Costco is known as one of the leading whole sale business enterprise in North America. The case study indicates that the firm dominated the largest part of Canada whole sale industry with 72% shares. It was also the second largest global retailers as at 2015 global market report. The firm was listed as the 18 th in Fortune 500 companies in 2015 with 71 billion market share during the same period. Several factors have contribute to the evident success that Costco has reported during its trading period and it is important to examine some of them.
Costco’s Business Model
A business model of any firm refers to the plan laid down by that particular enterprise to create revenue and accrue profits from its operations. Costco’s business model sits well and has the ability to help the firm generate revenue from its operations and accrue enough profits to keep the business working well and reaching is competitive advantage. The model of the firm includes relying on quick turn over of inventory and high volumes of sales CITATION Tha16 \l 1033 (Than, 2016) . The leaders in the company believe that these are important factors that will ensure increased profits in the firm. The leaders in the firm also take part in offering law prices to fee paying members thus turning them into loyal clients.
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Costco also uses the model of limiting promotional activities, advertising, and marketing with the aim of reducing the amounts of revenues used in these areas. Instead the firm relies on direct advertising to their clients. They also use email marketing to their prospective clients thus, reducing over expenditure on marketing and advertising. As such it is important to note that the business model of the firm is appealing. This is because; they have come up with an appropriate method of reducing expenses on advertising, promotion, and marketing. They have used alternative means of promotions for reaching out to their current and potential clients and are still maintain their loyal clients as they draw in more customers.
Business Strategy
Just like any other business, Costco has its business strategy in pace. The chief elements of its business strategy include providing low prices on high quality goods. This strategy woos clients and keep them coming for more. The firm also relies on using low mark up on their brand name and merchandise CITATION Gre16 \l 1033 (Gregory, 2016) . The CEO states that their clients do not return to them because of the beautiful window display but because they offer products of high value. The leaders in the firm decided to do away with factors such as accounts receivable, billing delivery, and salespeople, which are traditionally known to increase pricing of goods and services. This move made it possible for them to offer their clients low prices on merchandise of high quality.
Thus, it is important to note that the strategy adopted by leaders at Costco is a better strategy since it has made it possible for the firm to maintain a large number of loyal clients. The strategy has also been instrumental in attracting more new clients as well as increasing sales and profits of the firm’s merchandise.
The effectiveness of a CEO
All business organizations have a CEO who oversees the activities of the firm. Jin Sinegal is Costco’s CEO and has proven to be an effective CEO at what he does in the firm. First he helped come up with the best and most valuable business mode for the firm. Secondly, Sinegal also helped the leaders in the firm to create effective business strategies that have allowed the company to not only increase sales and profit but also maintain a large number of loyal clients CITATION Tha16 \l 1033 (Than, 2016) . Moreover, the effectiveness of Jim Sinegal is evident in the fact that he appreciates the stakeholders, employees, and clients at wit the same degree. Sinegal realizes that the success of the organization.
Jim would receive a grade of A for his tireless work. This is because Jim played an important role in creating a business strategy that brought tremendous and continuous success to Costco. Moreover, Jim also used the Porter’s five forces analysis to evaluate how Costco’s external environment can affect its productivity and competitive advantage. Thus, he was a leader who did not only consider the internal but also the external factors and how they can affect the performance of the organization.
Craig Jelinek took over as Sinegal’s successor in 2014 and has been doing a commendable job as well. A side from carrying on the legacy that Sinegal left, he introduce the need to take effective care of the employees. Craig believes that the employees will work well if they are provided with a more rewarding workplace. According to Craig, such a workplace will help in reducing employee turnover, increase on job performance, and boost productivity. Every person in the business industry understands that human resources are the back bone of success in any firm. As such, Craig has played a fundamental role in recognizing the fact that proper regard of their human resources will continue the profitability of the firm.
The core values
The core values of any organization refer to the guiding principles that the employees, stakeholders, and other members must rely on to bring success to the firm. Jim Sinegal relied on the ABC principle in creating the core values for Costco. First Jim requires that leaders and employees in the firm must adhere to strict codes of ethics, this include taking care of the members and human resources, respecting Costco partners, rewarding shareholders, and respecting the firm’s suppliers. He requires that the firm should bring high quality products or merchandise to their clients and offer the lowest price possible to these customers. Finally, Jim ensures that the firms must comply with the law be best environmental stewards, effective corporate citizens and provide excellent client services in the firm. Thus, these core values are vital in looking at every aspect of the organization ranging from the clients, to employees, stakeholders, environmental health, as well as corporate governance in the company.
Financial statement
From the results presented in exhibit 1and 4, it is evident that Costco is more profitable than Sam’s Club and BJ’s Wholesale. This is because the exhibit indicates a continuous financial increase over a long period. This is not to say that the other two entities have not been profitable, however, the amount of returns on investment presented by Costco is greater than those presented by these two business enterprises.
Venturing into external markets
Some of the plans that almost all organizations have is to be world market leaders at some point in their operations. Once can report that Costco has been successful in entering global market. This is evident from business global positioning that placed the company at the 2 nd position worldwide CITATION Tha16 \l 1033 (Than, 2016) . Thus, on can state that Costco enjoys a world presence than most of its competitors based on its performance and global positioning as well as the fact that it was listed 18 th in the fortune list. On the other hand, the SWOT analysis recommends that the firm should take an active role in coming up with online stores to further enhance its global presence.
Strategic analysis
On can report that Costco is performing well from a strategic perspective, this is evident from the fact that the firm is the second largest in the global wholesale arena. This is to mention that Costco has taken an early lead in the wholesale industry globally CITATION Cos17 \l 1033 (CostcoWholesale, 2017) . Secondly, the fact that it has many shops located in various parts of the world is another indicator that the organization is performing well. Thirdly, the firm has effective strategies that allow it to examine both internal and external factor that can affect the firm. It has relied on these effective strategies to report increased performance in profits both in an out of its parent company. Hence it is evident that the organization is performing well from a strategic point of view.
Competitive advantage
Similarly, the case study indicates that the firm is enjoying competitive advantage better than its rivals. This is evident from the fact that the firm is able to conduct an external analysis to evaluate how its external environment is affecting its performance CITATION Tha16 \l 1033 (Than, 2016) . Moreover, the firm is competitive from local and international arena hence is enjoying a competitive advantage. Similarly, the leaders accept the fact that they have rivals in the market and note that they need to come up with better strategies to beat the competition in the industry in which they operate.
The nature of the firm’s competitive advantage is one that accepts the fact that there are rival companies coming up with similar products within the same industry in which it operates. As such, the leaders have decided to ensure high quality and low prices to attract more clients and maintain their loyal clients.
From this analysis, it clear that Costco has a winning strategy that they use keeps high performance in their firm. Their winning strategy enables them to have reliable suppliers who bring in more goods and services that they can sell to their clients. They are able to ensure client loyalty and customer satisfaction at all time. Moreover, the leaders in the firm also appreciate their stakeholders and ensure that they keep them happy at all time. The winning strategy also enables them to perform external and internal analysis to know the factors that affect their performance. Moreover, they also use porter’s five forces analysis to help them maintain competitive advantage in the fir m.
References
Costco Wholesale. (2017). The Costco Story. Canada: Costco Wholesale. Retrieved from https://www.costco.ca/about-us.html
Gregory, L. (2016). Costco’s Mission, Business Model, Strategy & SWOT. Retrieved from http://panmore.com/costco-mission-business-model-strategy-swot.
Than, T. (2016). Costco Mission, Business Model and Strategy . Retrieved from https://www.slideshare.net/TranThang6/costco-mission-business-model-and-strategy.
