Organizational Culture Analysis: Costco
In 1983, Costco Wholesale Corporation, the fourth-largest retailer in the United States, was founded by former Price Club executive, Jim Sinegal, and lawyer Jeffrey Brotman. Costco focuses on selling products at low prices in bulk packaging and focuses mostly to large families and small businesses. They sell products like flat-screen TVs, gallon jugs of mayonnaise, and coffins. Costco operates 556 stores worldwide: 405 in the United States, 77 in Canada, 31 in Mexico, 21 in the United Kingdom, 9 in Japan, 7 in South Korea, 6 in Taiwan, and 1 in Australia. Costco employs 140,000 employees and accumulates $70 billion in annual sales. It became the first company to rise from zero to $3 billion in sales in less than six years, and reached the $1 billion mark in 3 years. Costco saves, enabling them to keep costs low, by not spending money on marketing, only carrying one brand, unless a house brand is offered, of a product, and not stocking bags or packaging materials. Costco has a policy of not marking their products for more than 15% of the supplier price. Jim Sinegal, founder and CEO of Costco, answers his own phone, sends his own faxes, and visits with his employees and customers. He made Inc. magazine’s 26 Most Fascinating Entrepreneurs list. Sinegal is number 4 on the list “because who knew a big-box chain could have a generous soul.?” Sinegal only makes $350,000 a year, earning him among the lowest 10% of the CEOs, even though Costco ranks 29th in revenue among all American companies. Sinegal believes that “having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong.” Wall Street is unhappy with Sinegal’s “generous soul” and he has been accused of being “too benevolent” by analysts. Sinegal’s goal isn’t pleasing Wall Street, though. He strives to please his customers and employers and to create a company that will still be intact in 50 to 60 years. The 140,000 Costco employees make an average