LED 560 SLP #3

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Trident University International *

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Management

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Feb 20, 2024

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Uploaded by CoachHawkMaster342

1 Trident University LED 560: Leadership and Strategy SLP #3: The Action Compass Dr. Virginia Johnson

2 Introduction Costco Wholesale is a massive retail brand that has 838 warehouses around the world. Each store has about four thousand Stock Keeping Units (SKU) and Costco relies on quality products from each manufacturer and does all of its shipping in large values. Costco’s strategy is based on its merchandise quality and prices that are lower than others elsewhere. In this paper, there will be a discussion about Costco’s strategy or strategies, application of the Grand Strategy Matrix (GSM) to determine the optimal strategy Costco should use, and determining if Costco is using the best strategy or if they should change their strategy. Costco’s Strategy In Costco’s 2022 Annual report, Costco reported that their strategy is “to provide our members with a broad range of high-quality merchandise at prices we believe are consistently lower than elsewhere” (Annual Report, 2022). Costco does this by having over four thousand stock keeping units in each store while having around eleven thousand online. They rely on fast- selling models, sizes and colors of products which can be sold in a case, carton, or multiple-pack quantity. The organization generally accepts returns on merchandise while having different return policies for electronics. Membership is a major part of the company’s strategy, and the company had a renewal rate of 93% in the US and Canada and 90% worldwide with almost 119 thousand paid cardholders (Annual Report, 2022). Competition from other US retailers and wholesalers allows Costco to be selective on the companies that it selects to sell products from to ensure they compete worldwide. As Costco is very successful as a wholesaler, the next thing to review is where the organization sits in the Grand Strategy Matrix. Grand Strategy Matrix

3 Looking at the ground strategy matrix, Costco works in quadrant 1 (Strong Competitive Position and Rapid Market Growth). “The first quadrant refers to organizations with strong competitive base and operating in fast moving markets” (Francis, 2018). Costco competes with companies like Walmart, Sam’s Club, Kroger, and Amazon and is able to shift its priorities to any and all countries that it operates out of. “Such organizations are better to adopt or pursue strategies such as market development, market penetration, product development etc.” (Francis, 2018). Costco is able to leverage their requirements of high-level goods from each of the companies that it sells products from and uses that to state that it is providing the highest quality products around. Lastly, “The idea behind is to focus and make the current competitive base stronger” (Francis, 2018). In their annual report, Costco said that they often sell inventory before we are required to pay for it, even while taking advantage of early discounts and saving money. They are able to use this strategy to be successful overseas and to keep their competitors in the rear-view mirror. Is Costco Pursuing the Best Strategy Costco Wholesale has a great strategy that allows it to compete at an international level while maintaining its constant level of taking care of its primary focus of selling goods at lower prices. The first thing that Costco’s strategy allows is for is to be able to be competitive internationally while doing things that lower its costs for shipping goods. “In today’s competitive dynamics, understand that many aspects of business must be held at parity across a wide swipe of the competitive landscape… you must maintain stands of work equal to that of your competitors” (Ireland and Hitt, 2005). According to their annual report, Costco buys most of their merchandise directly from manufacturers and route it to cross-docking consolidation points which creates freight volume and handling efficiencies, lowering cost associated with traditional

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4 multi-step channels (Annual Report, 2022). By doing this, they can reduce the cost of all products and provide products worldwide at lower costs, which plays into their strategy of prices lower than elsewhere. Additionally, Costco has to be competitive on an international level and they do that by ensuring it stays constant no matter the cause. “The global economy has created a new competitive landscape… for the most part, these changed are revolutionary… revolutionary changes happen swiftly are constant, even relentless in their frequency and affect virtually all parts of an organization simultaneously (Rhodes, 2010). Costco does not open a store up in any international country without knowledge that they can succeed, and their strategy allows for them to succeed where their global competition may not. Conclusion Costco Wholesale is a massive retailer that has in store and online selling capabilities and has continued success in the United States and internationally. By leveraging their merchants to provide high quality merchandise and paying attention to current markets and competition, Costco has created strategies that continue to help it grow and succeed. Costco has continued to be in the first quadrant of the Grand Strategy Matrix and will continue to be in that quadrant as there is not a competitor that challenges its competitive position and market growth. In this paper there was a discussion about Costco’s strategy or strategies, application of the Grand Strategy Matrix to determine the optimal strategy Costco should use, and determining if Costco is using the best strategy or if they should change their strategy.

5 Reference Page Annual reports and proxy statements . Costco Wholesale Corporation - Financials - Annual Reports and Proxy Statements. (2022). Retrieved September 18 th , 2023, from https://investor.costco.com/financials/annual-reports-and-proxy-statements/default.aspx Francis, A. (2018, August 6). Grand strategy matrix . MBA Knowledge Base. Retrieved September 18 th , 2023, from https://www.mbaknol.com/strategic-management/grand- strategy-matrix/ Ireland, R., & Hitt, M. A. (2005). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy Of Management Executive , 19(4), 63-77. Retrieved September 15 th , 2023, from EBSCO. Rhodes, M. (2010). Five essentials of an effective strategy. Free Management Library . Retrieved on September 15, 2023, from http://managementhelp.org/blogs/strategic-planning/2010/06/07/five-essentials-of-an- effective-strategy/

LED 560 SLP #3

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