Costco History Essay Example

1984, Price Club's sales exceeded one billion dollars, making it the first company to reach this milestone in just six years. Nearly a decade later, in 1993, Costco and Price Club merged to form PriceCostco. This merger was a perfect fit, as the two companies had similar business models and sizes.

The merger of PriceCostco and Costco in 1993 resulted in a total of 206 locations and $16 billion in annual sales. Jim Sinegal, the President and chief executive of PriceCostco, also assumed the same roles at Costco (Priceviewer). However, the merger was short-lived as PriceCostco was renamed Costco in 1997 with Jim Sinegal continuing to hold the positions of President and chief executive (Carden, 2011).

Costco's mission statement emphasizes providing members with high-quality goods and services at affordable prices. To achieve this mission, the company follows a Code of Ethics that includes principles such as obeying laws, taking care of members and employees, and respecting vendors/suppliers.

Jim Sinegal, CEO of Costco, stated that if the organization follows four specific actions, their ultimate objective of rewarding shareholders will be achieved (Costco, 2011). The operational philosophy of Costco revolves around minimizing costs and transferring the savings to customers. Their approach includes offering brand-name products of superior quality at prices lower than any other retail channel. To achieve this, they purchase large quantities of merchandise directly from manufacturers rather than relying on distributors.

The merchandise is shipped directly to a selling warehouse instead of a storage area, which helps reduce freight costs. Costco warehouses are strategically located on sites with minimal property costs, rather than high-value real estate locations. The merchandise is placed directly on the selling floor and remains on

the pallets it was delivered on, leading to lower labor and handling costs. To further save the customer money, Costco keeps the number of sales and service employees at a minimum, thus reducing overhead costs. Additionally, due to its extensive membership base, Costco has significant influence and bargaining power to negotiate prices with manufacturers and suppliers.

According to Jim Sinegal (corporate, 2012), Costco is able to provide lower prices and better values by reducing costs and eliminating unnecessary frills typically associated with wholesalers and retailers. This includes items such as salespeople, fancy buildings, delivery, billing, and accounts receivable. They operate with low overhead, allowing them to offer significant savings to their members. Costco prides itself as a top warehouse/big box retailer, surpassing competitors in sales volume. Their success is attributed to their "consumer first" business model, which has contributed to increased sales and growth.

Costco has implemented various strategies to guarantee continual savings for their customers, including the creation of their own brand known as 'Kirkland Signature'. The company's headquarters are situated in Kirkland, Washington, which is where Costco originated. In 1995, Costco introduced the Kirkland Signature brand within their stores.

Costco's Kirkland Signature line encompasses a diverse range of products, such as diapers, coffee, tires, clothing, film, and housewares. It aims to match or surpass the quality of well-known national brands (Priceviewer). In certain cases, national brands even partner with Kirkland Signature to create their merchandise. Numerous manufacturers acknowledge Costco's market success and influence and opt to collaborate with Kirkland Signature in producing items under its brand.

Some companies, like Hanes and Whirlpool, have adopted Costco's "consumer first" business model. These companies have introduced new and innovative concepts

similar to those offered by Costco, such as Costco Pharmacy (1986), Produce and Bakery (1987), Optical labs (1987), 1-Hour Photo (1989), Hearing Aid Centers (1994), Costco Gas stations (1995), Costco business Centers (1996), Costco Travel (2000), Costco Home (2003), and Car Washes (2006" (Walker, 2011). Beyond providing affordable prices, Costco's structure and culture aim to fulfill the needs of their customers.

Costco places equal importance on the value of its products and its employees, understanding that reducing turnover and increasing satisfaction among workers contributes to long-term success. They hire employees at a higher hourly rate than average and prioritize internal training and promotions. This approach fosters loyalty and a sense of worth within the staff, resulting in consistent financial success for Costco as it continues to expand globally.

The organization has demonstrated the effectiveness and benefits of their mission and ethics to all stakeholders, such as customers, employees, suppliers/vendors, and stockholders. Have you ever pondered over the true significance of organizational design? Have you contemplated its optimal efficacy? If your response is affirmative, then how have you addressed it? If your response is negative, then what is the reason behind it?

Organizational design entails a formal process that integrates individuals, information, and technology. Organizations comprise individuals who collectively possess a common purpose, vision, and strategy. This arrangement ensures that people are aligned with the intended objective or purpose.

