Costco Anaylsis

Topics: Costco, James Sinegal, Term Pages: 3 (869 words) Published: September 6, 2010
1. Do you think Jim Sinegal is an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? What support can you offer for these grades? Refer to Figure 2.1 in Chapter 2 in developing your answers.

I believe that Jim Sinegal is a very effective CEO. His company was the first U.S. company to ever reach 1 billion in sales in less than six years. He exhibited leadership skills and engaged with team members at other Costco Stores. He believed in calling one another on a first name basis and had an informal dress clothes to avoid the typical boss attire. Sinegal did things that most bosses don’t do, and these things allowed him to be an effective leader.

I would give Sinegal an “A’” in strategy. Instead of following the competition, he choose to make prices lower. Most competitors constantly think of ways to increase product prices, but Costco feels that lower prices drive more customers through the door. Although they had the opportunity to make more profit off of higher price margins, Costco kept smaller margins, to keep their prices low. Costco also provided a limited selection of fast selling product, which helped lower cost and also allow them to be more efficient.

Costco’s treasure hunt merchandising instilled a sense of urgency in customers because there was no assurance that the product would be available for long. Allocating ¼ of treasure hunt items allowed for increased the likelihood that each customer would purchase one of these items.

Because Costco’s centers a lot of their business in remaining low cost, they do not spend too much money in advertising. Costco uses the word of mouth advertising to lure more customers in, which is another approach to keep cost low.

Sinegal manages his strategies by ensuring that excellent employees are brought upon his team. He attracts quality employees by ensuring that they are paid well and have a multitude of benefits. After they are brought...
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