Bow Valley College: MGMT1101 Costco Management Report

This report provides a comprehensive analysis of Costco Wholesale Corporation's management practices, covering various aspects of its operations. The report begins with a summary of Costco's business model, highlighting its low-cost strategy and global presence. It then delves into a detailed SWOT analysis, identifying the company's strengths, weaknesses, opportunities, and threats. The report further examines the environmental constraints impacting Costco, utilizing a PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors. Stakeholder analysis is also included, prioritizing the importance of employees, customers, and suppliers. The organizational structure and design of Costco are discussed, emphasizing its functional and divisional elements. The report also explores the motivational theories employed by Costco to engage its employees, highlighting strategies like high wages and employee benefits. Finally, the report concludes with recommendations for improving performance, including leveraging social media and digital marketing, along with suggestions for control and performance measurement using key performance indicators and balanced scorecards.

Running Head Costco 0
Introduction to management

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Contents
Summary..........................................................................................................................................2
SWOT Analysis...............................................................................................................................2
Environmental Constraints..............................................................................................................4
Stakeholders.....................................................................................................................................5
Organizational structure and design................................................................................................6
Motivating employees.....................................................................................................................6
Recommendation.............................................................................................................................7
Control and Recommendation.........................................................................................................7
Reference.........................................................................................................................................8

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Summary
Costco Wholesale Corporation is a chain of warehouses that sells premium goods at low costs. It
is considered one of the largest retail sales companies in the U.S. which include more than 750
stores in almost eight countries. The strategy of the organization is to provide the best quality
products at lower prices. Its headquarter is in Issaquah, Washington and it was founded by
Robert Price in 1976 as a price club and as Costco in 1983. Its revenue is more than US$152.7
billion and includes more than 254,000 employees (Devaraja, 2011). This report will include the
formulation strategies with the help of a SWOT analysis of the Costco. The performance of the
company is affected by environmental constraints. Costco stakeholders will be analyzed and
their importance for the organization. The organizational structure and design of the Costco
company will be included in the report. Motivational theories which are adopted by the
organization for motivating the employees will be discussed. The various recommendations will
be provided for monitoring the performance of the organization.
SWOT Analysis
Strength
The company Costco is the most recognized brand in the market which helps the organization to
increase the revenue and the low-cost strategy is beneficial for attracting a large number of
customers towards the organization.
With the help of the membership program, the organization can be able to expand its growth and
increase productivity. With the help of different distribution networks, the organization is able to
expand the business in the new market and enter new countries. The strength of Costco in
providing the extra discounts to members helps in building reputation and customer satisfaction
(Briscoe, et al., 2012).
Weaknesses
Lack of presence of Costco in the market requires the best practices for making the customers
aware of the brand. For the competitive advantages in the market, the organization is required to
adopt the promotional strategies for increasing the market share. The weakness of transportation
cost is required to be minimized which can be done by implementing the supply chain

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management system. The company is required to expand the business in the new market with the
help of research and development (Dalavagas, 2015). R&D must be done effectively for
analyzing the market for gaining competitive advantages with the help of technologies. The
profit margin of the company can be increased by increasing the prices of various products and
providing fewer discounts to members of the organization.
Opportunities
In order to expand the business in other countries with the help of the supply chain will help the
company in increasing the market share for attracting a large number of customers. The
opportunity to the organization is increasing the online presence and digital advertising can be
adopted by the company with the help of promotional activities and the latest technologies. The
digital platform will be beneficial for Costco to increase the awareness for reaching to a large
number of the customer through social media. Information systems can be implemented for
improving the system for managing the process and information of the organization (Gokpinar,
et al., 2010). Information systems like the supply chain management system, the Managing
information system can be adopted for improving the process efficiency and decreasing the
manual work which will also help in providing accurate information quickly.
Threats
The threat to the organization is competition in the market and it is considered as the biggest
threat. It can be protected by the organization by serving the quality products to the consumers
for retaining the customers in the market. The company is required to build an effective
relationship with consumers by providing various benefits. The company is required to reduce
the operational costs and must adopt effective strategies for gaining competitive advantages
(Gokpinar, et al., 2010).

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Environmental Constraints
PESTEL analysis
Political
Costco’s performance is affected by political factors like stability in the market which helps the
organization in encompassing the market shares. Costco considers the political factor for
improving the policies and strategies by expanding the expectation on the basis of environmental
and animal rights policy (Caraballo, 2016).
Economic
The organization is required to align the economic situation with the business. It requires to
consider the increase in international trading agreements. It is the opportunity for the
organization for establishing the new store in developing markets which will help in boosting the
financial performance. The organization is required to improve growth and stability (Olivares
Farías, 2013).
Social
Costco is required to consider the social factors for increasing the demand for business social
responsibilities. With the help of improving the corporate social responsibilities program, the
organization is able to increase the brand reputation and perception of customers. Customer
satisfaction can be improved by implementing the strategy and effective policies for
environmental performances (Maxwell and Knox, 2009).
Technological
It is challenging for the organization to keep the up-gradation in technology. The organization is
required to increase business automation by implementing the technology which will help in
increasing business efficiency. It will help in increasing the financial performances and savings
(Olivares Farías, 2013).
Environmental

