Report: Evaluating the Success Strategy of Costco's Business

This report analyzes the success strategy of Costco's business model, focusing on its ability to generate high sales volumes and maintain a fast inventory turnover. The core of Costco's strategy lies in offering low-cost products, a restricted selection of national and private label brands, and a welcoming shopping environment to its members. The report highlights the significance of the membership model in fostering customer loyalty and financial stability. Key elements of Costco's competitive advantage, such as low prices, limited selection, and a focus on large-volume purchasing, are examined. The role of effective leadership, particularly the influence of CEO Jim Sinegal, is also discussed. The report also compares Costco's performance with competitors like Sam's Club and BJ's Wholesale, emphasizing Costco's stronger customer base and financial sustainability. The analysis includes references to Costco's financial success outside the United States and the factors contributing to the company's continued growth and market share.

Running head: The Success Strategy of Costco’s Business 1
The Success Strategy of Costco’s Business
(Author’s name)
(Institutional Affiliation)

The Success Strategy of Costco’s Business 2
Costco’s business model main aim is generating high sales volumes and moreover, providing
a fast inventory turnover. The purpose of business is to provide their members with products at a
low cost on a restricted selection of nationality branded and selected private label products in a
wide range. The business model used is one of the best because the business always wants to
keep their customers in check, so as to make customers want to come back for more. The
business is set up to allow customers to renew their membership annually, this enables Costco to
note the loyal members because this will prove the satisfaction of customers (Yang et al., 2017).
Costco’s business has been competitive and successful all these years because the strategy
used is built on principles of low prices, restricted selection, and a very welcoming environment
for customers to go shopping in. Kirkland is the brand used to provide quality and better national
brands to customers. The business offers irresistible deals to customers, enticing them to spend
more than they might, this allows Costco to be competitive therefore maximizing on profits
(Loftsdóttir & Mixa, 2017).
Jim Sinegal was an effective CEO who was pretty firm on his view of the pricing strategy. He
dreamed of creating an organization that would stick around for 50 years not just making quick
money but giving customers best environment to do shopping in. He did hold the store from a
single store to the fourth largest retailer in the world. He had vision and mission because he
Sinegal never wanted any competitor to come in and beat their price. Sinegal was the CEO
behind the crafting of new strategies and implementing and executing the chosen strategy. In my
opinion, Sinegal is an effective CEO and that’s why the text did not record an evaluating
procedure to his strategy. The strategies crafted were low price, limited selection, and a better
environment for shopping. He concentrated on large volumes purchasing, effective and effective
distribution, and self-service warehouses facilities. Existing members do receive direct mail and

The Success Strategy of Costco’s Business 3
rarely to new members which are also a strategy to keep your loyal members in check (Turner &
Endres, 2017).
Costco’s strategies are competitive and that’s what brings success, Costco contains a superior
share of the wholesale club sales in the United States. Sam’s Club is second in line to Costco
while Bj’s is smaller compared to others. Costco is more successful because they are efficient
and they utilize their own resources fully compared to Sam’s Club and Bj’s wholesale. Costco
has a stronger customer’s base and greater sustainability, which allows them to be financially
stable. According to exhibit 2, it indicates Costco is financially successful outside the United
States (Borger, 2018). Low cost on goods, better environment and restricted selections are the
main strategy used in Costco that allows the business to be competitive in nature.
The warehouses have shown tremendous performance due to the increase in the sales and the
operating income. Nevertheless, there has been a continued increase in the revenue which has
eventually enabled growth and success of Costco. The company enjoys the benefits of
competitive advantage over other competitors due to low pricing, efficient customers’ service,
increase in the market share and lastly maintaining of a highly profitable reputation. Costco has a
winning strategy and this is observed with the success of the business.

The Success Strategy of Costco’s Business 4
References
Borger, M. J. (2018). Diamonds in the Rough: A Review of Tiffany v. Costco and a Call to
Apply Daubert to the Admissibility of Consumer Survey Evidence in Trademark
Infringement Litigation. Touro L. Rev., 34, 431.
Loftsdóttir, K., & Mixa, M. W. (2017). The opening of Costco in Iceland: Unexpected meanings
of a globalized phenomenon.
Yang, W. L., & Chen, P. S. (2017, August). E-food-traceability Learned by Consumers. In
Proceedings of the 3rd International Conference on Industrial and Business Engineering
(pp. 20-22). ACM.
Turner, S., & Endres, A. (2017). Strategies for Enhancing Small Business Owners' Success
Rates. International Journal of Applied Management and Technology, 16(1), 3.