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Costco Strategy

Free «Costco Strategy» Essay Sample

I. Description of the Company

Costco Wholesale Corporation, famous as Costco, refers to an American multinational retailer operating in the warehouse club industry. The corporation was established in 1976 as Price Club before it opened its first warehouse in Seattle, Washington, in 1983, where it has its headquarters. The proprietors, James Sinegal and Jeffrey Brotman, aimed at providing quality products and services to the corporation’s members who were majorly small businesses. Trading under the mantra of keeping costs down and leaving the customers to save, Costco has grown to become the second largest retailer in the United States and the third largest in the world with at least 60 million members. In line with the cost efficiency focus, Costco Wholesale Corporation’s mission is to continuously provide its members with quality products at the lowest possible prices.

II. Leadership: Company CEO and His/Her Qualifications.

Costco Wholesale Corporation is led by Craig Jelinek as the CEO and the President of the corporation. Craig took over the leadership of the corporation from James Sinegal in 2012. Before being appointed as the CEO on January 1, 2012, Craig Jelinek worked in the same corporation as the chief operating officer (COO), a position which he had held since 2010. Before then, Craig Jelinek was an executive vice president heading merchandising in the organization, a position which he achieved after working in the company’s various management levels for twenty years since 2004. Craig Jelinek’s experience in business development, merchandising, and operations in the company and other organizations is believed to be the major explanations as to why he was appointed as the CEO of the corporation. However, analysts also indicate that there is a possibility that in addition to Jelinek’s long career, he got appointed to the position due to the proprietors’ faith in him as the person who would push forth with the corporation’s strategy.

III. Which of the Five Generic Strategies?

Since beginning its operation, the corporation has been focused on providing high quality products to its customers at the same time maintaining the prices at a minimum level, an approach which is enabled by the corporation’s low cost strategy. The corporation trades under the mantra of keeping the prices low and allowing the customers to save on major price discounts. This strategy is enabled by the fact that the corporation focuses on very small mark-ups of up to 15% as opposed to major retailers who demand mark-ups ranging between 25% and 50%. The rationale in the low mark-ups is that Costco does not advertise its products which helps in reducing its operating costs. The analysis of the corporation’s strategy indicates that alongside the acceptance of the warehouse club industry and focused members-only treatment, Costco focuses on growing the already tremendous customer base by providing subscription fees, which are as low as $55 per year. The corporation also provides indiscriminate low prices for all members with the only difference being a 2% discount saving on quoted products for executive members indicating that the corporation focuses on the overall low-cost provider strategy.

IV. Short Summary of Products or Services Offered.

Costco provides a range of expansive products. However, the products provided by the corporation are fewer compared to the variety of goods provided by other retailers such as Walmart. For instance, Costco provides only four brands of toothpaste compared to more than sixty brands displayed and offered by Walmart. In addition, Costco specializes in providing high quality products and occasional brands such as Dom Perignon champagne which target high value members such as those in the executive members list. The products include a wide variety of household goods such as electronics, foods, clothing, and furniture. They also provide office products such as computers, printers, desks, and stationery. As for services, the corporation provides holiday packages.

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