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The organization is required to maintain the sustainability environmental for gaining the
competitive advantages. The low-carbon lifestyles will help in satisfying the lifestyles for the
consumers (Kurtz, 2012).
Legal
Costco is required to improve the employment practices for exceeding the requirement of
employment laws. They are required to adjust the policies and strategies for optimizing the
performance despite the tax reform issues. They are required for imposing new policies for
exploiting the legal opportunity (Kurtz, 2012).
Stakeholders
The various stakeholders are included in Costco are creditors, employees, government,
customers, suppliers, and owners. The top priority of Costco is employees as they consider them
the most essential part of the organization as they help in directly influencing the business
performance. The corporate social responsibility efforts of the organization help in satisfying the
interest with the help of a number of policies and programs like health benefits, 401 plans,
internal leadership development policy for promoting employees (Ellman and Pezanis-Christou,
2010).
Customers and suppliers of Costco are the second priority of stakeholders. Customers are
essential for the organization which helps in affecting the revenues. The quality and affordability
of products are essential for the customers. Costco maintains an effective relationship with
suppliers and does not stock the products. Costco is required to satisfy the investors’ interest.
Investors are considered as essential stakeholders as it helps in determining the capital for the
growth of the organization. Investors are interested in the growth and profitability of the
organization. Corporate social responsibility helps in addressing the concerns which help in
growing and increasing the net income. Communities are the least priority for Costco. It is
analyzed that the communities are interested in supporting households and development. For the
potential growth of the organization, customers are essential as they help in directing the
business (Spencer-McDaniel and Anthony, 2012).

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Organizational structure and design
The organizational structure of Costco
The organization structure and design of the Costco Company mainly include the weak matrix. It
includes a strong functional structure and divisional structure. In a functional structure, the
employees are base on the functions of the business which includes marketing, accounting, etc.
the next divisional structure includes the components of location and market. The major
functions of the organization are HR, operations, legal, accounting, and finance. The chain of
command is followed by the organization which is sub-segments are included (Zheng, et al.,
2010).
Motivating employees
Costco Company uses the Maslow Hierarchy theory of motivation which includes fulfilling the
basic requirement of the employees. The organization offers the employee benefits which
include healthcare, vision programs, and pharmacy programs. For the motivation of the

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employees, the high wages strategy is adopted for motivating the employees. They focus on the
satisfaction of the employees which helps in increasing the profitability of the organization
(Whysall, 2010). They had developed the culture in which the trust level is maintained between
the employer and employees of the organization. They treat the employees as family and
partners. Management of the organization provides better responsibilities than its competitors.
The employee turnover rate as low as 5%. For increasing efficiency, the organization provides
various benefits to the employees and builds a friendly relationship for the growth of the
organization (Csaszar, 2013).
Recommendation
In order to improve the performance, it is recommended to the organization to use social media
resources for the growth of the business. The organization can focus on one or two social
networking sites for enhancing the relationship with the customers. The organization is required
to build effective relations between the customers and the organization. It is recommended to use
the reward system for achieving the goals and objectives of the organization. It is recommended
to the organization to expand the business with the help of digital marketing.
Control and Recommendation
The organization is required to measure the performance of the activities and business plan. For
evaluating the performance key performance indicator method will help in providing the result.
For controlling the activities and business plan, the concurrent and feedback control can be used
for monitoring the performance and strategies. It is necessary for the organization to consider the
feedback of the customers for making the decisions (Barnes, 2013). It is effective to use the
concurrent and feedback control for measuring the performance. In balanced scorecard,
concurrent and feedback control will be used for identifying and improving the business
functions and external outcomes. It is recommended to the Costco as it will help in achieving the
goal of the organization by measuring the performance and improving the growth of the
organization.

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Reference
Barnes, J. M. (2013). Case Study Report: Architecture Evolution at Costco. Tech. Rep.
Briscoe, D., Tarique, I. & Schuler, R., (2012). International human resource management:
Policies and practices for multinational enterprises. Routledge.
Caraballo, F. E. (2016). Organizational culture comparisons of China and the United States
using the Denison organizational culture model (Doctoral dissertation, Alliant
International University).
Csaszar, F. A. (2013). An efficient frontier in organization design: Organizational structure as a
determinant of exploration and exploitation. Organization Science, 24(4), 1083-1101.
Dalavagas, I. (2015). Swot analysis: Costco wholesale corporation. United States.
Devaraja, T. S. (2011). An Overview of Organizational Culture and Organizational
Change. Society of Interdisciplinary Business and Economics Research, Bangkok,
Thailand.
Ellman, M., & Pezanis-Christou, P. (2010). Organizational structure, communication, and group
ethics. American Economic Review, 100(5), 2478-91.
Gokpinar, B., Hopp, W. J., & Iravani, S. M. (2010). The impact of misalignment of
organizational structure and product architecture on quality in complex product
development. Management science, 56(3), 468-484.

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Kurtz, L. S. (2012). Stakeholder analysis. Socially Responsible Finance and Investing. New
York: John Wiley & Sons.
Maxwell, R., & Knox, S. (2009). Motivating employees to" live the brand": a comparative case
study of employer brand attractiveness within the firm. Journal of marketing
management, 25(9-10), 893-907.
Olivares Farías, R. (2013). La Cultura Organizacional, Un Activo Clave para la Supervivencia de
la Empresa: Los Casos de CEMEX, 3M, Google y Costco. Revista Daena (International
Journal of Good Conscience), 8(3).
Spencer-McDaniel Sr, J. A., & Anthony, P. (2012). Sustainable Solutions Paper: Several
Strategic Analyses of Costco Wholesale Corporation.
Whysall, P. (2010). Addressing ethical issues in retailing: a stakeholder perspective. The
International Review of Retail, Distribution and Consumer Research, 10(3), 305-318.
Zheng, W., Yang, B., & McLean, G. N. (2010). Linking organizational culture, structure,
strategy, and organizational effectiveness: Mediating role of knowledge
management. Journal of Business research, 63(7), 763-771.