Case2

Group 1 : David, Faye, Shelly. Fiona

Case 2 : Costco Wholesale Corp.: Mission, Business Model, and Strategy

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

The business model is to generate high sales volumes and rapid inventory turnover by offering members very low price.

It’s an appealing model, because Costco provide an lower price. And the lower price doesn’t come from lower quality or low cost labors. Costco cuts down the price by it’s operation management competitive.

All members will benefit from the management cost down, it will keep the loyalty of it’s members. To keep these members will help the business keep good revenue.

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

Price: Keep price low to members by cap fix margins. It can help to increase the loyalty of members.

Product Selection: Provide limited items and sale in big-container will help cost down the operation cost.

Treasure-Hunt: Provide lower price items with limited time to surprise it’s members.

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.

Jim Sinegal set a clear mission of Costco, and set the strategy of the company.

Sinegal shows his actions to demonstrate the mission, like he spent much time touring stores, and seeing the detail on the first line. Care about the customers and looking into details are showed to the store managers when Sinegal touring a Costco store. He will ask store managers to develop their own strategies following the mission. So he can lead the company to crafting and executing the Costco’s strategy.

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...