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Essay: Analysis of costco wholesale corporation

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Analysis of costco wholesale corporation

Analysis of Costco Wholesale Corporation


Costco Wholesale Corporation is headquartered in Issaquah, Washington. Based on sales volume, it’s the world’s largest warehouse club chain. Its founders are Jeffrey Brotman and Jim Sinegal. Since its size and business model were the same as those of Club price, they merged in the year 1993. It thus changed its name to PriceCostco. It was run by executives from both companies but Sol and his son Robert price who were the founders of Club Price later left in 1994 to form Price Enterprises. Its main competitor is Sam’s Club. It has an employment of about 142,000 part-time and full time employees. In order to fully analyze this company using the variables listed, Burke-Litwin model will be applied. It was developed by Litwin and his associates and was later refined by Burke and his colleagues. The external environment in this model represents input, while the output is represented by individual and organizational performance box (Burke and Litwin 527). Twelve organizational variables are the ones represented by the boxes. A change in any one of the box obviously leads to a change in another box. This is a model that is applied in analyzing, predicting, understanding and managing organizational change.

Main body (discussion)

In trying to achieve its mission statement, it has been using its code of ethics. It employs a divisional organization structure with its national wide operations being divided into three divisions. These are Southwest, Northern/Midwest and Eastern. Each of the divisions is headed by an Executive Vice President. The divisions are further divided to yield regions headed by Senior Vice Presidents. The regions are broken down to form districts which are governed by District Vice Presidents. There are numerous warehouses in these districts which are staffed with General Managers, numerous Assistant Managers and other subordinate staff members (United States District Court 4). Its organizational structure observes four business ethics; obeying the law, taking care of employees, respecting its employees and taking care of its members. There is belief that if all this is observed, then their ultimate goal of rewarding their shareholders will be achieved. There are direct buying relationships with producers of national brand name merchandise. It’s notable that their operations are nit damaged by buying from alternative sources. All workers are arranged in self managing teams, where all are made to feel that they are members of a supportive community

Costco Wholesale Corporation employees receive extensive and on-going training and education to continually improve their skills as per the market demands. We have effective mobilization of an engaged and committed workforce. The self managing workers of Costco are more productive, and there is low turnover. Core competencies are in the high-value and high-quality products with attractive prices. This is aimed at attracting a higher-end customer. There are established strong vendor relationships (Cheathouse.com 1). Economies of scale in purchasing are achieved through an item-focused strategy. This has been assisting the company to achieve its mission of respecting its shareholders. Excellence is achieved by operating within the core business and core competencies. It’s their core competences that are making it to achieve the ability to reach their always future projected performance. The effectiveness of core competences have been made easier by the structure of the organization that allows the workers self manage themselves.

Management has so much respect for its employees. For so any times, they have been chastised by Wall Street analysts for keeping good employees for long and paying them high wages. There is participative management that in response has made the per-employees sales to be high (Yukl 2). Keeping good employees has been a strategy for the company’s long term success. Managers have so much focus on their employees and customers; this has made considerable improvements in the company’s product mix and sales. Employees are always alerted in their warehouses and are thus happy in return to feed any latest information. This will happen from the field up the chain and even the headquarters. Ethics followed in the structure of the organization have made participative management to succeed.

Human resources department has always been employing workers who fit their job tasks. Diversity in employment has also been a common practice. There is employment of employees irrespective of their race, gender, sex, religion or even age. This has been followed by keeping of these employees for long in the company. It’s the reason why effectiveness and efficiency has been achieved in production. More production has been launched in New Leaf Tea in its all 77 stores in Canada. Achievement in such cases has been there as the management practices are always focusing on employees who are expected to work on each an every production program. There are effective information systems that carry business and personal information of their operations. Due to the management’s policy of allowing the employees to extend any useful communication to them, these systems have worked very well.

Working climate is positive as the philosophy of the company is to pay better than average, giving workers a salary they can live on and provide good benefits. This is a philosophy that has made them to effectively work with the human resource department in hiring employees who later are retained for long. Workers are provided with a broader range of health plans, with 92% receiving health-insurance premiums. High pay has raised its customer loyalty. This has raised employees’ motivation since other companies have nit been able to offer such benefits like Wal-Mart. Positive climate has been in close connection with the management practices which endeavor to allow employees to fully participate in the running of the company. The structure organization has assisted so much in extending of benefits to employees as it has ethics to observe.

Costco is a well-managed and very motivated workplace (Roos 1). Employees here are paid an hourly wage of around $15.97 which is quite competitive in today’s business world. There are also other competitive benefits like accounts and profit sharing plans. These employees are easily attracted and retained and some of them are of top quality. They are able to feel the success of the company. There is high job satisfaction for employees because of these benefits. As a result, productivity has been increased. Philosophy of the company’s management has made this to be a success. A relationship exists between the motivation provided here and the environment/work unit climate. Since the climate has been made contusive for employees, they are motivated in their job places and thus the increased production per employee.

Low levels of employee turnover tell us that employees’ individual needs are met. Costco has a very strong culture that is always followed. They seem to send a message to their employees that they value them (oppapers.com 1). Each an every employee would like to feel appreciated. This makes them to feel that they want to do more for the company. This in return has raised productivity levels. The dominant culture is shared by all employees. This has worked very well in motivating employees which is a key success determining factor.

Works cited

Burke, Warner and Litwin, George. A Causal Model of Organizational Performance and Change. Vol. 18(3) 523-545. New York: Sage,1992.

Cheathouse.com. Business Analysis on Costco Wholesale Corporation, retrieved on 30th August from
http://www.cheathouse.com/essay/essay_view.php?p_essay_id=68764, 2006.

OPPapers.com. Costco Research, 2008. Retrieved on 30th August 2009 from, http://www.oppapers.com/essays/Costco-Research/177522

Roos, Dave. Do we work harder when we’re paid hourly? Retrieved on 30th August 2009 from http://money.howstuffworks.com/work-harder-paid-hourly1.htm.

United States District Court. SHIRLEY RAE ELLIS, LEAH HORSTMAN and ELAINE SASAKI on behalf of themselves and others similarly situated, Plaintiffs v COSTCO WHOLESALE CORPORATION, defendant, n.d. Retrieved on 30th August 2009 from

Yukl, Gary. How leaders influence organizational effectiveness, 2009. Retrieved on 30th August 2009 from

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