Costco Wholesale Corporation known for their unique business style, it’s an American membership-only wholesale club that provide a wide selection of merchandise. They are currently the largest membership-only warehouse chain in the world as of 2018. Costco has an excellent loyal customer base as well as happy and dedicated employees. According to their website Costco.com, they were named one of three best companies to work for by Washington CEO magazine. They are also not so far behind from Walmart in the retail business, they are 2nd largest in the retail business behind Walmart and 3rd in the U.S.
Costco was founded in 1983 and their headquarters are in Issaquah, Washington. Costco operates internationally in several countries, but their majority business operates in North America as their more than 70% sales come from the U.S and Canada. Costco doesn’t have as much location as Walmart, as of 2018 they have 762 locations. So, what does Costco offer to customers?
According to Costco.com “Costco is a membership warehouse club, dedicated to bringing our members the best possible prices on quality brand-name merchandise. With hundreds of locations worldwide, Costco provides a wide selection of merchandise, plus the convenience of specialty departments and exclusive member services, all designed to make your shopping experience a pleasurable one.”
Customers need a membership to buy from Costco, general membership at Costco costs $60 USD per year, and there is also an exclusive $120 USD membership per year too. Since their establishment in 1983, they grow as a major business today, leading company in their business style category. Costco currently has over 90 million loyal members, so they will make money even if they don’t sell anything.
Costco was founded by Jeffrey Brotman and James Sinegal. After serving so many years as CEO of Costco James Sinegal step down in 2011 and succeeded by his long-term colleague W. Craig Jelinek. Jelinek is current CEO of Costco. Sinegal continued to serve as company advisor and Director until recently retired from the board of director. Business Development of Costco: sense with all their senses in every Costco Wholesale Warehouse experience.
The mission statement of Costco is to continually provide their members with quality goods and services at the lowest possible prices. Achieve their mission to conduct their business with the following Code of Ethics in mind:
- Obey the law
- Take care of members
- Take care of employees
- Respect vendors
Costco’s mission statements show that they are focusing on quality at a cheap price as their selling point. The simple formula Costco’s CEO following since the beginning, “sell it cheap”. They continue doing it for a very long time successfully. Since other retailer struggling with their business model to fight Amazon, Costco managed to keep their sales in the right direction. A financial writer Daniel B. Kline writes in his article, it has been a good run for Costco that shows no signs of slowing down even as other retailers feel the heat from Amazon.
Costco CEO Craig Jelinek is not surprised by his chain’s success. He has been with the company for over 30 years and in that time has seen a simple recipe that has served the chain through all sorts of retail trends. Costco’s CEO Jelinek explained in a television interview with consumer advocate Clark Howard that the warehouse club chain has carved out its own place in global retail by sticking to one strategy. Costco, he said, keeps its overhead low, which lets the company not have to mark up products as much as other stores in order to cover expenses (and make a profit). ‘
All you see is merchandise,’ Jelinek told Howard. ‘That’s what we do; we buy and sell merchandise. The floors, it’s not what they’re made from, it’s whether they’re clean. You know there’s cost to marble, there’s cost to mannequins, there are all sorts of costs of parts of the business.’ The warehouse club also has rules for how much it marks up any item on its bare-bones, warehouse-style shelves. The company has a 15% ceiling for markups, but the CEO said he preferred to keep it to 14%.
In order to do that the chain has to keep its sales volume high. ‘You buy quality merchandise at a very low price, keep your costs down,’ the CEO said, ‘but not on the backs of your employees.’ The chain, which pays above-average retail salaries, has a philosophy that keeping workers for longer makes them more efficient. Costco also keeps pricing down by having relatively few staff people on the floor. That’s made possible partly by the ones it does have being experienced and partly by using a store setup that limits the need to help customers. With a very effective business model, Costco shares have risen to 77% over a few years, at the same time the shares of Walmart and Target have gained about 22% and 6%, respectively.
For the 24-weeks ended July 18, Costco’s U.S. same-store sales increased 8.6%. Membership fees were up 11%. In the era of Amazon Costco managed to keep their business steadier than any other retail business.
The Structure, the HR and the Culture of Costco: The structure is a very important and critical in an organization. According to “Reframing Organization” a highly developed organizational structure is a clear strategy, focus on the mission, well-defined roles, and top-down coordination. Costco Wholesale Corporation’s organizational structure is based on the company’s current operations and locations.
As the biggest membership warehouse club chain in America, Costco Wholesale has designed its structure to ensure successful management of its business in the U.S. and overseas. However, Costco must change its organizational structure over time to suit its expanding global operations. Costco operates on three structures that are divisional structure, functional structure, and matrix structure that provide best frames to operate. The divisional organizational structure departmentalizes each unit, but they act independently and report to the head unit. The functional organizational structure uses different functions of the organization.
The matrix organizational structure uses dual reporting managers, one for the department and one from the division, to report to the head supervisor. Costco’s divisional structures operation nationwide divided into three division that are Southeast, Northern-Midwest, and Eastern. Those division supervised by an Executive Vice President. Those divisions have broken in to further divisions and there are pyramid structure of Senior Vice President, District Vice President, General Manager, Assistant Manager and subordinates.
Pyramid structure of the company makes it very stable with a broad base and chain of command. Costco’s organizational structure observes four business ethics; obeying the law, taking care of employees, respecting its employees and taking care of its members. There is a belief that if all this is observed, then their goal of rewarding their
