Costco Wholesale Corp. in $2020$: Mission, Business Model, and Strategy

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Costco Wholesale Corp. in $2020$: Mission, Business Model, and Strategy

In this case, you$$ll explore co$-$founder and former CEO Jim Sinegal$$s style of managing, his values and business principles, the company$$s clever and innovative business model, the chief elements of its business strategy, and the company$$s financial performance.

Before completing these exercises, be sure to read the Costco case.

$2.$ What are the chief elements of Costco$$s strategy?

What are the chief elements of Costco$$s strategy? How good is the strategy?

Select $$yes$$ for those statements below that are accurate and choose $$no$$ for those that are not.

The cornerstones of Costco$$s strategy are low prices, a limited product line and limited selection, a $$treasure hunt$$ shopping environment, strong emphasis on low operating costs, and ongoing expansion of its geographic network of store locations.

Yes

Costco has steadfastly and successfully pursued a low$-$cost leader strategy.

Yes

Costco was known for selling top quality national and regional brands at prices consistently below traditional wholesale or retail outlets.

Yes

Costco has steadfastly and successfully pursued a differentiation strategy.

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A key element of Costco$$s strategy to keep prices low to members was to cap the margins on brand name merchandise at $14$ percent.

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While Costco$$s product lines consisted of approximately $4000$ active items, some $40$ percent of its product offerings were constantly changing. Costco$$s merchandise buyers were continuously making one$-$time purchases of items that would appeal to the company$$s clientele and that would sell out quickly.

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Almost $100$ million cardholders were entitled to shop at Costco as of June $2020$; in fiscal $2019,$ membership fees generated $$3\mathrm{.}35$ billion in revenues for the company.

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Costco$$s growth strategy was to increase sales at existing stores by $5$ percent or more annually and to open additional warehouses, both domestically and internationally.

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Average annual growth at stores open at least a year was $10$ percent in fiscal $2011,6$ percent in both fiscal $2013$ and $2014,7$ percent in fiscal $2015,$ and $4$ percent in $2016$ and $2017.$

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Costco has steadfastly and successfully pursued a best$-$cost strategy.

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Costco strategy are high$-$priced items, a limited product line, and a strong emphasis on low operating costs.

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