The paper "The Mission Business Model and Strategy at Costco Wholesale Corporation" is a wonderful example of a Management Case Study. The wholesale club membership in the United States has been the new trend ever since it was introduced in the second half of the 20th century. The level of competition and strategic management plans by the various players in the industry reveal the extent to which the level of industrial maturity has reached as far as wholesaling and retailing is concerned. The limited number of players in the wholesale club industry is the main reason behind the heightened stiff competition.
This is mainly because of the requirements and obligations that one has to meet in order to qualify as a credible wholesaler. Costco Wholesale Corporation, Sam’ s Club and BJ’ s Wholesale are three of the few wholesale companies that offer membership opportunities to their customers as a move to foster brand loyalty and customer loyalty. This case study seeks to shed some light on the business model, mission and strategy at Costco and how Jim Sinegal, the company C. E.O, has helped in enhancing the overall performance of the company.
The study will also compare and contrast the performance of Costco with that of Sam’ s Club and BJ’ s Wholesale. Question 1: The Company's Business Model Costco Wholesale Corporation is an established firm with an overall experience that dates back all the way to the late 1970s (Courtemanche & Carden, 2014). The company is headed by Its long-term serving C. E.O Jim Sinegal, who is a strong believer in pre-conceived business frameworks, which, he believes are a great avenue for long term business success.
The driving forces that can actually be considered as the pillars of success at Costco are; the mission, the business model and the company's strategy. The business model at Costco focuses on the relationship with the members as well as the effectiveness as evidenced by the company's rapid inventory turnover and the high volumes of sales. This business model that focuses on the consumers at the expense of profit prospects is one of the main reasons the company is ranked one of the best in the industry. Furthermore, it is pursuant to the goals in the company's mission which is to become a corporate citizen, not only locally but also at the global scope.
This business model is highly appealing as evidenced by the returns experienced by Costco Wholesale Corporation. The company benefits from the advantages that come with rapid inventory turnover and high sales volumes. Question 2: The Elements of the Strategy The main elements of Costco's strategy are pricing, product selection, treasure hunt merchandising and low-cost emphasis. The pricing strategy is a key element not only for Costco but also for any other company that seeks to overcome the rivalry of its competitors.
In the case of Costco, it was important for it to minimize the irrelevant expenses in order to realize low overhead costs, which would, in turn, make it possible for the company to charge consumer-friendly prices to its products. Through pricing, Costco is able to remain afloat by out-competing its rivals such as supermarkets, departmental stores, and retail stores. Product selection is another element in which the company categorizes its products in such a way that it reduces the expenses that come with managing a wide variety of product categories.
The company is willing to attend to a limited section of its market in order to save on significant costs. This goes a long way in lowering the overhead costs, which give the company an upper hand as far as competition is concerned. Treasure hunt merchandising is where the company sells high-end products that are more appealing to the customers and are considered to be high budget products. These products are capable of raising the company's revenue in the event of low consumer turnout (Courtemanche & Carden, 2014).
Through treasure hunt merchandising, Costco is able to stand out as a one-stop-shop among the rest of its competitors. The other indispensable element of Costco's strategy is the emphasis laid on low prices. This is one of the most important strategies of the company since it is through low operational and overhead costs that Costco is able to offer unbeatable prices, which gives the company a competitive edge over the rest.
ReferencesCourtemanche, C., & Carden, A. (2014). Competing With Costco And Sam's Club: Warehouse Club Entry And Grocery Prices. Southern Economic Journal, 80(3), 565-585.