Sam's Club and Costco

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Costco 1

Tiffin University

MBA Graduate Program

MGT-622 Section 90

Costco Wholesale in 2008: Mission, Business Model, and Strategy

Professor Lillian Schumacher

Darrick Beckwith

January 30, 2011

Costco 2

Costco Wholesale in 2008: Mission, Business Model, and Strategy

What struck you as positive and/ or negatives? Were there certain strategic elements that were particularly insightful? Were there any glaring weaknesses that could jeopardize their success?
There are many positives that can be drawn from the way that Costco runs and controls its business. Costco’s motto is “To continuously provide our members with quality goods and services at the lowest possible prices” (Thompson, Strickland, Gamble, 2010). They have stuck to this mantra by providing affordable memberships to its customers, and affordable pricing of its merchandise. Costco’s strategy of low pricing and limited product line and selection made Costco successful by keeping their margins below their competitors; this is a positive in that it will draw more customers and more accounts for the growth and prosperity of the business. Costco’s limited product line and selection is also a positive because unlike it competitors, Costco offers efficiency in its sale process and makes it easier for the business to be managed. Sinegal stated that “If you have ten customers in to buy Advil, how many are not going to but any because you just have one size? Maybe one or two, we refer to that as the intelligent loss of sales” (Thompson, Strickland, Gamble, 2010). Another positive is Costco’s approach to treasure-hunt shopping. Costco tries to intrigue its customers by creating a sense of urgency with certain products that are high-end and that the company knows will sell-out quickly. Although these items a lot of times are higher priced, they still are reasonably lower than the average department store or its membership warehouse competitors. The only negative would be...
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