Introduction
Modern competitive business environments have forced many companies are aiming at reaching global consumers, and Costco Wholesale is not exceptional. The company exists as a corporation, and has been in the market for the past 35 years, and it has been evolving to become the consumers’ choice on basis of quality, pricing, and values. Costco operates as a global business with customers around the globe having a direct access or virtual access to its goods over the internet. However, no business can maintain a steady growth in the manner that Costco has done in absence of a good business strategy. It is the goal of this paper to provide a detailed analysis of Costco’s mission, vision, and business strategy with the goal of unearthing what has propelled it to the current position in the competitive business world.
Analysis
Costco’s continuous growth and expansion in the market has been guided by the company’s mission and vision. The vision acts as a compass to show direction where the company is headed to, while the mission helps the firm to forge a strategy as explained by Breuer and Ludeke-Freund (2017). Costco’s vision has opened a door in the global market where consumers are more concerned with pricing of goods. The company mission, according to Thompson (2021) is to provide customers with goods and services at the lowest price possible. The vision statement appears as an explanation of the vision statement. It describes Costco as a place where pricing gives clients unmatched savings. Evidently, the vision statement reflects the concern for consumers’ spending, and no one would wish to stay away from such places. The only limitation with the vision is that it does not mention anything to do with quality, which could be a concern for consumers who have a tendency of matching prices to the quality of a product.
Apart from the mission statement and vision statements, Costco’s growth has depended on a solid business model. A business model is a description of how the firm will generate revenue, maintain sales, identify the target customers, and the means of reaching out to the clients. According to Thompson (2021), Costco has focused on a model that generates high sales and low inventory turnover. The business model has formed part of the company’s strategy, enabling it to generate volumes of sales and high profit margins in the market. The business has also managed to cement a solid relationship with global consumers using a subscription system, where members who have a subscription can access and purchase goods at a lower price. In this process, clients can buy volume of goods and always think of the company whenever they think of making a purchase.
Good business strategies have the end user of the product in mind. In 2017, Costco’s business strategy had four unique elements that described its relationship with its clients. Vrontis et al. (2017) explained that a consumer-focused and value-based business strategy allows the business to understand and provide goods and services that resonate with needs and preferences of consumers. Costco’s business strategy reflects this mode of a value-based business strategy, where the combination of mission, vision, and goal of the business reflects the company’s determination to live to the fulfillment of its strategy. The four elements of the company’s business strategy are a pricing strategy, value-based or customer-focused services, and geographical expansion. The low-cost pricing strategy can be described as a weakness to the overall or net revenue generated as the company sells products cheaper compared to its competitors. However, it is also an advantage as the firm can compensate on the differences on revenue generated from the subscription program where members pay subscription fee. Additionally, the company compensates for differences in profits through selling high volumes of goods as an advantage for overcoming storage in warehouses and other additional costs that would arise if goods were not moving fast from the warehouses.
The second strategy is to maintain a limited brand selection for goods and services. While this strategy is aimed at making sure that the subscribed customers settle for a brand and the firm maintains a steady flow and ready market for the available brands, it is a disadvantage for customers who would wish to have a range of choices from the company. The limited brand strategy undermines the value-based or customer-focused approach where new clients may be frustrated when they find out that the brand they intended to buy is not available in the company’s online portal.
Apart from the low-cost pricing and limited brand selection strategies, the firm has maintained its competitive strategy in the market by having a team of management team and employees who have the mission and vision of the company at heart. Camilleri (2017) explained that successful businesses have leaders in place who value the efforts of the employees and the company at large. In this case, Costco’s management team understands the core role of the business and why it exists in the market. The management team has created an open engagement framework with employees by reducing turnover rates and focusing on maintaining a positive relationship with employees. The advantage of this strategy is that employees can refer clients to the firm and share the positive experience at the company with colleagues, which is necessary for a positive branding for the company. The business is also in a better position to overcome costs associated with turnover rates as employees feel safe and the company cannot incur additional costs in hiring new employees.
Efficient and effective management team can also play a direct role in setting objectives that are in line with the company’s mission statement and vision. The objectives are realizable and reflect the company’s culture, even when new employees are brought on board. An example of this is from Craig, who took over as Sinegal’s successor. The new CEO understood the company’s mission and vision and was able to set objectives that reflect the culture of business within the firm, making it necessary for the firm to continue thriving even when there was a change in top leadership.
The third element is to do with the place. It is where and when the client can find the goods and services. Today, the company has taken advantage of the internet and consumers can have an unlimited access to goods and services over the internet. This strategy has enabled the firm to have a global presence, which is good for reaching diverse markets and maintaining steady growth within a limited period. Yoon and Sengupta (2021) explained that a good strategy is one that gives customers a positive experience and one that encourages them to come back for more goods and services. It is, therefore, not surprising that Costco’s online presence has posed a significant threat to its competitors. The company’s website is also simple and easy to navigate without popup ads that could disrupt the client. Evidently, the goal is to give the client as much positive experience as possible and encourage the client to come back for another purchase.
Recommendation/Justification
Companies with positive reputations can flourish and withstand stiff competition in the market. Costco has a positive reputation in its sustainability programs and employee satisfaction. However, there is a need to business should shift to customer-centered sales strategy to increase its market share. The company’s positive reputation comes from the policy of obeying the law, taking care of members, taking care of employees, and respecting its suppliers. The company’s motto is based on “doing the right thing.” The focus on doing what is right protects the company from possible lawsuits and other expenses that could arise to deter it from pursuing its mission and vision (Roos & Hahn, 2019). One of the ways of achieving this is to scan each customer’s receipt before exiting the shop to make sure that no customer has been overcharged as this could trigger dissatisfaction. Introduction of new product lines will also make sure that the company provides its consumers with a variety of choices, instead of forcing them to only settle for what is available.
Conclusion
Costco is growing to become a global brand. The company has attained its tremendous growth by focusing on a pricing strategy that attracts customers who are always concerned with pricing. The strategy makes sure that customers get the lowest prices for quality products. However, the strategy suffers a limitation of limited brands that deny consumers freedom of choice. The low pricing strategy also reduce overall net profits that could have benefited the company. As the company expands to the competitive global market, it would be better for it to take into consideration the varying tastes and preference of consumers through expanding brand categories.
References
Breuer, H., & Ludeke-Freund, F. (2017). Values-based network and business model innovation. International Journal of Innovation Management, 21(03), 1750028.
Camilleri, M. A. (2017). Corporate sustainability and responsibility: creating value for business, society and the environment. Asian Journal of Sustainability and Social Responsibility, 2(1), 59-74.
Roos, D., & Hahn, R. (2019). Understanding collaborative consumption: An extension of the theory of planned behavior with value-based personal norms. Journal of Business Ethics, 158(3), 679-697.
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2021). Crafting and executing strategy. McGraw-Hill US Higher Ed USE.
Vrontis, D., Thrassou, A., & Amirkhanpour, M. (2017). B2C smart retailing: A consumer-focused value-based analysis of interactions and synergies. Technological Forecasting and Social Change, 124, 271-282.
Yoon, Y., & Sengupta, S. (2021). The role of business strategy on the adoption and effectiveness of broad-based employee share ownership. Journal of Organizational Effectiveness: People and Performance.