance, financial & travel services
 They have that capability to minimize the cost by negotiating with suppliers
 They never want their members to pay more than 14% above the firm’s cost of goods

2. Does Costco compete with nonmembership retailers, such as Walmart and Target? Why or why
not?

Yes, Costco will be in competition with Walmart & other big giants non-membership retailers
because of following factors-

 They have wide variety of offerings in terms of pleasing the members

 The charging cost is very reasonable & affordable for members
 Whatever non-membership retailers are giving, the better things is being given by
Costco in terms of varieties, quality & cost effectiveness
 672 membership warehouses so big advantage
 They are giving members insurance part which is a big plus for all the members
 They are not working on making money but they are restricted with 14% figure for all
their members

3. Can Costco compete successfully on a large scale outside of the united states and Canada? Why
or why not?

Yes, Costco will be able to make it outside US & Canada because the facilities which is given by
Costco is at par & definitely they can rock outside these 2 countries. For that, they need good
infrastructure & team who can coordinate the members & generate the sales figures. The most
important thing is word of mouth wherein people in other countries can share the feedback of this
company. Reviews will be read by the people & then taking the decision accordingly. Everyone
wants the benefits of the membership taken so Costco is providing all types of benefits & once,
Costco starts the journey of opening the warehouse outside US & Canada, they will definitely do the
best.

4. Can Costco compete successfully on a large scale outside of the United States and Canada?
Why or why not

Costco implements a subscription-based model for customers and applies quite innovative
strategies to run the business. It charges around $55 in US for a subscription and then offers low
prices products throughout the year. In this subscription, Costco offers its service and not goods so it
is obvious that the company should be able to prove its worth of subscription.

Operation wise, Costco applies upper margin limit by which caps its margin to a set limit and
financial data suggest that it has around 10-11% margin on goods sold. It also sells its own branded
goods by Kirkland Signature and as there no middle chain, it commands higher margin.

Costco also pays quite higher wage to its employees at around $21 per hour and because of this
employee productivity has been higher and plus there is very low level of attrition. In this it saves on
recruiting and training of new employees which cost more generally.

Another smart strategy is keeping lower SKUs or stock keeping units which is beneficial in terms that
lower SKU means there is lower tracking and managing cost. Further because of lower space,
suppliers tend to offer low prices for their products to be shelfed at Costco which further benefits the
company.

Overall, Costco has been in the business for more than 40 years and it has 663 stores worldwide
and if we consider its subscription renewal rate then it stands at 91% in the US and Canada while
87% at international levels. So, we can conclude that it is successful at this juncture even outside US
and Canada.

5. Does Costco compete with membership retailers such as Wal-Mart and Target? Why or why not?

Yes, Costco compete with membership retailers such as Wal-Mart and Target.

Costco pays higher to the employees. So it has less turnover rate (24%) than Walmart (50%).
Costco cares more about its employees and customers than its stakeholders. At all times, Costco let
their employees that they matter. Costco held a nearly 55% share of warehouse club sales across
the USA and Canada, with Walmart holding roughly 36% share. Costco also keeps prices low by
keeping store displays at a minimum and offering fewer items. Customers always find something
new at its stores. Costco and Walmart compete directly with one another with increasing frequency.

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

Business Model is used to exemplify the methods and ways which we used to generate planned
revenue. The Costco’s business model is to generate high sales volume and rapid inventory
turnover by offering low prices on limited selection of national branded and select private-label
products in wide range of merchandise categories. Costco’s offers these products to their members
who are of two types’ business members and gold star members.

This business model is tempting because it gives a test to Costco’s management to continue to
devise strategies and methods through which they can keep hold of existing members and catch the
attention of new members. Otherwise they will suffer failure because there will be a risk that
discontented members will not renew their membership. This business model takes company
towards total quality management.

7. What are the chief elements of Costco’s strategy? How good is the strategy?
Strategy is the organization’s pre-selected means or approach to gaining its goals or objectives,
while keeping in view current and future external conditions. Costco’s strategy’s elements are:

• Low prices

• Limited product lines and selection

• Treasure hunt shopping environment

By keeping low prices Costco’s is following cost leadership strategy which is good because on this
base they can compete with their competitors. By limited product lines and limited selection they are
offering limited 4000 items which are less as compared to its competitors. Costco’s is adopted
market development strategy by capturing new markets for existing products. By treasure hunt
shopping environment, they provides such product at low prices to its members which they believe
will not be available in next visit. This works as an incentive and members try to take maximum
advantage and therefore Costco’s sales volume increases. At Costco’s warehouse products are not
offered in every size. The strategy they followed is that by offering every size their efficiency will
decrease therefore it is said intelligent loss of sales.

