Plan Strategy

Strategy

The generic competitive strategy employed by Costco is that of the best-cost provider in the wholesale club category. The best-cost provider strategy is a mix of low-cost provider and differentiation.

This strategy is aligned with Costco’s abilities and resources. That is, a streamlined supply chain, purchasing power, good supplier relationships, high sales volumes, quick inventory turnover, and excellent customer service.

The three components of the company’s strategy are low pricing,

Limited product selection and what the company calls “treasure hunt merchandising”, or high end products acquired in closeouts and liquidations. This approach works well with the

Company’s target market

CEO Sinegal signaled that he intends to keep this strategy during his tenure, arguing that low price, high value products are precisely what it takes to achieve staying power in this industry. A long-term strategy is recommended and he hopes to heed this advice, being especially careful not to differentiate to the point of losing its price competitiveness.

While Costco strives to beat the competition’s pricing,

it also delivers exceptional value in its high-end offerings and customer service, giving consumers more for their money. This strategy works well for Costco, given its customers are the most affluent of all the warehouse clubs, with average incomes around $75,000. However, these customers are also value conscious, as evidenced by the members who opt for executive memberships, although it costs more per year, to take advantage of a 2% discount on most purchases. While this group only accounts for about a fourth of the company’s memberships, they represent nearly half of its net sales.

Leadership and Strategy Making

The process of crafting and executing strategy is done in 5 steps. Below, I will discuss the different steps and evaluate the performance of this company’s CEO, Jim Senegal in the process of strategy making, as well as discuss areas for improvement.

3Phase 1

During this phase, the CEO and other senior management meet to draft a strategic vision for the company. The strategic vision lies out the path the company will take in the future to improve its market position. Good strategic visions reveal where the company is going in the future and provide reasons for that particular path. Vision statements should be written and distributed to employees at all levels of the organization. This is why it important to include the reasoning for the chosen path. Employees must find the vision both reasonable and beneficial; after all, they have a lot to lose. When a company shares a well-crafted, well-thought-out vision statement throughout the organization, the benefits are palpable. Motivation and productivity group and it steers the course for the entire organization to be working towards the same goal. I did not find any evidence of a strategic vision, or where the company plans to go in the future. However, the company’s growth strategy shows that the company has been steadily expanding the number of warehouses each year, with some stores overseas. The second growth strategy was that the company opened two test stores ,Costco Home. While these two spots are steadily increasing revenue and profits, the company has decided to instead add extra space to new storefronts and essentially combine these two operations. A third way the company intends to grow is by expanding its private label brand from 400 items to 600 items over the next five years. From a pure math standpoint, this will prove effective incrementally, as the markup on the private label is 1% higher than other goods. As for the direction the company is heading and why, Sinegal receives a C. Recommended action is to call a meeting of senior management to draft an exceptional vision statement with the direction the company

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