Costco Case

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MGMT 499-51 Case Studies in Strategic Management
1. Are Costco's prices too low? Why or why not?
Costo’s prices are not too low because one of their business strategy is built on low pricing. In order for Costo to continue to be in the business of wholesale and warehouse club, they need to have a strategy and sustainable competitive advantage. Every business understands that customer’s needs and wants for goods have a cordial relationship to price. In line with Costco’s philosophy, in order to keep members coming in to shop, they need to keep wowing them with low prices. We should not forget that there are other competitions in warehouse club business and in order for Costco to stay above them and remain competitive; they need to import one of the most important element of marketing mix, price, which will ultimately lead to more success in their organization. This low pricing has made the company experience high sales volume and rapid inventory turnover. The advantage of this is that rather than the company maintaining a huge working or operating capital, they could invest the capital in another area to grow the company. Maintaining a large operating capital can tie up a company’s financial resources, which can affect the growth of a company.

2. Does Costco pay its employees too much? Does it make sense for Costco to compensate its employees so much better than the employees at Wal-Mart/Sam's Club? Why or why not?
Costco does not pay its employee too much. It does make sense for Costco to compensate its employee so much better than Wal-Mart/Sam’s Club. Good compensation for employees is another business strategy that Costco has employed in order to be set apart from their rivals and also to be able to win a sustainable competitive advantage. It makes business sense that the company will get better productivity from the employees. Also bonuses and benefit packages are also the reasons why people chose the places the work at. A work place that has good...
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