Costco Case Analysis (Case Study Sample)

Costco Case Analysis Assignment Student’s Name Department, University Course Professor’s Name Date Costco Case Analysis Assignment Costco Wholesale is one of the largest retailers in the world, ranked third behind Walmart and Amazon.com. It is one of the leading retailers in the North American retail market's discount warehouse and wholesale club sectors. Costco has recorded significant growth since its inception. Even after CEO Jim Sinegal left in 2011, the retailer has continued to be a leader in this industry under the leadership of CEO Craig Jelinek. CEO Jelinek assumed control of Costco Wholesale in January 2012. Since then, Costco's annual revenues have increased from $89 billion and 598 membership warehouses at the end of fiscal 2011 to $152.7 billion and 782 membership warehouses at the end of fiscal 2019. Costco has maintained its position as the third-largest retailer in the world and in the United States as of March 2020, owing to its strategies in leadership, mission, vision, and operations. Identification The chief elements of Costco's strategy include leadership style, pricing, product selection, and growth strategy. Leadership Style As leaders of Costco, both Sinegal and Jelinek established a leadership style akin to that of employees' well-being, valuing them and creating a conducive environment for work. The leadership style also values customers tremendously, which is why the company's mission is predicated on quality, lower prices, and customer service. Both leaders have tremendous experience in leadership; Sinegal has over 37 years of experience serving as a director, producer, and expert critic. Sinegal was focused on paying close attention to pricing and detail. He was a leader who worked tirelessly visiting stores, one store to the next; he barraged store managers with inquiries about sales figures and inventory levels of specific items. Sinegal set the standard for how the corporation ran its discounted retailing operation because of his excellent merchandising knowledge, high expectations of store managers, and high standards for staff. The leadership style is one of the central strategies for the company's success. Pricing The central goal of Costco's business strategy was to keep customers coming in to shop by impressing them with low prices and resulting in significant sales volumes. Costco's price strategy for many years included capping its markup on name-brand products at 14% instead of 25%, greater for other discounters and most supermarkets, and markups of 50% and higher for department shopsFor instance, Costco offered fresh food and grocery costs that were 20–30% less expensive than those of the other supermarket chains, with Walmart being the exception. Product Selection Along with this cheap pricing strategy, Costco also came up with a plan that was centered on choosing products that they called Kirkland Signature goods. This was an important tactic since it allowed the business to choose goods that its clients most urgently required, so constantly ensuring their sales. The corporation also made sure that these goods were of a comparable or higher caliber than those sold under national labels. Given Porter's 5 forces, it is clear that Costco is aware of the industry competition, new players, the essence of supplying power, the customer, and the threat of substitutes. This is why the company uses pricing and product selection to gain a competitive edge against competitors. Growth Strategy The growth strategy for Costco was to open new warehouses both domestically and overseas and to improve sales at its current stores by at least 5% annually. At stores open for at least a year, average annual growth was 10% in fiscal 2011, 6% in fiscal 2013 and 2014, 7% in fiscal 2015, 4% in 2016 and 2017, 7% in 2018, and 6% in 2019. Costco has been aggressive in expanding its geographic reach and opening new warehouses. Analysis and Evaluation Most of these strategies are tremendously effective. For instance, a crucial component of Costco's strategy and the reason for its low prices was keeping operating expenses to an absolute minimum. Costco can offer lower prices and better values by removing nearly all the frills and costs usually associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing, and accounts receivable. This strategy was, of course, first introduced by Jim Sinegal and later reaffirmed by Craig Jelinek. The company maintained a lean organization with very little overhead, allowing it to pass on significant savings to its customers and members. Notably, the company's strategies also brought about cost savings across its dealings. For instance, most warehouses were of a pre-engineered metal design with concrete flooring and little interior decoration because Costco's low prices and wide assortment of products drew customers there in the first place. Floor layouts were created to maximize the...