Costco Wholesale in 2012: Mission, Business Model, and Strategy

1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Costco’s business model is to generate high sales volume and rapid inventory turnover by offering fee-paying members attractively low prices on limited selection of national branded and select private-label products in wide range of merchandise categories (Thompson, 2014).

I think that the business model is appealing because it does not hide anything. It clearly states what the company is in business to do, which is to generate as much profit for the company while giving the customers the best product at the best price.

2. What are the chief elements of Costco’s strategy? How good is the strategy?

The key elements of Costco’s strategy is to offer ultra-low prices, offering a limited selection of nationally branded and private-label products, a treasure hunt shopping environment, strong emphasis on low operating costs, and a geographic expansion (Thompson, 2014).

I believe that their strategy is pretty good. Costco’s keeps customers coming back again and again by offering low prices. They carry a much lower stock of brand-name products than other stores which allows them to drop the product price even more than other superstores. Costco only carries about 3,600 products in their stores and about 20 to 25 percent of these products can only be bought in the stores at certain times (Thompson, 2014). This is what the Costco Company calls their treasure-hunt merchandising and can help entice customers to come back over and over again.

3. Do you think Jim Sinegal has been an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? What support can you offer for these grades? Refer to Figure 2.1 in Chapter 2 in developing your answers.

I think Jim Sinegal is an effective CEO. He has a helped the Costco Corporation for over 29 years which helped them to be one of the top three largest retailers in the United...