CASE COSTCO STUDY
Question:
1. What is Costco’s business model? Is the company’s business model appealing? Why or
why not?
2. What are the chief elements of Costco’s strategy? How good is the strategy?
3. Do you think Jim Sinegal is an effective CEO? What grades would you give him in
leading the process of crafting and executing Costco’s strategy? What support can you
offer for these grades?
4. How well is Costco performing from a financial perspective? Do some
numbercrunching using the data in case exhibit 1 to support your answer. Use the financial
ratios presented in “A Guide to Case Analysis” and in table 4.1 of the text to help you
diagnose Costco’s financial performance. How does the company compare to Sam’s Club
and BJ’s Wholesale?
5. Does the data in case exhibit 2 indicate that Costco’s expansion outside the United States
is financially successful? Why or why not?
6. Perform a SWOT analysis and complete a strategic group map for Costco. What do
these tell you about the company’s strategy and performance? How well is Costco
performing from a strategic perspective? Does Costco enjoy a competitive advantage over
Sam’s Club? Over BJ’s Wholesale?
7. Does Costco pay its employees too much? Does it make sense for Costco to compensate
its employees so much better than the employees at Wal-Mart or Sam’s Club? Why or why
not?
8. What recommendations would you make to Jim Sinegal regarding the actions that
Costco management needs to take to sustain the company’s growth and improve its
financial performance? My recommendations for the growth and improvement of Costco
would be careful of the domestic markets entered because of the risk of Cannibalism as
shown on sales in 2009.
Answer:
1. What is Costco’s business model? Is the company’s business model appealing?
Why or why not?
Costcos business model is one of rapid inventory turnover and high sale volumes. The
company implemented this model by offering customers national and some private label
brands at low prices. Costco business model is appealing in that it combines the offerings
of low prices with rapid inventory turnover. Because of its inventory turnover, Costco it
able to sell inventory before that inventory payment is due to manufacturers. This allows
Costco to save money from the ability to accept manufacture discounts for early payment.
2. What are the chief elements of Costco’s strategy? How good is the strategy?
Costco chief strategy is offering wide range of products at the lowest possible cost. Costco
