Costco Wholesale Chain Distributorship Analysis

Today, Costco is considered the largest wholesale chain distributorship in the United States, the third-largest retailer in the United States, as well as being ranked the ninth-largest retailer in the world. Additionally, as of July of 2007, the retailer has been considered the largest retailer of fine wine in the entire world. With its headquarters in Issaquah, Washington, the company has grown to become one of the most recognized retailers of house and outdoor pieces of equipment, far surpassing others in the same field. As a wholesale club, Costco is in a league of its own, considered as the fourth largest retailer within the United States. Within the 27 years of its operation, the company has grown to be the primary discount retail warehouse, leading through the incorporation of its strategy to offer a limited selection of merchandise at rock-bottom pricing. This has also been incorporated by the setting of a razor-thin profit margin from the sales of the wares, as well as the establishment of a lofty ethical set of standards that are instilled in the provision of quality goods and services together with the rewarding of the company’s workers with profitable premiums, working be3nefits, such as healthcare insurance and the chance to buy loyalties.

The concept of the creation of Costco as a warehouse club was initially thought out in the 1970s by Sol Price. According to James Faraday, Price set out to create a warehouse store: named the Prince Club, which was designed as a giant retail store with the capability of expansion and diversification. By 1983, Jeffrey Brotman and James Sinegal, two of Price’s students, started the very first Costco store in the city of Seattle, Washington, strategically merging it with the original Prince Club store which had gained critical acclaim. After some time, Sinegal went on to eclipse the influence that his onetime tutor, Price, had in the market, through his capability to attain the right products and make them available for the customer at the right time, in the desired condition and at the right price. Today, Costco Wholesale Corporation is one of the largest wholesale stores in the world, with about 500 or more stores throughout the United States and the entire world. The stores have become internationally known through their capability to offer discount shopping offer without fail, low-cost considerations for retailers as well as the quality of the goods and services that are offered. The store also offers membership for to discounted prices, at a small nominal annual fee; the Costco warehouses are strategically designed to help small to large scale businesses and organizations to reduce the costs of production as well as the repurchase and reselling of goods that occur in the everyday running of a business. The individual consumers of the organization are also reimbursed for the costs incurred through their purchasing of personal needs goods.

Throughout the world, Costco has come to be known as a top-quality international organization, with regional and international brands that are guaranteed the production of quality products. The retail stores are dedicated to the production of a large selection of products and services. Shoppers to the organization are guaranteed the purchase of goods and services from a wide range of selections and fields; the best example given by the company being the purchase of a small 300ml can of mayonnaise to the purchase of a $100,000 diamond ring. Because of this diverse market, the company makes huge profits, with an estimated gross margin of under 15 percent; making it the largest low-cost operator in the wholesale industry.

With Costco’s employees and the retail managers being the highest-paid the rest that is in the family of Costco lead a humble but very comfortable livelihood that supports them in every corner of life be it education, health service, and other facilities relevant to life. This has made the employee job-oriented and has been working hand in hand with its directors and managers enabling the company to meet its goal. This has been hard work that goes around in all sectors of the company that moved from one stall in Seattle to a multimillion-dollar organization with hundreds of branches in different states.


According to James Sinegal, the transformation of a single store into a multinational warehouse club “often begins with the vision, drive and perseverance of a single individual” in the company (Sinegal 3). Additionally, to succeed in today’s competitive market, “aspiring business owners must be able to identify goal trends, provide ethical leadership, and develop effective corporate cultures and mange the various environments in which they operate” (Sinegal 3). This is the typical philosophy of all globalization that takes place throughout the world, calling not only on the increase in quality of the goods and services that are sold by the organization, but also the ethical and moral responsibility with regards to how the employees handle the customers that are placed in their charge.

The globalization strategy that has been employed by Costco has been the expansion of the opportunities in new frontiers, building and establishing new stores throughout the United States and beyond these national borders. The company understands that the market in the United States is already saturated with other wholesale stores, realizing that the most explosive sales will only be realized from the international market. This international market is the only place where big box stores are not yet known and are typically a new novelty concept. Before the start of 2003, the primary investment objectives that were used by the company were the harnessing of new market frontiers in the international market. However, as production and growth continue, the company has significantly realized that most of these local markets are already saturated, necessitating the taking of immediate action to strengthen not only the existing markets but also to create new ones that are as far away as possible from possible saturation. This thus necessitates the prevention of intrusion from the newly identified markets and opportunities, preventing outside competition and harassment. According to, 2003 saw the creation and opening of about 25 new stores throughout the international market, a 68 percent increase from the previous investments. Since then, the company has overseen the opening of about 70 other new stores in the markets of Europe, 5 in South Korea, 3 in Japan, and 5 in Australia. According to Sinegal, the globalization tactic that is employed by the organization is not only standardized but competitive; being run by the leading maxim of “starting from the bottom line.” accordingly, this bottom line implies that the company cannot leave its management behind, even if this globalization has to be undertaken.

