Costco Wholesale Case Study (Mt4450 Strategic Management)

To have a sense of realism in to the process of business administration and management where I am using and becoming comfortable with the principles and concepts to master the material I was assigned Case Study 1: Costco Wholesale 2008: Mission, Business Model and Strategy. In order to properly apply the information I have learned to complete this assignment I will need to identify Costco’s historical perspective, identify Costco’s current situation, pinpoint Costco’s central issues, and relate my recommended solution and the implementation of my recommendation.

1. The historical perspective of Costco defines the organization’s earlier strategies and structure and identifies the organization’s development and how growth has taken place.

a. Costco’s earlier strategies had three major cornerstones:

1. Low prices: Costco was known for selling top quality national and regional brands at prices consistently below traditional wholesale or retail outlets. A key element in Costco’s strategy to keep prices low to members was to cap the margins on name-brand merchandise at 14% compared to 20 to 50% margins at other discounters and supermarket.

2. Limited product and limited selection: Costco’s merchandising strategy was to provide members with only 4,000 items in an effort to deliberately limit the selection in each product category to fast-selling models, sizes and colors while also creating an environment where many consumable products were sold in big-container, case, carton or multi-pack quantities. Costco also offered a limited number of its own private label brand products, Kirkland Signature, in order to keep prices at about 20% below comparable name-brand items.

3. A “treasure hunt” shopping environment: Even though Costco has a limited product and selection, about one-fourth of Costco’s line of 4,000 products was constantly changing in an effort to appeal to the clientele which also sell out quickly due to the quality, often luxury or high-end items,...