Running head: COSTCO

Costco Company

Name

Institution
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Table of Contents
Introduction....................................................................................................................................3

Social responsibility.......................................................................................................................3

Innovation and change....................................................................................................................5

Control............................................................................................................................................7

Managing information....................................................................................................................9

Conclusion....................................................................................................................................10

Reference......................................................................................................................................11
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Introduction

Costco Wholesale Corporation also trading as Costco operates a chain of warehouse

clubs that serves only its members. Costco is the second largest world retailer and the largest

warehouse chain with about 800 warehouses all over the world. The company is dedicated to

offer and bring the best possible prices to a membership warehouse club and with quality brand

name merchandise. The company has the largest success in retail and wholesale industry. The

wholesale retail club are sources of diversified consumer goods selection with a total sales that

amounted to $126.17 billion by September, 2018. The company operates under the ‘Costco

Wholesale’ name. The lower priced and high quality products that are offered by the company

provides high satisfaction for the customers in the membership and products. In this context, we

shall discuss the social responsibility, control, management of information and innovation and

change that currently is being undertaken by Costco Company.

Social responsibility

Costco Wholesale company activities are geared towards maximizing the

performance in all its business spheres. The company employs defensive strategy. The corporate

social responsibility of the company addresses various stakeholder interest groups such as

employees (top priority), members/customers, investors and communities. The stakeholders and

the company affects each other. Therefore, the effort on the social responsibility of the company

addresses the concerns of the stakeholders. The success of the process will lead to long term

beneficial impacts to Costco such as customer loyalty and stronger brand image. Due to the

changing market conditions, the corporate responsibility program of Costco is continuously

evolving including policies and programs dealing with long term existence and viability of the

company in the worldwide retail industry. The CSR performance of the company is improving
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because the company continuously improves its sustainability and supply chain through addition

of new programs and polices over time.

Employees of Costco are more prioritized among its stakeholders and they are considered

the most significant since they directly impact on the performance of the business. The

stakeholder interest group are equitable career opportunities and employment. The corporate

social responsibility of Costco directly meets the needs of its employees through a number of

programs and policies such as health benefits, promotion of employees through the internal

leadership development policy, 401(k) plans, disability insurance, long term care insurance, life

insurance, dismemberment and accidental insurance.

Members and customers are the second priority for Costco stakeholders. The Costco

revenues are directly affected by the customers. The group stakeholder interest include

affordability and quality of products. To achieve these needs of the customers, the company has

an agreement with suppliers that offer low bulk/wholesale prices. Stocking of products that do

not satisfy the low price policy for wholesale/bulk purchases are not done by the company. The

Kirkland signature label by Costco Company ensures high quality products. Therefore the

corporate social responsibility of the Costco will satisfy the customer interest as its major

stakeholders.

The investor’s interest should also be satisfied by the company as one of its major

stakeholder group. The investors are important since they determine the capital amount available

to grow the business. The investor interest include growth of the business and profitability. The

efforts of the Costco social responsibility programs is geared towards addressing these concerns

such as expansion of the company overseas and in the United States. The Costco Company is

continuously growing due to its improving income over the recent past.
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The least priority for the Costco stakeholder group approach are the communities. The

communities are important since they impact on the perception of employee and consumer about

Costco. The supply chain of the company are also influence by the communities. The interest of

the community include support for community development, households, and environmental

protection. The charitable contribution committee for Costco addresses the interest of the

community through the donations. The company has participated in awarding grants to regional

and local organizations for the support of education, children, human and health services

The corporate social responsibility of Costco are effective in addressing the interest of the

major stakeholders. The needs of the employees are supported properly. The company ensures

the investors and customers interest are satisfied since they are the major stakeholders. The

company has a Charitable Contribution Committee that support various community development

initiatives in a flexible way. Therefore Costco has attained success in corporate social

responsibility of the retail industry.

Innovation and change

To modernize the bakery division, the company used the SAP to assist in its process of

increasing efficiency in the fresh food division such as bakery, meat, food court and produce.

The bakery division of the Costco enters the destroyed and damaged items to stock items into the

SAP system that later produces the report for the week. The SAP generated report will include

other variables such as the sporting events, weather that might impact on the demand of sales

over the seven years. The company made the things that they will sell only during the process

applied at the bakery division. The company is on long term mission to modernize their process

in business by tapping into the intelligent applications into the bakery division and other

solutions to increase operational efficiency. The process will involve teaching employees, asking
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for help from partners and learning from employees. The process is expected to make the work

easier. The company is teaching its employees the virtues of business practices to increase its

sales.

The pilot project concept proved to be a success as labor hours and product wastes were

reduced. The company is planning on increasing the additional 500 Costco bakeries throughout

the United States. Other division will adopt and benefit from the process and will increase

similar efficiency levels in their respective divisions.

The company uses data of its members to improve its marketing initiatives in a more

admirable way. The Costco warehouse franchise uses the membership only model implying the

company has a lot of data on every of its customers. Data they can extract include what they

purchase, how often they shop, their appetite to coupon or promotion and personal information

numbers such as email address and mobile phone numbers. For example, when the company

wants to reach its products they can contact customers that purchases contaminated products.

The technique has the chance of reaching the consumer compared to posting a sign on the

counter checkout. The success of the retail notices are tracked by the company thus helping it

achieve its objectives. The company relies heavily on big data to save costs. More than 50

buildings in United States has been installed with sensors. The sensors use algorithm to monitor

real time water usage and the company is alerted incase of a leak or breakdown or any other

unusual activity. The Apana created the system which has helped the company reduce its water

usage by more than a22% and thousands of dollars are saved every month. The process has made

both the executives and environmentalist happy.