The aim of organizational design is to enhance communication, information, and resources to optimize human achievement. This leads to an integrated system of people and resources that are tailored to the specific direction of the organization. Organizational design essentially implements an administrative plan under the guidance of a leader or leaders.

The effectiveness of the organization's design depends on teamwork among its members. Additionally, identifying the mission, vision, strategy, purpose, and needs of the organization and establishing attainable goals will contribute to its success. Effective leadership also plays a vital role in ensuring adherence to the process and cultivating a culture of innovative thinking.

The effectiveness of a leader in an organization depends on their possession of a mission, vision, strategy, and followers. Without these elements, the organization is destined to fail. Costco serves as an example of a company with a successful organizational design. The concept known as the "Trap of favored ways of thinking" describes how it negatively affects one's thinking. To achieve success, organizations must steer clear from falling into these traps that hinder creativity, restrict capabilities, and impede progress in the long term. Common traps include Group Thinking where productive conflict is crucial for evaluating ideas and preventing hasty implementations; non-productive conflict can lead to a hostile environment.

Group thinking is prevalent, with the phrase "We have never done it like this before" highlighting the necessity for change to prevent identical outcomes. It is crucial to exhibit courage and take the lead in experimenting with novel approaches. Remember to implement meaningful modifications.

The "You're Gooder" syndrome highlights an issue where respect towards authorities is given undue importance, overshadowing aspects like candor, honesty, and courage. This results in an inbred culture where hiring decisions are based on time served and loyalty rather than exceptional performance, leading to problems. Incompetence prevails along the leadership chain of command, perpetuating further incompetence. Arbitrary directives and policies are determined by top management, indicating a disconnect and lack of understanding if

decisions are made randomly or without clear reasons.

The content of this text had a profound effect on my mindset as it brought to light knowledge that I was previously unaware of and taught me many things. It provided a clear understanding as to why organizations face challenges, experience failures, and achieve success. It invoked various memories from my military career, as well as from experiences with my teachers, mentors, and friends. When contemplating this concept in relation to Costco, it is evident that any of these limited perspectives could have potentially hindered their accomplishments. It highlights the importance of recognizing and overcoming negative influences that inhibit an organization's growth.

How did you design your positioning to circumvent it? The ugly face represents organizations that utilize employees, the global economy, or the natural environment as means of domination to serve their selfish desires and exert dominance. They take what they require and discard or ruin what is not necessary. "Whether intentionally or unintentionally, organizations frequently have a significant adverse effect on our world." (Morgan,1998 pp.)

261). Food and tobacco companies ingest or promote pollutants, poisons, and other cancer-causing hazards. Equally concerning are threats arising from environmental pollution, be it legal or illegal dumping into water and land. People are harmed by contaminated air, land, and water, leading to cancer or other health issues. Disappointingly, some big corporations responsible for these dangers often go unpunished.

These organizations prioritize profits over human welfare. Foreign countries can easily be exploited through hazardous employment, disease, and degradation. Costco has tackled many negative perceptions by prioritizing the well-being of their customers, employees, and suppliers. Their employees receive significantly higher pay compared to other companies,

they have internal promotion opportunities, and they are treated with respect and appreciation. On a global scale, Costco has expanded to foreign countries and has created job opportunities, offering above-average salaries and valuing individuals with respect and appreciation.

References

1. Branch, S. (1999, 09 06). Inside the cult of costco. Fortune, 140(5), Retrieved from http://web.ebscohost.com/ehost/detail?sid=acf1a04d-bld9-440c-9019-e786ca768e32@s Cardon, B. (n. d.).
2. Costco company history.

Retrieved from http://goarticles.com/article/Costco-Company-History/4651134

(11 ed., pp. 54-61). Canada: South-Western, Cengage Learning. Walker, S. (2011, 05 16).

Retrieved from http://www. vendor. com/_blog/VENDORCO_BLOG/post/The_Hisory_of_Costco Retrieved from http://www. costco.

co.jp/eng/costco.htm Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=83830&irol-homeprofile Retrieved from http://priceviewer.

Retrieved from http://www.referenceforbusiness.com/history2/91/Costco-Wholesale-Corporation.html