The University of Lahore

Lahore Business School

Assignment: 4
Strategic Management
Master of Business Administration

Submitted to: Miss Fizza

Submitted by: Maryam Khushbakhat.

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 Case: A Simple strategy Costco
How is Costco’s business model different from other retailers such as Walmart and Sam’s
club? Why do you think Costco’s strategy works?

Business model is classified as a rapid inventory turnover by generating high sales volumes. The
company implemented their revenue through membership by offerings their member low price
product of the national selection plus their private brand also.
Costco’s business model is a great appealing because they built a strong relationship with their
customers by offering them a good quality merchandise with low price. Costco earned customer
loyalty, the number of the membership keep increasing, and they have expanding
internationally. They built a strong relationship towards their suppliers because of their rapid
inventory turnover, Costco would be able to sell their merchandises before the payment is dues,
so they would be able to take a discount from the manufacture for making an early payment.
Costco have a strong relationship toward their employees because most of their employees
want to work with them until they’ve reach their retirement.

2. Beyond low turnover, how else does Costco benefit from treating its employees well?

The company's strategies that differentiate it from its competitors are to treat employees well,
limit the number of items it sells, and keep markups low. Costco clearly values its employees.
The company pays its employees on average 40 percent higher than competitors and offers
health care insurance to all employees who work more than 20 hours per week. The company is
also known for promoting from within, with 98 percent of their store managers and many of
their company executives having started out as stock clerks or cashiers. These efforts have
helped build a loyal and hard-working employee base that actively contributes to building a
profitable bot- tom line.

3. Are you surprised that Costco sells cars? How does offering diverse products help the
company attract new members?

No, it didn’t surprise me. Costco has responded to this threat by expanding the diversity of their
inventory, offering deep discounts on high-ticket items such as cars. Such tactics help to
encourage membership by making the company the go-to location for purchases that
consumers prefer to make in person and while they are there, they can pick up some toothpaste
at a pretty good price.

Costco now has a comprehensive website and sells online. Is this a threat to Costco's business
model? Is there a downside to selling online?

Even though Costco doesn’t focus on online sales, it uses it as a way to provide products and
services that might not be available in its warehouses. This is a privilege that members enjoy.

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