With the success that the company has had in its expansion from the United States to Canada and Australia, development plans into further parts of the globe are underway, mainly in china and the Middle East. China is the most viable market for globalization, increasing in its attraction levels because of its enormous size both in geography and population. The Chinese market has also experienced enormous growth since the year 2003, favorably accepting and retaining the services that the company has to offer and setting aside a market that is both unrivaled and competition friendly. Additionally, the growth of the Australian market has also increased the chances for growth and globalization for the giant conglomerate, with its industrial development favoring the sale and purchasing of the goods and services that the organizations stock. As long these perceived growth and globalization benefits overweigh the possible problems that might lay within this global expansion, globalization of the conglomerate seems to be at an ever-increasing speed, with the company’s management not being afraid of entering these markets. The biggest recommendation that has been made for the growth of the organization is to enter into these overseas markets and conquer them, creating market dominance through the provision of quality products that far surpass those provided by the competitors. While many international destinations do not have a one-stop shop that offers all the goods that the customers want and need at one store.

Team Work

Costco being one of the famous companies offers things at all levels from wholesale to retail it is sure that they have gotten into this position because of unity. The good range of talent at different levels in the field in the company has been utilized to make a good organizational decision so that they can reach the level of success they have now. With a good chosen team the amalgamation of all this different strengths results into a field of expertise that work together towards the given goal of Costco. At Costco they have ensured that in every department there is not less five experts to work on issues as they arise.

With a dare need for expansion, and also considering the size of the company it is clear that the company will need several opinions and suggestion that will help raise the size of the company. At every time that Costco Company has a need to introduce anything new in the market, which is expansion, the board of trustees will always hold a meeting that will turn out to be very useful for the reason of ironing the flow and surge of ideas that intended plan, testing the proposal for its survive level and at the same time specking out any foreseeable pit falls.

The story of Costco has a long history that goes a long way from a rise of a single store and going up the ladder to a multinational succession of gigantic warehouse. With all the work at hand, though the ultimate responsibility rests in the hands of the team leaders and other entrusted people there is little that can be done when it comes to accomplishing any job a good team structure was laid at every level of growth in the company giving it a foundation to rely on in respective places.

As the company with time continued to open new branches and the management level kept ion expanding and becoming more complex to manage it. Soon they realized that all the work can be made easier by the introduction of incentives to the workers so that they can participate in the company building. The sales managers introduced a free will suggestion policy that leads the workers to be more flexible and at liberated to express themselves. Costco soon introduced a dramatic raise in the employee’s salaries with an average hourly wage of up to $17 in the retail levels and the wholesale level getting a raise of up to 92% increase. This in return developed a good team spirit that later created a sense of loyalty and belonging. The fact that the company is taking good care of your financial matters extending their generosity to covering issues like health insurance the employees soon developed an influential motivating force among them that could not give chance to of laziness or languor. The employees due to the sense of pride and belonging to a triumphant business group they compete internally to give the best in return to the company. The extra influence among the workers is healthy when it is controlled since it always leads to zealous work done and resulting to high returns at the end of the day.


Ethics which is also known as moral philosophy subdivision of philosophy that tackles and deeply addresses about morality. This is the good and the evil, the does and the don’ts meant to be observed in the working environment. Ethics are a set of principles founded on work and diligence, which helps mould character in the work place. Workers who demonstrate a good work ethic make it easier in the working environment. Good implementation of the rules set, goes along way due to their reliability, good scheme and maintaining social skills. This will act as an appropriate tool to make the best decision in the company and as the same time a strong basis to resolve business divergence. For a company to raise up all the way to the top like the Costco there are a number of challenges that an organization has to go through and conquer them so as the recognition can be placed on their hands. Especially in the 21st century the competition from the other apprising similar companies the owners must be in a position able to point out the other relevant global trends that will enable them be in a position to deal with the market. Ethic will not automatically be followed in the work place since you have employed professionals rather it is the culture that you create in the work place that anyone in the family will have to follow. In Costco the culture of obeying the ethics and the disciplinary rules in the company I brought about by the decisions made by the leaders and managers in the company. The company has presented ethical leadership through their action as the managers in charge of the running of the company.

