Costco Wholesale Corp.: Case Study
1. What is Costcoʼs business model? Is the companyʼs business model appealing? Why or why not. 1.1. The companyʼs business model was “to generate high sales volumes and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories.” As a consumer this is a attractive business model because it saves money for the people purchasing while maintaining a strong business and not having to maintain capital. 2. What are the chief elements of Costcoʼs strategy? How good is the strategy? 2.1. The chief elements of Costcoʼs strategy is to offer members low prices of limited selection of nationally branded and selected private label products offered in a wide variety of categories resulting in rapid turnover. Another element of their strategy is to create a self service with proﬁcient distribution system and to reduced man-handling. Both of these strategies are good because they cater to consumers needs, proﬁt the business, help keep a low gross margin, and stay ahead of competitors. 3. Do you think Jim Sinegal is and effective CEO? What grades would you give him in leading the process of crafting and executing Costcoʼs strategy? What support can you offer for these grades? 3.1. I believe Jim Sinegal is a effective CEO and I believe without him in the company Costco would not be in the positive place they are now in. Sinegal has an objective for the company (rapid turnover) and he takes action to make business run effectively to get results. He has gotten consumers to purchase a wide variety of brands and products at all ranges of prices such as 1 million pumpkin pies during Thanksgiving week in 2007, gasoline sales of 4.6 billion in 2007, and 40 rotisserie chickens in 2008. Without the 232,000 members and growing, Costco would not be the go-to store for last minute and holiday needs resulting in the average bill...
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