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The Analysis of Costco's Business Strategy and Its Main Limitations

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The objective of this paper is to explore the possibilities of a company with a strong corporate culture like Costco’s to survive in the face of the rapidly increasing globalization using its current business approach. On the off chance that an organization follows a globalization approach, product design and promotional approaches are universally planned. This system depends on the supposition that there is a solitary worldwide interest for some shoppers and modern items. The hypothesis is that individuals wherever need to buy similar products and act in a similar way (Daft, 2017, p. 270).

The company’s dedication to its employees and customers, rapid and positive response to complaints and its devotion to societal development is a model worthy of emulation. This case will avail managers a better understanding of the complexities of business in a global environment and how to maximize profit. Another unique take from this case is the planning and strategy formulation that would make organizations stand out from their competitors.

Analysis

In spite of the many advances Costco made to put the company in a decent position, it faces a host of challenges ranging from non-disclosure of management job opportunities to prospective applicants. The company may have valid reasons for not doing so, but the public may start thinking that the lack of notification for such openings was to allow the company bring in their preferred candidates regardless of their experience or qualification. Costco is also faced with the issue of an unfair working environment for people of color, women, and people in the minority from reaching top management positions in the company. In a bit to quell these suspicions, Costco took its job postings online for people to see. Also, the recruitment process at Costco is now fully computerized which I believe is a bid to limit human involvement in the recruitment process, so they don’t exploit the process for their selfish gain.

Costco also grappled with a problem of global mindset when it showed no consideration for the culture of the Mexican people when it proposed to build a parking lot on land which housed a Casino that was in a state of disrepair in Cuernavaca, Mexico. The disputed land had historical importance and cultural significance to the people of Cuernavaca (Daft, 2017, p. 261). A global mindset is a blend of tolerance and responsiveness to cultural and business differences with a desire to incorporate diversity across the globe. Global learning is an ever-developing and evolving process based on cognitive feedback mechanisms that facilitate the quest for knowledge that extends and refines human mental structures (Lovvorn & Chen, 2011, p. 276).

Also given that must multinational spend huge sums of money on promotions and advertising to attract prospective customers, and penetrate new markets, the situation at Costco is entirely different. Sinegal who was the founder of Costco told an ABC News interviewer that the company invests little or no resources towards promotions, that over 100 thousand willing employees promote the company to its friends and neighbors. No doubt the employee efforts towards advertising the company has brought good fortune to the company in contrast to its competitors like Amazon and Walmart, but could Costco do more by budgeting money to have advertising companies run its promotions? That remains to be seen.

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Integration

Every business needs a working strategy. These strategies include sales strategy, marketing strategy, human resource management strategy, etc. For Costco, the rapid growth of the company can be attributed to an overall effective management strategy. The specification in strategic planning is necessary for departments to narrow down their objectives, control and manage risks, encourage and encourage the company to adopt a marketing strategy

Unarguably, word-of-mouth is the oldest and most common means of advertising. With over 140000 employees around the state, Costco is the perfect example of a brand that sells itself. Backed by its good customer relations and enthusiastic employees, the CEO has every reason to brag. Currently, the organization has no current marketing strategy. A marketing strategy will not only enable them to stay abreast of current trends in the business world, but it will also help them gain and maintain a competitive advantage in any economy. Shoppers are more interested in online transactions. Costco can increase customer base by creating awareness both online and offline.

It may seem admirable that employees created a Costco emergency brigade but putting the lives of employees at risk irrespective of how reasonable it may have been at the time it is as a result of negligence. Apparently, Costco is in need of a Risk Management strategy. Risk management is the probability of inconsistencies that can cause harm. Risk is an occurrence that varies from what is planned, but this variance is only apparent if it results in a loss (Kasidi, 2010). The strategy Costco should adopt is one that will put a team in place to manage emergencies of that nature. Considering that they have goods inside the warehouse, an emergency team should be on and around the location in case of any fire outbreak or disaster.

Conclusion

Costco’s business strategy of zero financial commitment to adverts and promotions and money saved from that channeled into decent employee wage bill and low prices for its merchandise has seen the company go head to head with other heavyweights in the industry.

Planning is an essential tool in any management process. A plan can only be known as strategic if it targets the goals of the organization whether short term or long-term goals. Planning pays attention to details. It manipulates to a great advantage all the factors that are responsible for achieving organizational goals. One major factor managers consider while planning is the effect their plan may have on the overall performance of the staff. Careful planning helps to reduce the risk of failure. Take for example the Costco situation, they could have lost employees as a result of negligence because they failed to plan ahead and prepare adequately for such an emergency. A good plan takes all angles into account.

My key takes from this case is that going forward, I will incorporate effective planning and risk management strategies to preempt the incidence of mishaps in any organization I find myself. Also, in spite of the successes that Costco recorded with its staff being the only people that promoted the business, I still believe the company stands to benefit from an all-out advert campaign that will promote its business to people that its staff cannot reach. Marketing is integral even though it comes a huge cost. Companies would make up for the money spent.

References

  1. Daft, R. L. (2017). Management (13th ed.). Boston, MA: Cengage Learning.
  2. DeRosa, D. M., & Lepsinger, R. (2010). Virtual team success: A practical guide for working and leading from a distance. San Francisco, CA: Jossey-Bass.
  3. Kasidi. (2010). Risk Management. Jakarta: Ghalia Indonesia.
  4. Lovvorn, S., & Chen, J.-S. (2011). Developing a Global Mindset: The Relationship between an International Assignment and Cultural Intelligence. International Journal of Business and Social Science, 276.

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The Analysis of Costco’s Business Strategy and Its Main Limitations. (2022, August 25). Edubirdie. Retrieved February 2, 2023, from https://edubirdie.com/examples/the-analysis-of-costcos-business-strategy-and-its-main-limitations/
“The Analysis of Costco’s Business Strategy and Its Main Limitations.” Edubirdie, 25 Aug. 2022, edubirdie.com/examples/the-analysis-of-costcos-business-strategy-and-its-main-limitations/
The Analysis of Costco’s Business Strategy and Its Main Limitations. [online]. Available at: <https://edubirdie.com/examples/the-analysis-of-costcos-business-strategy-and-its-main-limitations/> [Accessed 2 Feb. 2023].
The Analysis of Costco’s Business Strategy and Its Main Limitations [Internet]. Edubirdie. 2022 Aug 25 [cited 2023 Feb 2]. Available from: https://edubirdie.com/examples/the-analysis-of-costcos-business-strategy-and-its-main-limitations/
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