Suppliers Relation

26

Academy of Management Perspectives

August

Decency Means More than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club

Wayne F. Cascio*

Executive Overview

Wal-Mart’s emphasis on “Always low prices. Always” has made it the largest retail operation in history. However, this unrelenting mission has also created a way of doing business that draws substantial criticism regarding the company’s employment practices, relationships with suppliers, and the company’s impact on local economies. This paper focuses on a company that delivers low prices to consumers, but in a fundamentally different way than its competitor, Wal-Mart. That company is warehouse-retailer Costco. In the following sections we will begin by providing some background on the company, including its history, its business model, its ethical principles, core beliefs, and values. Then we will consider some typical Wall Street analysts’ assessments of this approach, followed by a systematic comparison of the financial performance of Costco with that of Sam’s Club, a warehouse retailer that is part of Wal-Mart.

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o be sure, Wal-Mart wields its awesome power for just one purpose: to bring the lowest possible prices to its customers. Sam Walton, affectionately known as “Mr. Sam” by Wal-Mart associates, embodied a number of admirable values that he instilled in the company he founded: hard work, discipline, modesty, unpretentiousness, and frugality. By all accounts he also wanted his employees to be motivated, inspired, and happy to work for Wal-Mart. At the same time, however, he was driven, tireless, and determined to drive a hard bargain (Walton, 1992). His brilliance lay in his ability to execute a singularly powerful idea: Sell stuff that people need every day, just a little cheaper than everyone else, sell it at that low price all the time, and customers will flock to you. Wal-Mart’s mission is found as a slogan printed on every Wal-Mart bag: “Always low prices....