Costco Analysis Memo
Costco Analysis Part 1
Memorandum
To: CEO John Sinegal
Cc: Dr. Birjandi
From: Stephen Collum
Date: 11/29/2009
Subject: Costco’s Business Analysis
Dear John Sinegal,
I’m writing you to give you my analysis of your company Costco. I’m impressed with your managerial skills used during your year-round warehouse visits. Also, the transition from the old workplace to the new workplace is incredible. Last I would like to praise your company’s high employee retention rate.
During your numerous visits to various local Costco warehouses I noticed that you used different managerial skills that exemplify why your company is so successful. Your conceptual skills are displayed as you allow each warehouse to act as their …show more content…
own company in a divisional structure, but you have a vision for the company as a whole. Your technical skills were displayed as you checked whether stocks were replenished and positioned to sell. In addition, you discussed sales strategies with warehouse management. Furthermore, you used your human skills as according to the article, “abandon the old-command-and-control mindset and emphasize coaching, motivation, and empowerment instead.” This allows your employees to feel empowered and helps with employee retention (which we will discussed more in-depth later).
On a day-to-day basis your warehouse managers draw upon many of the same skills that you have to use, because as the articles phrased managers are “local CEOs.” With the divisional structure of your company, the warehouse managers have more responsibility versus a functional structured company.
The warehouse managers need technical skills as they make independent merchandising decisions, based on demographics of their area and customer wants/needs. Typically, most managers need the conceptual skills, because they are expected to make decisions guided by the company’s mission and values, in addition to being based on the inventory and sales …show more content…
information.
On another note, the aspects of Costco’s business model which exemplify the transition from the old workplace to the new workplace are the way which your employees are treated.
As stated earlier, Costco has a high employee retention rate, in part because the employees feel empowered. Costco’s employee pay is among the highest among discount retailers and your company offers one of the best health insurance plans available. This has led to a workforce that is productive and loyal. Also, it is in contrast to the old workplace where jobs were less stable and employees had no say-so pertaining to company functions.
Lastly, Costco’s high employee retention rate help the warehouse club maintain low-prices, because it allows the company to keep its overhead costs low. The cost for employee training, recruiting, and so forth can be very expensive. Also, high retention rates make your business run more effectively, because operations tend to run more efficiently with more experienced staff.
In conclusion, you new age business model is marveled and should be applauded. If there were more companies like Costco around America would be a better place, where its citizens would be happy and people would be able to live more prosperous, productive, and happier lives.
Part
2
I believe that you are motivated by a since of collectivism. Your company displays this because your company doesn’t just focus on the shareholders and managers, but also on the employees, suppliers, and community. An example would be Costco’s five-point code of ethics. According to the article, “The Costco Code of Ethics indicates that, to achieve its mission of providing members with quality goods and services at the lowest possible price, Costco must 1) obey the law, 2) take care of its customers, 3) take care of employees, and 4) respect it suppliers. “ Your company believes that if you follow these four guidelines, it can accomplish your ultimate goal of rewarding its shareholders.
The code of ethics is a rejection of the profit maximization approach, because cares about its customers and its employees. The profit maximization approach aims to get the highest rate for its product and save as much as possible on operations. This causes employee pay to become a low as the market allows, which in the retail industry would fall under poverty level or underemployed level.
Furthermore, Costco’s business approach comes at the expense of profits for your company. Employee pay rates are the best in the industry, but executive managers’ salaries are below what the industry average. This links into social entrepreneurship as your company has taken the imitative to see your employees living above poverty.
Memorandum
To: CEO John Sinegal
Cc: Dr. Birjandi
From: Stephen Collum
Date: 11/29/2009
Subject: Costco’s Business Analysis
Dear John Sinegal,
I’m writing you to give you my analysis of your company Costco. I’m impressed with your managerial skills used during your year-round warehouse visits. Also, the transition from the old workplace to the new workplace is incredible. Last I would like to praise your company’s high employee retention rate.
During your numerous visits to various local Costco warehouses I noticed that you used different managerial skills that exemplify why your company is so successful. Your conceptual skills are displayed as you allow each warehouse to act as their …show more content…
own company in a divisional structure, but you have a vision for the company as a whole. Your technical skills were displayed as you checked whether stocks were replenished and positioned to sell. In addition, you discussed sales strategies with warehouse management. Furthermore, you used your human skills as according to the article, “abandon the old-command-and-control mindset and emphasize coaching, motivation, and empowerment instead.” This allows your employees to feel empowered and helps with employee retention (which we will discussed more in-depth later).
On a day-to-day basis your warehouse managers draw upon many of the same skills that you have to use, because as the articles phrased managers are “local CEOs.” With the divisional structure of your company, the warehouse managers have more responsibility versus a functional structured company.
The warehouse managers need technical skills as they make independent merchandising decisions, based on demographics of their area and customer wants/needs. Typically, most managers need the conceptual skills, because they are expected to make decisions guided by the company’s mission and values, in addition to being based on the inventory and sales …show more content…
information.
On another note, the aspects of Costco’s business model which exemplify the transition from the old workplace to the new workplace are the way which your employees are treated.
As stated earlier, Costco has a high employee retention rate, in part because the employees feel empowered. Costco’s employee pay is among the highest among discount retailers and your company offers one of the best health insurance plans available. This has led to a workforce that is productive and loyal. Also, it is in contrast to the old workplace where jobs were less stable and employees had no say-so pertaining to company functions.
Lastly, Costco’s high employee retention rate help the warehouse club maintain low-prices, because it allows the company to keep its overhead costs low. The cost for employee training, recruiting, and so forth can be very expensive. Also, high retention rates make your business run more effectively, because operations tend to run more efficiently with more experienced staff.
In conclusion, you new age business model is marveled and should be applauded. If there were more companies like Costco around America would be a better place, where its citizens would be happy and people would be able to live more prosperous, productive, and happier lives.
Part
2
I believe that you are motivated by a since of collectivism. Your company displays this because your company doesn’t just focus on the shareholders and managers, but also on the employees, suppliers, and community. An example would be Costco’s five-point code of ethics. According to the article, “The Costco Code of Ethics indicates that, to achieve its mission of providing members with quality goods and services at the lowest possible price, Costco must 1) obey the law, 2) take care of its customers, 3) take care of employees, and 4) respect it suppliers. “ Your company believes that if you follow these four guidelines, it can accomplish your ultimate goal of rewarding its shareholders.
The code of ethics is a rejection of the profit maximization approach, because cares about its customers and its employees. The profit maximization approach aims to get the highest rate for its product and save as much as possible on operations. This causes employee pay to become a low as the market allows, which in the retail industry would fall under poverty level or underemployed level.
Furthermore, Costco’s business approach comes at the expense of profits for your company. Employee pay rates are the best in the industry, but executive managers’ salaries are below what the industry average. This links into social entrepreneurship as your company has taken the imitative to see your employees living above poverty.