Sam's Club and Costco
Costco 1
Tiffin University
MBA Graduate Program
MGT-622 Section 90
Costco Wholesale in 2008: Mission, Business Model, and Strategy
Professor Lillian Schumacher
Darrick Beckwith
January 30, 2011
Costco 2
Costco Wholesale in 2008: Mission, Business Model, and Strategy
What struck you as positive and/ or negatives? Were there certain strategic elements that were particularly insightful? Were there any glaring weaknesses that could jeopardize their success? There are many positives that can be drawn from the way that Costco runs and controls its business. Costco’s motto is “To continuously provide our members with quality goods and services at the lowest possible prices” (Thompson, Strickland, Gamble, 2010). They have stuck to this mantra by providing affordable memberships to its customers, and affordable pricing of its merchandise. Costco’s strategy of low pricing and limited product line and selection made Costco successful by keeping their margins below their competitors; this is a positive in that it will draw more customers and more accounts for the growth and prosperity of the business. Costco’s limited product line and selection is also a positive because unlike it competitors, Costco offers efficiency in its sale process and makes it easier for the business to be managed. Sinegal stated that “If you have ten customers in to buy Advil, how many are not going to but any because you just have one size? Maybe one or two, we refer to that as the intelligent loss of sales” (Thompson, Strickland, Gamble, 2010). Another positive is Costco’s approach to treasure-hunt shopping. Costco tries to intrigue its customers by creating a sense of urgency with certain products that are high-end and that the company knows will sell-out quickly. Although these items a lot of times are higher priced, they still are reasonably lower than the average department store or its membership warehouse competitors.
The only negative would be
Tiffin University
MBA Graduate Program
MGT-622 Section 90
Costco Wholesale in 2008: Mission, Business Model, and Strategy
Professor Lillian Schumacher
Darrick Beckwith
January 30, 2011
Costco 2
Costco Wholesale in 2008: Mission, Business Model, and Strategy
What struck you as positive and/ or negatives? Were there certain strategic elements that were particularly insightful? Were there any glaring weaknesses that could jeopardize their success? There are many positives that can be drawn from the way that Costco runs and controls its business. Costco’s motto is “To continuously provide our members with quality goods and services at the lowest possible prices” (Thompson, Strickland, Gamble, 2010). They have stuck to this mantra by providing affordable memberships to its customers, and affordable pricing of its merchandise. Costco’s strategy of low pricing and limited product line and selection made Costco successful by keeping their margins below their competitors; this is a positive in that it will draw more customers and more accounts for the growth and prosperity of the business. Costco’s limited product line and selection is also a positive because unlike it competitors, Costco offers efficiency in its sale process and makes it easier for the business to be managed. Sinegal stated that “If you have ten customers in to buy Advil, how many are not going to but any because you just have one size? Maybe one or two, we refer to that as the intelligent loss of sales” (Thompson, Strickland, Gamble, 2010). Another positive is Costco’s approach to treasure-hunt shopping. Costco tries to intrigue its customers by creating a sense of urgency with certain products that are high-end and that the company knows will sell-out quickly. Although these items a lot of times are higher priced, they still are reasonably lower than the average department store or its membership warehouse competitors.
The only negative would be
References: Thomson, Jr., A., Strickland III, A., Gamble, J. (2010). Crafting and Executing Strategy. The Quest for Competitive Advantage. 32-50. Bowmer, R. (2007, July 17). How Costco Became the Anti-Wal-Mart. The New York Times [Online]. pp. 1-7. Available: http://www.nytimes.com/business/yourmoney/17costco.html [17 July 2007].