Costco’s Philosophy and Leadership Style

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Costco is a membership warehouse club and is dedicated to bringing the best possible prices on brand-name merchandise and its quality. Costco provides a wide selection of merchandise, including the convenience of specialty departments and exclusive member services for hundreds of locations worldwide. Designed to make consumers shopping experience seamless and a pleasurable one. The company’s first location, opened in 1976 under the name Price Club, it was in a converted airplane hangar on Morena Boulevard in San Diego.

The company knew it could achieve far greater buying power by serving small businesses and a select audience of non-business members. The growth of the warehouse club industry was alive and flourishing. In 1983, the first Costco warehouse location opened in Seattle. Costco became the first company to grow from zero to $3 billion in sales in less than six years.

When Costco and Price Club merged in 1993 to become PriceCostco, it had 206 locations generating $16 billion in annual sales. To become a valued member at Costco you must first purchase an annual membership with Costco through their website or in person at a retail store. Their operating philosophy or mission/vision statement is: “Keep costs down and pass the savings on to our members. Our large membership base and tremendous buying power, combined with our never-ending quest for efficiency, result in the lowest possible prices for our members.” Since the continuation of the Costco name in 1997, the company has grown globally.

The fiscal year of 2017 total sales were $126.1 billion. Anyone shopping at Costco feels they might be getting a good deal buying in bulk they are sadly mistaken. In the long run they might be buying in bulk to save few dollars but ultimately it goes to waste since the customer is unable to use the goods effectively till their expiry date or till their expired. The main problem with buying in bulk is that perishables and organics such as produce goes bad before even being consumed or resold if bought by a business.

Which leaves the end buyer wasting a lot more than they are actually saving in dollars. Also, if you have a lot of something the customer tends to consume a lot more of it resulting in health problems and weight gain. The third aspect of the Costco effect it has on consumers is that when they see an item at a significantly discounted cost they suddenly get the urge to buy it, even if you didn’t need it. But as consumers we try to justify the buy as if we got a tremendous bargain of a deal. This happens to be the case with all apparels sold at Costco, especially since they sell a lot of name brands at less than competitive fair prices.

Since inception Costco now runs hundreds of warehouses around the world, management decision making within the company varies from region to country.

Decisions were made in an unsystematic rational way so that the decision maker is aware of all outcomes, possibilities, and has proven to be the most consistent way when choosing the best alternatives to its consumers. For example, on the spot situations that are out of the normal range of conflict may constitute for an unsystematic approach to the situation that is random and would and would not be dealt with according to procedures implemented.

When it comes to customer service the decisions on inventory and display, there is a stringent decision making that takes place followed by a systematic approach in the corporate offices resulting in a rational model of decision making. All while the unsystematic model can be seen more prominently on the warehouses floor. Costco’s mission statement has also contributed to its customer service culture to continually provide their members with the highest quality of goods and services at the lowest possible prices to remain competitive. In order, for them to achieve their mission they will conduct their business with the following Code of Ethics in mind.

Rule #1 Obey the law – A moral imperative to challenge a law, must conduct business in total compliance with the laws of every community where they shall conduct business.

Rule #2 Take care of our members – Costco membership is open to businesses and individuals. The members are sole reason for their existence and are their key to success. So, if they don’t keep their members happy and satisfied, they feel there is little else that makes a tremendous difference.

Rule #3 Take care of our employees – Costco believes that their employees are their utmost important asses. They feel that they have acquired the best employees in their industry, so they are compelled to reward them with many opportunities towards personal, career growth and rewarding challenges.

Rule #4 Respect Suppliers – Without their suppliers, they ultimately don’t have a business.

So, they believe that for them to prosper, their suppliers must prosper as well. Begin each relationship with the supplier with trust and respect. By following these four core codes of ethics they believe that they will achieve their main priority which is to take care of their shareholders. Costco is known for their customer satisfaction and job satisfaction so by following these four codes of ethics they have been able to maintain a healthy work environment since inception.

The Flexible Leadership Theory describes two methods of leadership functions, customer relationships and how decisions are made. The first approach emphasizes the use of leadership to apply influence and the second focuses on the main decision-making processes. Costco can be considered an organization that applies the Flexible Leadership Theory is because they implement savvy market strategies, treat consumers and internal employees well. They tend not to micro-manage their staff and upper management is not working for their own interests but for the interests of the consumer. Their upper management also looks to hire potential manager candidates that will be capable to act independently, make decisions all while being business savvy and economical.

Costco gives store managers the freedom to implement decisions that they feel will benefit the company and end consumers. By doing this they don’t feel the pressure to follow exact orders from upper management that ensures the company succeeds. Costco accommodates all store managers to make decisions suing their best judgement. All this goes to show is that their leadership style is very unique and had led to a multi-billion-dollar giant within the retail industry.

Cite this paper

Costco’s Philosophy and Leadership Style. (2020, Sep 08). Retrieved from https://samploon.com/costcos-philosophy-and-leadership-style/



How good things happen to Costco?
Costco's success can be attributed to their business model of offering bulk products at lower prices, excellent customer service, and a loyal membership base. They also invest in their employees, offering competitive wages and benefits, leading to a positive company culture and high employee retention rates.
What is Costco motto?
Costco's motto is "low prices, high quality." The company strives to offer its members the lowest possible prices on quality merchandise.
What is Costco organizational culture?
Costco's organizational culture is based on its founder's principles of providing quality products at low prices and treating employees and customers with respect. This culture has helped Costco become one of the most successful retailers in the world.
What is Costco's reputation?
One of the country's most respected brands, Costco has a reputation for loyal members, happy workers and fat-pocketed investors .
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