Question Case

CASE

2

Costco Wholesale Corp.: Mission,

Business Model, and Strategy

ASSIGNMENT QUESTIONS

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

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

3. Do you think Jim Sinegal is 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.

4. How well is Costco performing from a financial perspective? Do some number-crunching using the data in

case Exhibit 1 to support your answer. Use the financial ratios presented in Table 4.1 of Chapter 4 (pages

104-105) to help you diagnose Costco’s financial performance.

5. Based on the data in case Exhibits 1 and 4, is Costco’s financial performance superior to that at Sam’s Club

and BJ’s Wholesale?

6. Does the data in case Exhibit 2 indicate that Costco’s expansion outside the U.S. is financially successful?

Why or why not?

7. How well is Costco performing from a strategic perspective? Does Costco enjoy a competitive advantage

over Sam’s Club? Over BJ’s Wholesale? If so, what is the nature of its competitive advantage? Does Costco

have a winning strategy? Why or why not?

8. Are Costco’s prices too low? Why or why not?

9. Does Costco pay its employees too much? Does it make sense for Costco to compensate its employees so

much better than the employees at Wal-Mart/Sam’s Club? Why or why not?

10. What recommendations would you make to Jim Sinegal regarding the actions that Costco management

needs to take to sustain the company’s growth and improve its financial performance?