The case notes that Costco’s mission is “bringing the highest quality goods at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethicsâ€¦” and then the mission outlines the code of ethics. The company’s operations clearly stick to this mission statement. This is possible because the mission statement is clear, and it specifically relates to what the company does. It hits upon a number of different elements of the business that essentially define what it is that Costco does.
The second element is that Costco does these things. The strategy of the company is to be a low cost provider, so a lot of what Costco does is related to that. When we examine the mission, we see that Costco is basically framing the low cost strategy against a backdrop of relatively high quality goods, good customer service and solid ethics. These last three things are basically a framing mechanism, however, that explains the parameters of the business. The business itself is still a low cost provider and so most of what Costco does supports that. It utilizes its strong bargaining power with suppliers to get low prices while delivering a reasonable standard of quality.
One of the more interesting aspects of the strategy is the human resources policy. Costco differs from other low cost providers in that it doesn’t try to have a low labor cost, but rather it wants to have low labor turnover, because it believes that the costs associated with turnover are higher than the costs associated with good wages (McArdle, 2013). The result is that Costco has about the same productivity from its workers as other low cost providers do with their low-wage workers. The result is that Costco is able to fulfill more than one aspect of its mission — it can provide low costs with higher service standards, something that other low cost providers struggle with.
The business model for Costco is to offer a cost leadership position (Quick MBA, 2010). There are many aspects of Costco’ business that specifically support this. The first is that it pays its employees a living wage, and this creates a high degree of loyalty. Costco therefore has much lower turnover than many of its peers, and the result is that the company has a higher level of efficiency from its employees, and they provide good customer service for a company with a low cost strategy.
Costco further supports the low cost strategy by offering relatively few SKUs. What this means is that the products that it does offer tend to sell quickly. Costco is therefore able to actually sell goods before it has to pay for them, creating a situation where it can get early payment discounts on goods that it has already sold, something that is of tremendous financial benefit. Further, this means that Costco is able to offer very low prices, which helps it to compete, because in the low cost business having the absolute lowest prices is an essential component of gaining market share.
Another element is the treasure hunting. This serves two purposes. The first is that it actively engages the customers in looking for bargains, which engages them bit more in the shopping process, giving them something of a value-added shopping scenario. Further, it reinforces in the minds of the customers that Costco is a steep discounter with the lowest prices, because they can go looking for these incredible bargains in the Costco store. Finding one incredible bargain is something that customers are more likely to remember than the fact that some items are the same price at Costco as they are anywhere else.
The low cost of the stores is also a key part of the business model. To succeed as a low cost provider, you really have to build the low cost mentality into the corporate culture. Everything from not heating the warehouses to having a CEO that takes relatively little salary gives the impression that Costco is determined to do everything in its power within its ethical framework to deliver on the lowest prices.
3. The Exhibits 1-4 do not tell much about the financial performance of Costco. They indicate that the company is growing still, that it sells a variety of products, that is growing (again), and again that it is growing. So the exhibits tell the same story a few different ways. But growth is not really enough for evaluating financial performance. The financial statements are better for telling that story. The first critical financial statement is the income statement. On the income statement, it shows that top line growth has been quite impressive, going from $71.4 billion in FY2009 to $105 billion in FY2013. Bottom line growth has been more rapid, as Costco has doubled its net income during the same period, even though it didn’t double its revenues (MSN Moneycentral, 2014).
The balance sheet shows steady growth in both assets and liabilities, but equity growth has stagnated. This is probably not a good thing, as it indicates that the company’s leverage has increased despite the steady increase in profitability. Growth appears to be faster than is possible to achieve simply be reinvesting profits, so Costco is increasing its debt in order to finance this growth — there was a spike in long-term debt in FY2013, for instance. However, it is important to understand what extenuating circumstances there might be with respect to the balance sheet and the taking on of this debt. For example, debt is associated with higher risk but debt also comes with a low cost of capital. In recent years, interest rates on debt have been very low, and this might mean that Costco management specifically sought out this higher debt in order to lower its cost of capital. Alternatively, the company might have seen a real opportunity for growth and simply wanted to move fast, and therefore required some financing to make that happen. The overall result might be, therefore, that the increase in debt reflects specific managerial decision-making rather than simply unfavorable performance.
Costco does a great job of linking its mission and strategy with the philosophy and values. The philosophy and values are well-embedded into a number of elements of the mission. For example, the mission talks about ethics at length, outlining the different elements of the company’s ethical philosophy. As result of this, Costco has a very clear sense of its philosophy and its values built right into the mission statement. The mission statement is also closely linked to the strategy, as it essentially describes the strategy.
The result of all this is that Costco has a fairly tight integration of all of these different concepts. The most important thing is that this is not just talk — the actual strategies on the ground are highly aligned with the mission statement and the values of the company. This is especially seen in the customer service emphasis and in the wages paid to the employees, because it was difficult to build those two elements into the low cost business model. However, Costco found a way that is not just lip service, and that is something that is very successful in terms of integrating a number of different values and philosophies into the company’s strategy.
McArdle, M. (2013). Why Wal-mart will never pay like Costco. Bloomberg. Retrieved April 4, 2014 from http://www.bloombergview.com/articles/2013-08-27/why-walmart-will-never-pay-like-costco
MSN Moneycentral. (2014). Costco. Retrieved April 4, 2014 from http://investing.money.msn.com/investments/stock-income-statement/?symbol=cost
QuickMBA. (2010). Porter’s generic strategies. QuickMBA. Retrieved April 4, 2014 from http://www.quickmba.com/strategy/generic.shtml
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more