Costco's Study Case Essay

Submitted By annajenkins
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Costco’s main pricing strategy aims at selling top-quality merchandise bellow the prices of other retailers and wholesalers. The product is of good to excellent quality and often supplied by name brand manufacturers. How far is Costco willing to go to deliver a “real value” while charging minimal price? Costco has been faced with lawsuits for selling counterfeit merchandise and instances of selling merchandise from unauthorized sellers, so called gray market merchandise. Charges such as trademark infringement, dilution, and counterfeiting, unfair competition, false and deceptive merchandising practices recently brought up by Tiffany and Co. could severely damage Costco’s reputation and weaken its loyal membership customer base. It is crucial that company implements better practices that will ensure that products that they sell to public are genuine and promised value delivered to their consumer is in fact real. Costco’s main competitive edge lies in selling high quality and brand merchandise for prices that are almost unbeatable. If the consumer isn’t getting the promised value, possible loss of membership base is to be expected.
In today’s age of corporate social responsibility becoming a culture of any successful company, being environmentally responsible is vital to company’s existence. Costco has reached settlement with more than dozen California counties for violating safe environmental practices between years 2007 – 2012 regarding the safe storage, handling and disposal of hazardous materials including pharmaceutical waste. Costco reacted promptly in order to eliminate the issue and to repair costs that have occurred from such activities. Costco also agreed to sponsor funds for environmental projects. Ethical behavior and community citizenship need to be implemented in Costco’s strategies in order to sustain its leadership position in a market. Certain market share could be lost to competitors such as Bj’s Wholesale that has been actively seeking involvement in actions to protect the environment and excessive charity work.
In a shadow of Walmart’s discrimination case, Costco has also been challenged with ongoing gender suit including about 1000 female employees alleging discrimination. Even though the case is under the review, many believe it has bigger chance to succeed at court that Walmart’s discrimination case. One of the reasons for that is the fact that the case is less general and it doesn’t rely on at-guilt-statistical evidence. The decisions on promotions are made at corporate headquarters at Costco; the top management signs off on all general manager and assistant manager promotions. Unlike Wal-Mart, which challenged decisions on promotion across a wide variety of job positions, the Costco suit involves only the positions of general manager and assistant general manager, which is a much narrower range. Costco’s biggest strength is in fact the high employee retention and excessive promotion within. Human resource issues such as the one mentioned above, puts company’s intangible assets in jeopardy and could possibly ruin company’s public image.
Based on our extensive research, considering the above current challenges and other macro environmental factors, we predict that Costco will retain its leadership position on a market in the next 5 years. Due to its brand recognition, superior market positioning and well established distribution and warehouse channels Costco can successfully sustain growth and leverage its strengths for future success. Costco holds a distinct competence in delivering the top value for the lowest price margin possible, competence that is appreciated by its strong membership base. Costco also holds the highest membership retention rate at a whopping 86%.When it comes to the weakest out of the three companies researched, we predict that Sam’s will be the weakest one in 5 years. Sam’s Club has recently closed at least 10 locations for underperformance. Bj’s wholesale appears to be very
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