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What Is the Costco Business Model? Is It Appealing?

Autor:   •  February 12, 2018  •  Case Study  •  1,536 Words (7 Pages)  •  100 Views

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What is the Costco business model? IS it appealing?

The main aspects of costco's business model are derived from offering its fee paying members the ability to purchase from a limited section at very low prices compared to that of the opposition thus generating high sales volume coupled with rapid turnover. The fast turnover also allows for Costco to pay its vendors sooner thus leading to early payment discounts thus saving even more money. In my opinion I feel that this is a very appealing model however it does come with very high entry barriers due to the high initial capital investment that I feel needs to be in place to hold you through the initial phase of acquiring a large enough customer base to outweigh all operating costs.

What are the chief elements of costco's strategy? How good is the strategy?

Costco has four key points that factor into its strategies which range from maintaining extremely low prices, expanding its geographical reach with more store locations, having a “treasure hunt” shopping environment, and its strong emphasis on low operating costs while maintaining a limited selection of both private label and national banded products. In regards to how good the strategy actually is I personally think that it is extremely successful in regards to being able to foster a large and loyal consumer base while also encouraging new potential consumers to enter its influence via the constant expansion of its network reach.

Do you think Jim was an effective CEO? How well is Craig as a successor?

I feel that Jim was extremely effective as a CEO especially for the initial growth stage that Costco was in when he started. Jim was very meticulous and held a very high standard for each and every location. He also made sure to foster a very warm and friendly culture within the stores even stating that “we want to be a company that’s on a first name basis with everyone”. Then when u factor in the merchandising expertise that he possessed and how involved he was in trying to best optimize sales I don’t think I could give him any less than an A. Both the sales and consistent growth while he was there both help to solidify that letter grade. I feel as though Craig is doing very well as a successor and allowing for the company to flourish however I feel this is partly due to the fact that Jim left all the groundwork for him. As long as he continues to monitor trends and developments and not becoming complacent with executing new possible strategies Costco will continue to flourish.

What core values did Jim stress?

The most important values that I feel Jim stressed in the Costco stores were that of customer engagement and familiarity while also encouraging almost familial bonds with the employees of each Costco. He wanted a cohesive unit that worked together


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