Evaluating a Firm
Monday, October 1, 2012
Dennis R. Boedeker, MBA, C.P.M., CPIM
Certified Advanced Facilitator
Assuming the role of a Mutual Fund Manager, Costco Wholesale, a Fortune 500 company,
has been chosen for analysis to decide whether to invest funds with the organization. This paper
will high-light the results of a SWOT analysis, the internal and external stakeholders, their wants
and needs, and finally, how their wants and needs are being met by the company.
Costco Wholesale Company is an acknowledged market leader and was listed 28th in the top
100, most successful businesses in the world, in 2010, and ...view middle of the document...
Costco’s unique selling proposition (USP) consists of products that are limited, but different,
and considered high-end products. “Costco’s warehouses carry only about 4,000 products,
compared with supermarkets that have 40,000 items” (Cascio, 2006, p.558). Costco provides a
variety of goods so the customer can shop in one convenient place. The in-store products are
placed in the main aisle so when customers first walk in they can see with one quick glance, all
the bargains available. Customers never know what is going to be in the store at any given time,
however, all products are carefully chosen by marketing managers behind the scenes. Due to
the limited variety of products that customers would not normally go shopping for, they see the
merchandise and it’s bargain price, and make a purchase based on a great deal. Customers are
spending more, but saving in the long run. On September 30th, 2012, CNBC highlighted a
documentary about Costco and its’ functions within the organization, and stated, “Costco has
tapped into the psychology of shoppers” (CNBC, Costco, 2012).
Some would say that Costco has too narrow of a product line, however, they compensate this
with phenomenal prices below market value. Costco has a slower market growth as compared to
Walmart, but because they have had a consistent and constant growth since opening, investors
choose to stay with Costco for their consistency and proven growth over time. “Costco generates
on average $10.32 of sales per dollar invested, whereas, Wal-Mart only generates $5.44, which
means that Costco is twice more efficient than Wal-Mart in using its resources, despite their
differences in business model and merchandising and promotional strategies” (Corona, 2012,
Opportunities are many for all stakeholders. Costco’s biggest money maker is membership,
but also has a promising and consistent growth value in investment relations since its beginning.
Sinegal has earned himself the prodigy of proven management. According to Jim Sinegal, the
Company's Co-Founder and Director, "Costco is able to offer lower prices and better values by
eliminating virtually all the frills and costs historically associated with conventional wholesalers
and retailers, including salespeople, fancy buildings, delivery, billing, and accounts receivable.
We run a tight operation with extremely low overhead which enables us to pass on dramatic
savings to our members" (Costco, Investor Relations, 2012).
As owner and CEO, Sinegal visits all stores at least once a year to check things out for
himself. They have a solid mission and code of ethics. “Our Mission is to continually provide
our members with quality goods and services at the lowest possible prices. In order to achieve
our mission we will conduct our business with the following Code of Ethics in mind:
Our Code of Ethics
1. Obey the law.
2. Take care of our members.