Costco Organizational Theory and Behavior

Research and Report for Costco
What is Costco’s Competitive Advantage?
Costco’s competitive advantage lies in the value attained from membership. The warehouse club's members pay for the desire of shopping there and that produces a difficult to disrupt circle that profits the company. In essence, paying for membership strengthens the customer’s associations to the brand while the fundamental value proposition either gives rise to an upsurge in usage levels or creates onus on leaving. Consequently, this results in a competitive advantage for Costco that only a small number of other retailers in the market can compete with (Kline, 2017). Executive Members account for just about 30 percent of the total membership of Costco but make up approximately 66 percent of the company’s sales. This is a major aspect that sustains Costco’s competitive advantage. Notably, Costco offers consumers low prices for different products, and joining, particularly making payment for the Executive Membership, is a suitable approach for attaining cost savings for numerous people. Remarkably, once the Costco chain gets a consumer, there is a great likelihood that the company will hold on to him or her, owing to the guarantee of what the company offers, and the increased forthcoming savings it signifies (Kline, 2017).
Imperatively, for a competitor in the retail industry to disrupt Costco’s cycle, it implies that it would have to offer equivalent pricing devoid of charging customers a membership fee and at the same time incurring costs to convey such approaches. This would be a difficult endeavor for any company to attempt owing to the reason that majority of Costco’s profit, approximately 75 percent, emanates from membership fees. The inference of this is that any rival trying to place similar prices for Costco, and at the same time incurring expenditure to market its brand devoid of taking in membership revenue, would be an intention of losing funds up until it creates a substantial amount of market share. This outlines the prominence of Costco’s competitive advantage (Kline, 2017).
What is Costco’s Best Practices?
Best practices can be defined as a set of guiding principles, ethics or conceptions that signify the most effective or practical course of action and generate optimal outcomes. Costco’s best practices lie in their employee relations. The focus on employees at Costco is pivotal to the corporation’s success and capability to incessantly provide a better shopping experience for its members. A great deal of focus on corporate culture and values at Costco is accredited to the personal interests of top management. The company’s executives lay emphasis on placing their employees first, which has given rise to low employee turnover rates. This can be perceived through the corporation’s per-employee sales, which are deemed to be greater as compared to those of major competitors like Wal-Mart and Target. In addition, the customer service in the retailer’s stores is exceptional and fast, and the company continues to face expansion not only in the number of warehouses but also in terms of products and services for consumers (Gerard, 2018). In addition to offering its employees with some of the best remunerations and benefits in the retail industry as a whole, Costco rewards its employees with bonuses as well as other incentives. In particular, Costco has a tendency to offer wages that are approximately 40 percent higher and offers more comprehensive health and retirement benefits as compared to rival companies such as Target and Wal-Mart, which amounts in significant cost savings in employee turnover expenses. The company undertakes employee promotions internally, and motivates workers to provide any suggestions and feedback as well as giving criticisms and complaints. More so, the managers are given independence to experiment with their various departments or retail stores to increase sales or decrease expenses as they deem fit (Gerard, 2018).
References
Gerard, J. (2018). Employee Relations Best Practices: Costco's Approach to HR. iSight. Retrieved from: https://i-sight.com/resources/employee-relations-best-practices-costco/
Kline, D. B. (2017). What Is Costco's Competitive Advantage? The Motley Fool. Retrieved from: https://www.fool.com/investing/2017/03/17/what-is-costcos-competitive-advantage.aspx