Case 1 Costco
Costco Wholesale in 2012: Mission, Business Model, and Strategy
Dian Pertiwi Sulistianingtyas
Faculty of Economics and Business
Universitas Gadjah Mada
Jim Sinegal, co-founder and CEO of Costco Wholesale that was founded in 1983 has been able to completely driving the company in its 29-year as the American giant retailer. Costco Wholesale, a first ever U.S company to reach $1 billion in sales less than six years, had a total of 598 warehouses in 40 states and Puerto Rico (433 locations), Canada (82 locations), the United Kingdom (22 locations), east Asia (26 locations, some trough a 55 percent-owned subsidiary), Australia (3 locations), and Mexico (32 locations, trough a 50 percent-owned joint venture). In fiscal 2011, Costco’s warehouses generated sales exceeding $200 million annually while mostly the average annual sales per store is $146 million. Four stores had sales exceeding $300 million, including one that had more than $400 million in sales. Costco now become the third largest retailer in the United States, the seventh largest retailer in the world, and the clear leader of the discount warehouse and wholesale club segment of the North American retailing industry.
The company’s mission is “to continually provide our members with quality goods and services at the lowest possible prices”. However, the executives trio of Costco adding more broaden view on its mission by including employees, suppliers, shareholders, citizens, and the environment as an important part to be treated well.
The centerpiece of Costco’s business model allows it to have high sales volume and rapid inventory turnover. Thus, it enables Costco to operate profitability at low gross margins. As the result, the margins can only covered all operating expenses and generated only a modest contribution to operating profits. Membership fees help the company to maintain the positive level of