Essay Example on Costco Dominance: Business Model and Strategy

Costco is the largest warehouse chain in the country in which merchandise is sold in bulk quantity at discounted prices to members who pay an annual membership fee. It is also among the largest top retailers in the country. Established in 1976, it currently has more than 700 warehouses located all the world and more than 80 million members and annual revenue exceeding $ 16 billion (Robbins et al., 2018). Costco's dominance on the top position attributes to its business model and strategy; however, with many consumers embracing online shopping, some speculation has arisen of declined sales because of the competition.

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Unlike Wal-Mart and Sam club, Costco's business model focuses upon memberships from customers who renew the memberships and join as well, annually. The excellent treatment offered to their employees, low markups, and limitation on the number of items sold also creates a distinction between them and the companies mentioned above. Making employees feel valued is a key strategy as it's easy for them to give out their best and work towards achieving the company goals and profit margins.

Offering a limited selection of quality products in a wide range of goods to members at low prices generates rapid inventory turnover and high sales volume. Purchasing products from manufacturers in considerable amounts enables them to negotiate for a discount. As a result, they offer the products to customers at a lower price, which is usually not more than 15% above the amount they purchased (Robbins et al., 2018). The approach plays a significant role in making theirs to strategy work of providing quality products to customers at lower prices.

Treating employees well comes with a wide range of benefits in return. Apart from lower employee turnover that saves the company the expenses that accrue from recruiting and training new staff, the company benefits from increased employee productivity and loyalty. The provision of health coverage to employees and the exemplary payment makes the employees feel they are part of the company. Also, the promotion of employees to higher positions from within motivates and boosts their morale. As a result, Costco benefits by having employees who are loyal, hardworking, motivated, and self-driven, which leads to high productivity and also makes it easy to achieve profit margins since everybody is involved in playing their part towards the success of the company.

Costco's involvement in selling cars is a surprise, but with the changing economic trends, the adoption of new merchandise is essential to keep up with consumer needs. Costco Company has always ensured the prices it offers are the lowest, and the products are of high quality. The strategy is, without a doubt, the reason for its success over the years. Selling cars is likely to attract new consumers and thus increasing their membership.

Consumer needs are diversified; therefore, offering various products by Costco helps them attract new customers by providing a guarantee that they will meet the needs of consumers accordingly. In addition, with the increased consumer's confidence with online shopping, offering different products acts as a measure to counteract the competition as the consumers who prefer buying products in person can get whatever they need at Costco.

Conclusion

In conclusion, Costco's success and dominance attribute to their business models and sales strategy. The provision of quality products at low prices attracts many customers. The excellent treatment offered to their employees has also contributed to their high productivity and growth. Lastly, their way of mitigation problems is also impressive, such as providing various products in a bid to counteract online shopping.

Reference

Robbins, S., Coulter, M., DeCenzo, D., & Woods, M. (2018). Management (14th ed.). Pearson