Thesis on "Costco Strategy Any Company's Success Depends Entirely"

Thesis 5 pages (1445 words) Sources: 5

[EXCERPT] . . . .

Costco Strategy

Any company's success depends entirely on the strategic direction the company follows. Each type of company requires a different type of strategy. This is why there are so many types of strategic models. There is no recipe for strategic success. Each type of general strategy must be adapted to the company in case. The strategy must be developed in accordance with the business type, the company's size, and the outcomes that are expected to be attained by following the strategy in case.

The strategy also depends on the timeframe allocated for attaining the established objectives. For example, two similar companies activating in the same activity sector, with similar sizes, can follow completely different strategies. This is because one of the companies has set its objectives for short-term and the other has set its objectives for short-term or medium term.

Also the strategy must be flexible, it must allow modifications. This is because the macro environment may change quickly and frequently. All these outside factors influence the company and its objectives, and therefore its strategy.

The strategy must be able to rapidly respond to such changes in order to counteract their negative effects. Also, the strategies for each department of the company must be in accordance with the general strategy that the company follows. Otherwise, the results of the company's activity could be lower than expected or the objectives cannot be attained at all.

Costco Strategy

In order to have a comprehensive strategy, the company must start by formulating a mission statement on which the gene

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ral lines of the strategy will be based. Costco's mission is "to continually provide our members with quality goods and services at the lowest possible prices" (Thompson, 2009). As one may observe, the mission statement reveals the factors on which the company's strategy is built on. These factors are:

Quality of goods and services

Very low prices

Continual serving of the customer

The business model that Costco designed was intended to generate high sales volumes and rapid inventory turnover. In addition to this, the business model used by Costco was designed to provide its customers "low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories" (Thompson, 2009).

As a consequence, Costco currently commercializes the following categories of products: appliances, auto products, baby products, beauty products, bed and bath products, books, CDs and DVDs, computers, decor products, electronics, fashion, floral, food and wine, funeral, furniture, gifts and tickets, hardware, health, housewares, instruments, jewelry, office, outdoor, pets, sports, toys, and games.

The reason behind this type of strategy consists in the fact that the company's managers in charge with developing Costco's strategy considered that rapid inventory turnover would allow Costco to increase its profits and to diminish gross margins in a significant manner compared to its competitors. However, this required other tactics, like:

Volume purchasing

Efficient distribution

Reduced handling of merchandise in no-frills

Self-service warehouse facilities

However, the company's strategy was not based on intuition, even if it may sound very simple to base one's strategy on low costs and high quality. In reality, Costco's strategy is based on a very strong set of principles. The company is very much aware it is not recommended to make any mistakes in any area.

The key principles of Costco's strategy are:

Obeying the law

Taking care of the company's customers

Taking care of the company's employees

Respecting the suppliers Costco works with Rewarding the company's shareholders

Each of these issues is as important as the others. The company cannot function in a healthy manner unless it obeys the law. This shows respect for the authorities and for the company's customers that respect the law themselves. Also, this shows an example for other companies and individuals to follow.

The most important element of the company's activity is represented by its customers. The company is trying to expand its customer base and to induce loyalty more and more in the customers' minds.

The company's employees are also very important. Costco is aware of the fact that its human resource is the most important resource that company could have. In order to have satisfied customers, the company must first have satisfied employees. If the company's employees are satisfied with their work conditions at Costco and with their financial reward, they will treat… READ MORE

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Quoted Instructions for "Costco Strategy Any Company's Success Depends Entirely" Assignment:

“

The textbook: Crafting & Executing Strategy by A. Thompson, AJ Strickland, J Gamble

CASE PAPER ONE INSTRUCTIONS

COSTCO

Introduction

In this course we do an analysis of two cases based on what we have covered up to that point in the texts, material from preceding courses, and based upon whatever supporting and substantiating material you wish to introduce to assist in your analysis. Read them with an open mind and do not try to find a problem where there may not be one. Do not be pre-disposed to assume that something needs to be fixed. These are cases, and not problems to be solved. Read them from the perspective of the material in the text, and do your assessment in those terms and concepts. These cases are provided to illustrate the material, the themes and topics, of their associated chapters.

As a method for yourself try this approach:

first read the case as a short story and get an understanding of what is being described;

second, go back over the case from front to back and jot down short notes about chapter relevant items as they occur (e.g. pg 2, para 3, cf discussion on strategy), and then

last assemble in a logical manner like topic references into a coherent story. Because they are little history stories, the cases do not come with the topics grouped, but the student has to collect and assemble.

ASSIGNMENT

Give a current assessment of the effectiveness of Costco*****s strategy. In your case analysis of Costco (cf. case #1, page C-01 in the text) address the following points:

What are the key elements of the company*****s business model?

Is their financial position sound, and is it successful?

What type of generic strategy is present here, what are the elements that support its implementation, and is it being successfully implemented?

These three points should be the focus of your paper. The case provides ample data to support reasons for conclusions about part b. Feel free to consult and reference outside sources for more information (cf. the guidance on library usage).

Remember your paper should be composed with a good opening paragraph as an introduction and a good summary paragraph as closure. Remember to include a reference page, not counted as part of the page count requirement, for any direct citation material. In addition to citations to your text, you are encouraged to include other source citations to substantiate any assertions you make. Library and web research are encouraged to provide the most current perspectives as things may have changed since the case text was written.

Post this narrative research paper, FIVETO SIX double spaced pages using APA format, not counting pages for References and also a Bibliography(if you use one), as an attachment file into your Assignments Folder. That is not a lot of space, so you will have to marshal your points and evidence carefully. In the business world having to be precise, and succinct is valued, and that*****s part of the learning here *****“ state your case, support your case, and be brief about it!

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