Costco Wholesale Corp: Mission, Business Model, and Strategy

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Figure 2.1. shows that total revenue and operating income at Costco from 2003 to 2006 is increasing, and the company has a steady expansion. These numbers can prove Costco's success and Jim Sinegal, CEO and cofounder, does a great job in the company. Sinegal saves on operation costs in order to provide low price while still keeping high quality products for customers such as constructing warehouses with inexpensive concrete floors, providing each product with only one size, carrying less variety than other competitors to keep inventory costs down, as well as offering customer boxes for carrying instead of plastic bags. Sinegal also attracts customers to spend more than they may anticipate by offering treasure-hunt merchandising with limited quantity. Low prices strategy usually comes from saving wages and benefits for employees. However, Sinegal offers the employees good health care plan and compensation because he believes this way would increase employee’s performance and decrease employee turnover. In addition, most Costco’s managers and vice presidents had started from entry-level jobs. They are familiar with Costco’s operation and know how to better manage the employees and business. On the other hand, Sinegal also brings five principles and a philosophy into Costco’s corporate culture and the manner in which the company operates. Based on the statements above, I think that Sinegal operates Costco’s business very well, not only in its business model and strategies but also in the way he treats and respects the employees. He also spends much of his time visiting one Costco store to another, he even picks up the phone and answers customer’s questions. In my opinion, I would grade him an A because he does everything he is supposed to do as CEO and better.
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