Case 2 - Costco Wholesale.docx

Costco Wholesale (4th March 2019) Diversification – Costco has more than one business, but in the same area or building (related diversification) Integration Strategy: the business is also selling products using its own brand. Costco buys product from suppliers and put their labels, means that they don’t have to pay more for the production (this is not outsourcing). Strategic Alliances: partnerships with other business Industry: group of companies that produce the same products. Corporate strategy: to manage more than one business (multi-businesses firm) Business strategy: to compete in the market/industry Functional strategy: to support the competition in the market/industry Agenda: executives need to simplify the complexity of the reality. Characteristics of Warehouses:     

Entry barrier is high, needs a lot of capitals (working capital and capital expenditure) Focusing on B-to-B (large quantities) but they also sell product to customers in small quantities (households and end users) Threats: new business model that change the value chain – online retailers Highly competitive Price sensitivity

The employees have the equal opportunity to the higher level in condition that they know the basic of the business. Therefore, the employee turnover is low, because they receive good benefits. The implication is high cost of recruitment and training. Sinegal: pay attention to make employees and customers happy. Costco doesn’t explain its vision explicitly, but we can see it clearly from what drives them (mission). Why there is no vision? Because the founder is also the CEO. The majority of stockholders also the CEO. It’s difficult to copy Costco, because each store is part of one system. If you can afford to buy one store, it means nothing. Costco has bargaining power towards its suppliers.