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Control

Costco has developed policies and standards for operation management that serves a wide

range of the organization activities. The standardization policy for Costco ensures the company

has unified direction and consistency in its operations management in achieving the long term

fulfillment of its vision and mission.

Costco Company has designed its goods and services to achieve the highest possible

quality at low cost such as the Kirkland signature brand. The company deals in wholesale retail

services, insurance services, optical services, photo center services among others.

The company is working towards quality control management by offering high quality

service through HR development and training. The company is also using the co-branding

technique using the Kirkland Signature brand that is synonymous with high quality service. The

Kirkland signature is important in establishing consistent quality in all its stores and Costco

warehouse.

The processes and design capacity under the Costco emphasize on efficiency and speed

for maximum capacity. Using the operation management strategic decision, the main objective of

the company is to optimize cost effectiveness of the company. The warehouse-style stores

wholesales assist in attainment of this objective. The pallets that are used in the maximization of

efficiency at the stores while moving goods will ensure Costco facilities has enough capacity

utilization process.

To maximize market reach, Costco Company has used the appropriate location strategic

control. The strategy involves establishing warehouses near or in the urban centers. The Costco’s

location are majorly in cities. The strategy enables the company to maintain high revenue per

facility and thus increase the profitability of the company.

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The layout and design strategy of the company involves using the stores that have

warehouse-style layout. The goal of the company in this strategic decision area of operations

management is to reduce the usage of the extra spaces. The warehouse-style stores doubles as

storage spaces and therefore, the company will not invest in extra storage space.

The objective of Costco is to reduce turnover and motivate employees. The company

develops most of its leaders from the current set of employees by using the internal leadership

development process. The employees are promoted internally through internal leadership

development and the management highlights the fast paced jobs all through from the human

resources and job design strategy developed.

The supply chain management of the company involves using diversified strategy from

the suppliers. The supply chain is focused more on low prices and high quality goods. The

company is thus offering reduced amount of the array of products in its stores and warehouses.

The company minimizes selling its produces that have high wholesale or bulk prices.

The company has ensured a higher inventory efficiency using the warehouse-style stores

as storage and retail stores combined into one. The company does not arrange individual goods

into shelves but rather displays goods into its shipping pallets. The inventory costs of Costco is

thus reduced.

The scheduling method used by Costco is similar to those of other companies in the retail

industry. Automated systems are used for scheduling the sales personnel and ensures maximum

utilization of the HR capacity. The conventional strategy and tactics of the Costco wholesale is

applied here. The Costco Company has minimal control on its maintenance cost for the

warehouse style stores. The business model of Costco is to ensure ease of maintenance.
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Continuous hiring is carried out by the human resources with high number of development and

training programs to support the business needs of Costco Company.

Managing information

Costco Company has automated its process related to management of information such as

packaging, marketing communication, graphics and efforts to Paxonix’s PaxPro software. The

company uses the Paxonix software to streamline and automate its process to assist in meeting

increased market demands for its design package and provision of the market collaterals to its

retail areas. To automate and streamline the project management process, Costco required a

comprehensive solution. Paxonix offered the best solution to Costco as it helped in accelerating

time of marketing new products and increase efficiency with new products. By adopting

Paxonix, we will streamline and automate the process. More staff will be freed up and hence

offer speed and greater innovation in marketing new company’s products.

In previous years, Costco depended on desktop tools, excel and printed proofs to manage

the information and data. The company was looking for easy to use and flexible system for

process automation and making critical information available to key personnel during the

creative process. In this regard, Paxpro, a web based solution will offer Costco company with

real time visibility in its ongoing projects that will allow it to approve its process faster ad allow

the managers execute, plan and deliver projects on required timeline. Costco Company is

delighted with Paxforms, a PaxPro intelligent forms. The data and processes was aligned with

the business rules of the company and which will accelerate time to reach wider market. By

adoption of the PaxForms, Costco has improved data capture, approval process and information

sharing that has helped reduce errors and faster delivery of information to decision makers.
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There is significant relative lack of ambition for Costco e-commerce capabilities and any

disruption to its brick and mortar is highly vulnerable. The total sales currently Is $4 billion, a

figure that is much less compared to other small retail company such as Macy and Best Buy. The

company should invest into its online digital retail e-commerce to keep pace with other players

in the industry. Costco should invest its expertise in e-commerce to improve on its ability to

bolster the organization capabilities in online trading.

Conclusion

In conclusion the company has a better chance of beating its competitors in pricing

because its business models is buoyed with a lot of membership cash. The $88million Costco

membership worldwide simply represents a healthy stream of revenue for the company and

accounts for 72% of the pretax profits. The shoppers at Costco renew their membership at

roughly 91%, a relatively high rate. However, Costco should note that the growth of membership

stream revenue has decelerated to about 5.5% from 7%. Costco generate most of its revenue

from selling membership. The company makes profit from the low pricing due to its successful

membership model. The company charges $60 for standard members and $120 for executives

and a 2% of redeemable award on purchase amounts that are pretax.

The successful brand ‘Kirkland Signature’ started in 1992 as in-house brand has

diversified into other products such as vodka, luggage. The Kirkland Signature has a strong value

that competes with national brands. It’s considered the best brand for a store. There is a

significant strong brand preference and the number one Amazon e-commerce portal. There is a

chance of the company capturing more demand from other e-commerce websites such as the

Costo.com channel. The company has adopted the best management of information that includes
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the Paxform. The company has several standards aimed at reducing cost and increase quality.

The company has a better corporate social responsibility framework that is generally successful.

Reference

https://globenewswire.com/news-release/2017/10/05/1141664/0/en/Costco-Wholesale-

Corporation-Reports-Fourth-Quarter-and-Fiscal-Year-2017-Operating-Results-and-September-

Sales-Results.html (Links to an external site.)Links to an external site. Retrievd on 20/11/2018