The researched firm for this paper is Costco Retail Company. Costco Retail Company is now greatly renowned for operating a very successful low cost business strategy. The company has beat giant retailers like Wal-Mart and Target using its low cost strategy. Costco sells retail goods to customers at very low prices compared to all the players in the industry. This has enabled it hold on a very large market share and enjoy the highest level of customer loyalty. Despite the fact that everything offered at the Costco stores is the same that is retailed elsewhere in the industry, customers feel they can get similar commodities and services for the least price level at this firm. To maintain these low prices, Costco uses strategies aimed at minimizing the operational costs. Moreover, the low cost strategy has had a very significant and unexpected impact on how this firm approaches its human resource management.
Despite operating a low cost strategy, Costco pays the best wage rate for its employees and offers them good benefits. Costco emphasizes on the happiness and plight of its human resource despite leading in implementing low cost strategy. Costco has 600 employees working on full employment terms in the United States of America. This size of workers represents 50% of the entire retail industry in the country. Therefore, Costco is the largest employer in the retail industry despite leading a low cost strategy. Costco pays a remarkable wage rate of $17 per hour while its competitors like Wal-Mart offer as low as $10 an hour (Cascio, 2006). When it comes to benefits, 82% of the employees at Costco are given health insurance cover. Moreover, workers of this firm only pay 8% of their health premiums compared to the high percentage, 33%, paid by workers at other companies like Wal-Mart (Cascio, 2006). 91% of the employees at Costco are put on a retirement pension plan. Averagely, the firm contributes $1,330 per employee for the retirement pension plans (Cascio, 2006).
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It can be seen that Costco offers expensive benefits and high wages for its employees despite operating a low cost strategy at the same time. This firm is able to sustain its low cost strategy through the offsetting cost containment effects of the high wages and expensive benefits given to its workers. These offsetting cost containment effects include the very low employee turnover rate, high motivation and dedication to work hard for the company by the workers. Costco has been able to significantly minimize the cost of replacing workers through the high level of employee loyalty to the firm (Campeau, 2014). Therefore, the resources that would be used into hiring and training new employees are channeled towards offering discounts for the customers by selling low-priced goods.
The company is also able to capitalize on the experience and best talents, which it keeps in the loyal staff. It is quite beneficial when a company manages to stay with its top talented and skilled workers, because they are always the source of its high performance. The high productivity of the experienced workers makes it possible to offer goods and services at low prices, while still making profits. Moreover, this company is able to attract some of the best qualified and skilled workers when recruiting for new positions. A lot of the people in the labor market are attracted to a firm by its human resource management terms. Since Costco offers the best wage rate and high benefits, it is able to attract talented and best skilled workers. These are some of the approaches used by this firm to channel resources for maximum effect.
References
Campeau, M. (2014). ‘A stick and a carrot at the same time’: Why Costco pays twice the market rate. The Financial Post. Retrieved February 16, 2017 from http://business.financialpost.com/executive/c-suite/a-stick-and-a-carrot-at-the-same-time-why-costco-pays-twice-the-market-rate.
Cascio, W. (2006). The High Cost of Low Wages. Harvard Business Review. Retrieved February 16, 2017 from https://hbr.org/2006/12/the-high-cost-of-low-wages.