8. Do you think Jim Sinegal was an effective CEO? What grades would you give him in leading the
process of crafting and executing Costco’s strategy?

Yes, I think Jim Sinegal is an effective CEO. He has a vision and proper plans that where Costco’sis
and where it will be in long term time period. He plays an active role in overall strategy formulation,
implementation and execution. He acts as producer, director and knowledgeable critic.He cut to the
chase quickly, exhibiting passionate intent to detail and pricing. He used to firing a stream of
questions at store managers about sales volumes and stock levels of particular items. He used to
regularly analyze position of certain products in stores and give his comments on any aspect of store
operations that caught his eyes. Jim Sinegal lead its team by front and the position where Costco’s
wholesale stand is proof that he is and effective CEO.

9. What support can you offer for these grades? How well is Craig Jelinek performing as Sinegal’s
successor? 

In referencing Figure 2.1 in Chapter 2, Jelinek has continued the basic strategic vision, mission and
core values of Sinegal. He set objective that he felt were important, which fell in line with the
beginning basic objectives of Sinegal and continued with the crafting of the vision, implementing a
strategy and then effectively tweaking the objective as needed. He is not a person that is going to go
with the status quo. He wants to continue the vision of the company and move it forward with
increased sales and growth.

Costco is a Washington based wholesale corporation which is one of the largest warehouse
partnership company in Washington with its branches in many countries.

10. Describe the culture at Costco.

The Costco Wholesale become one of the largest retailers in the world. The success behind the
company is none other than its unapologetic culture which nurtured by its founders. Their
organizational culture is one of the main reason behind its success.

The companies guaranteed organizational culture makes the employees more passionate on their
work and to work with values and to establish values, habits and tradition among them. This
organizational culture of employees make the consumers happier and more satisfied.

11. How does Costco motivate it employees?

Both the employees and employer are interlinked for the existence of both. Without a better
corporation and understanding each other the employee and employer cannot achieve more heights.
The Costco company is having more than 2,25,000 employees worldwide. The company is well
known for their attitude and valuing their employees. The Costco leadership make it clear that they
value their employee more than anything and let us discuss how the company become a model for
treating their employee and how they motivate them.

Since 2012 most of their managers and executive joined out in their warehouse and the promotion
that the company given to them make to achieve more. The company argue that it is easy to
understand that how and what would affect the warehouse if you have once worked in. This attitude
makes the employees more active because unlike other companies these employees have more to
achieve if they are active and sincere in the company.

The another thing is that, the company is giving better wages and facilities to their employees. They
pay more than any other retailers with an average employee earn $21/ hour . More over that, they
are providing insurance and other benefits to 90% of their employees. The company argue that they,
don't want their employees worrying about other things so they can focus more on their job.

12. What environmental issues does Costco face?

The giant retailers were on the threshold few years back for its violation of rules related to
environment.

The Environment Protection Agency claim that the company federal violates the Claen Air Act by not
maintaining leaks of its powerful ozone harming refrigerant named R-22. Which is said to be 1700
times more harmer than the Co2 emmission . The company has paid a large amount of fine in
supplement to regulating its refrigerant in between 2004 and 2007.

13. How is Costco a socially responsible company?

Costco is well known for its a social responsibility as well. The Costco mainly engaged in four
sustainable responsibilities.

Engaged in and conscious of the welfare of its employees , care for the employees and members
reside, environmental consciousness and social responsible vendors are their noted sustainable and
social responsibilities.

Their leaders are claiming the credits for their social responsible conscious values an the global
reporting initiatives confirm their claim.

As per the 2015 sustainability report, Costo highlights many elements such as ,
climate change statement, carbon emissions footprint, development and site design, energy
management, packaging designs, recycling, and waste stream management and etc.
The company also receives best employer award in 2017 from Forbes magazine for its employee-
centric culture.