Costco has been in operation for a long time in which, it has been able to structure itself efficiently to maintain profitability and its going-concern status. Costco boasts of high inventory turnover enabled by its high customer turnout, mainly because of customer loyalty instilled over time especially among the US population. Costco has adopted organizational strategies that have facilitated its success, but however some have proven detrimental to the company as the following analysis reveals.
Strengths
- Costco keeps low prices for both its retail and wholesale items therefore, encouraging high inventory turnovers that translate to high profitability.
- Consistently low prices and the fact that Costco is willing to fight corporates like Coca-Cola for its customers encourage customer loyalty to Costco; therefore, besides attracting new shoppers they gain a form of fixed income from steady shoppers. All these characteristics including the good and friendly customer experience at Costco are the factors that helped Costco be the best in the American customer satisfaction index.
- Employee welfare is as key at Costco which contributes to low employee turnover, due to the low recruiting and firing costs Costco can be able to afford good remuneration for its employees that include benefits as heath cover. At Costco employees have the opportunity for career advancement which contributes to good employee retention for Costco thereby creating employee good motivation and loyalty, a fact evident by employees contributing to a large part of Costco shoppers.
- Costco as has a wide product range for sale ranging from foodstuffs to vehicles, this broad product mix ensures efficiency for shoppers to shop for everything under one roof.
Weaknesses
- Some of Costco’s weaknesses include its battle with Coca-Cola; this strategy lost the company a piece of their revenues from soft drink sales. Therefore, in the future Costco should choose PR strategies that are less detrimental towards sales.
- Costco’s strategy of high employee turnover increases their wage burden since workers who stay will eventually demand job security and reliable pay, therefore, by using short-lived employees wages can be kept to increase profits.
Opportunities
- Costco can be advised to take advantage of specialization; this attracts a specific group of customers so as to attract specialized revenues. An example is Home Depot which has specialized in home improvement
Threats
- Theses includes price-wars between them and suppliers, an example is when the company stopped seeing Coca-Cola drinks until the Coca-Cola reduced its prices.