There have over the years been the able to develop effective company ethnicity, by be leading in a fair manner and creating an environment that is revenue productive friendly. Costco serving in all levels in the market from executive sales to the lowest level of a common consumer there is a great need to keep inviting new market and also the hardest part is maintain the existing ones, the company has heavily invested in the training their workers especially those in the sales department. They have not left all the work to the employee to figure it out how to treat the customers but have chipped into the developments. They have from time to time introduced the workers to professionals that will aid in ironing their skills and performance in order they can give the expected results.

With a good system in place for resolving disagreement ethically it results to strengthening loyalty towards the company. The subject has faith in the system, since they know the procedure to the resolution of any clash is the same and fair as either party with disagreement can craft a just and rational resolution.

Providing Leadership in Bulk

After the procurement of the giant conglomerate in 1996, the company then bought some land in Cuernavaca, Mexico, having no idea that this move would spark it off as the biggest global warehouse club in the world. What had initially started as the initial running of an ordinary business move for the company “soon turned out to be a public relations crisis” (Sinegal 9). Numerous protestors to this move were arrested, with the ensuing conflict receiving tremendous media attention. Accordingly, the company thence required that the leadership management develop new strategies to cater for this crisis, moving to stop the “chainsaw crews” from the media and other stakeholders from turning the crisis into a public debacle.

Because of this public relations disaster, the company set aside numerous sensitization programs, going beyond their original expansion budgets in order to preserve the national and international status that it had had for a long period of time.

Accordingly, the biggest problem that the leadership of the company has had for the longest time is getting people to change and accept this change: this is in regards to the employees of the organization as well as the intended customers of the organization. in order to achieve this goal, both at the local and the international markets, the company has heavily invested in communication, sometimes calling for press conferences and regular news releases, in order to inspire and introduce change, and change the skeptical views of the employees so that they can enthusiastically carry the strategies out.

According to Williamson, the company’s CEO, Jim Sinegal, has often refused to ship his operations base to an offshore office, because he believes that this move might change the image that people have had for long. As most economists have noted, the use of offshore offices has stopped making sense when most people in the industry start doing it. This is because the coast advantage of an office goes away, together with the fact that “customers who no longer have salaries and money to buy the products and services made by all the cheap labor” (Goldhagen 45). Though the economic principle of ceteris paribus states that there is a necessity of “all other factors or things remaining the same,” there is hardly an occurrence where things ever remain constant (Goldhagen 45). Accordingly all actions of the leadership and management teams of the organization have an associated reaction.

According to Williamson, discussions of the leadership in the Costco Wal-Mart challenge never fails to present the David versus Goliath metaphor. According to the writer, Costco, depicted as David in the story, has continuously been able to provide better resources and services, fulltime quality opportunities, together with employee benefits while at the same time focusing on the experience of the customer as they visit the warehouses. Goliath (Wal-Mart), on the other hand, has opened just about as much retailers throughout the United States, using its enormous size to extract concessions from the various resellers that are available in order to lower their selling prices and ensure their popularity.

Costco’s CFO, Galanti, has maintained that the company will focus on the hiring of more workers in its various distribution centers in order to ensure that customers are not inconvenienced between the time they check in and the time they checkout, increasing satisfaction and service quality. This is because of the growing problem that the company has experienced: of stores and parking lots being fully stuffed with purchasing customers. Additionally, the fact that most of the company’s clientele reside in the wealthier urban sides of the nation, most of them being “executive club members” who are busy and requiring fast, executive assistance has necessitated strong leadership qualities in management.

Works Cited

Goldhagen, David. Costco: The Role leadership and teambuilding in organizational behaviour. New York, NY: Alfred A. Knopf, 2002.

Sinegal, James. Costco Wholesale Corporation. New York, NY: Berghahn, 2010. Print.

Williamson, Dickson. The creation of giant conglomerates and globalization. New York, NY: Alfred A. Knopf, 2009. Print.

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