Case Application 2 Chapter 10

A Simple Strategy at Costco

1. How is Costco’s business model different from other retailers such as Walmart? Why do
you think Costco’s strategy works?
Costco manages a membership-based system in which customers pay an annual fee to access its
stores. This model helps customers to be more loyal and focuses on a differentiation strategy. Also,
Top managers shape Costco's organizational culture and facilitate change management efforts to
adapt to evolving market conditions. They encourage innovation, collaboration, and continuous
improvement. According to changing situations, they create strategic plans. That is why, Costco is
the best example of a strategic management process. It will be explained step by step.

Firstly, Costco cares about the external environment. The external environment is playing a critical
role. That's why Costco has analyzed the external environment in a good way. It clarifies trends, and
other retail stores’ approaches such as Walmart, Amazon, or Save on Foods. According to its
analysis, it may create a strategy to look beyond and top managers in Costco set the goals to achieve
the strategy.

Secondly, Costco conducted an internal analysis while making an analysis of the external
environment. Costco has been successful thanks to a specific plan and startup by analyzing its own
capacity and what it can do. And how did it achieve this success? It has revealed its own strong
sides. Its important position in the field of supply chain, customer loyalty, and purchasing power
have made its success inevitable.

Thirdly, Costco applies its methods by investing in infrastructure such as warehouses and
distribution centers to reinforce bulk purchasing and distribution operations. In addition, it hires and
trains staff to provide efficient customer service and continue in an efficient shopping environment.
It enhances Costco’s reputation in a good way.

Fourthly, Costco controls critical factors such as increasing membership, customer satisfaction
levels, and sales market results to evaluate its strategies and plan. It has always acted in accordance
with a mission and strategy. Therefore, Costco wants to continue its successful position in the retail
industry by controlling its strengths. By checking here, it has also monitored its weaknesses and
managed to be one step ahead of other competitors.
In conclusion, Costco’s approach is proactive. It focuses on strategic management processes such as
investing in infrastructure, developing, and motivating employees, and knowing its weaknesses and
strengths etc. It will continue to progress and grow under these conditions.

2.Beyond lower turnover, how else does Costco benefit from treating its employees well?

One of the most powerful aspects of Costco is the staff it trains to support effective customer
service. This strategic advantage can be a vital importance in the retail industry or other industries.
When employees feel comfortable and valued, they attempt to provide effective customer service.
This strategy involves customer satisfaction. The most important way to increase a customer's
loyalty is to make them happy and ensure that they are satisfied. Customers do not go to other
competitors because of their loyalty, in this case, their competitors will fall behind and Costco will
come to the fore. In this way, Costco can achieve its long-term goals or missions.

Happy and engaged employees increase productivity. During the hard times, they can be motivated
by middle-level managers or top managers because those managers’ aim is to maintain continuous
improvement. At the same time, employees can't get efficiency from anywhere working under
pressure, Costco knows this situation very well and manages this situation very well. If the staff
who Costco trains feel under pressure, this may lead to their involuntary departure, and Costco may
find a new staff and train it may be a big waste of time.

Effective leaders play a vital role in shaping Costco’s reputation. Costco's reputation as an employer
of choice is strengthened when it treats its employees well. They lead to promoting diversity and
cooperation between employees. This positive perception enhances to customers, investors, and the
broader community, and attractiveness as a business partner. A supportive work environment creates
a peaceful place, and, in this area, employees can share ideas and build a creative and an innovation
environment and this situation is beneficial for Costco because it affects Costco’s organizational
culture in a positive way.

In summary, treating employees supports strategic benefits to Costco beyond lower turnover. It
increases the customer experience and customer loyalty and improves productivity, efficiency, and
reputation.