PLU Pacific Lutheran University academically rigorous .doc

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					Leah Wakeman
Carrie Dotson
Tiffany King
Final Paper

What is Costco? What does Costco do?

       Imagine a one stop shopping location for everything on your list from groceries

and electronics to jewelry and gas with bulk buying discounts but without the bulk. This

is what you will find at any Costco location, a warehouse full of many products, services

and friendly people. Costco‟s mission is “To continually provide our members with

quality goods and services at the lowest possible prices.”( Costco strives to

achieve this goal by providing a large selection of brands including their quality and price

competitive brand Kirkland. They also buy from multiple suppliers in bulk which allows

them to get competitive bulk pricing and passes these discounts onto their members


       Costco‟s core competencies also assist in their quest to strive for quality goods

and services at the lowest prices. There are three key core competencies that allow

Costco to work towards their goal. The first is carrying one of the largest and most

exclusive product category selections to be found under a single roof. This allows them to

provide their customers with many different quality goods and services. According to the

President and CEO of Costco they are able to achieve their goal of having the lowest

prices by eliminating all of the frills and costs associated with typical wholesalers and

retailers. By taking this action and preserving this core competency Costco is able to

maintain a very low overhead and pass these savings onto their members. What Jim

Sinegal means by eliminating the frills is cutting back on some of the nonessentials,
making choices such as building a concrete box rather than a fancy building and letting

members shop in their warehouse rather than a store with pretty floors and shelves. The

third core competency is relationships, everything that is fundamental about Costco

focuses on the relationships they have with communities, workers, suppliers, etc.


Organizational design(s) and control systems

         Costco‟s business model for its organizational design is simple, providing

consumers the best products for the lowest prices. Costco uses its different divisions such

as marketing, accounting, financing, etc. to create the business model.

         The marketing division works in the business model to provide consumers the

best products for the lowest prices by getting the word out. The marketing division

markets to Costco‟s consumers to show how effective the business model is and markets

to Costco‟s suppliers and potential suppliers to show how efficient the business model is

to sell their products.

         The accounting and finance divisions work to keep the costs low for the products.

The cost accounting works with the suppliers and with the actual company locations to

set prices at their lowest for products and keep overhead in the company locations low.

Therefore there is still a profit for Costco while they keep their image of quality and great


         The global division works to provide quality products that will be consumed in

the different countries. For example, universally, in almost all countries the Kirkland

Signature brand of toilet tissue is the top selling item. In Mexico, a surprise hit was the

Kirkland Signature soy milk; in the United Kingdom, Yoshida‟s sauces, Oberto beef
      jerky, Kirkland Signature nuts, jelly beans, and coffee were all surprise hits also; in South

      Korea California navel oranges and Titlist golf balls flew off the shelves.

                       Costco's Board of Directors As of August 2007
Dr Benjamin S Carson Sr., M.D.      Ben has been a director since 1999.
       Susan L. Decker              Susan has been a director since 2004, she is president of Yahoo!
                                    Inc., where she has worked since 2000
       Daniel J. Evans              Dan has been a director since 2003. From 1983 through 1989, he
                                    served as a U.S. senator for the State of Washington
    William H. Gates, Sr.           Bill has been a director since 2003. He is the father of Microsoft
                                    Chairman Bill Gates and co-chair of the Bill & Melinda Gates
     Hamilton E. James              Tony has been a director since 1988.
    John W. Meisenbach              John has been a director of Costco since its very beginning.
     Charles T. Munger              Charles has been a director since 1997.
      Jill S. Rechelshas            Jill has been a director since 1996.
    Richard M. Libenson             Richard has been a director since 1993.
     Jeffrey H. Brotman             Jeffrey was a Costco co-founder and has served on its Board since
                                    its beginning
    Richard D. DiCerchio            Richard is the chief operation officer, Global Operations,
                                    Distribution and Construction, at Costco. He joined the company in
     Richard A. Galand              Richard has been a director since 1995 and is the chief financial
                                    officer at Costco.
      James D. Sinegal              James is a co-founder of Costco and serves as the company
                                    president and chief executive officer
              Jim Murphy, the senior vice president of international operations, says that

      “exporting Costco‟s philosophy of quality and value requires four elements: the right

      people, the right location and the right products at the right price.” The global division

      works hard to research what each country would want to buy but there have always been

      surprises. A visiting student in Korea said she was so excited to find honey turkey. After

      studying there for almost a year, she couldn‟t find cold cuts anywhere except for Costco.

      Where does Costco conduct business?

             Costco is part of seven main geographical markets. These markets are; Puerto

      Rico, United Kingdom, Canada, Japan, Korea, Mexico and Taiwan. Costco does business
with all of these countries in a variety of ways from physically establishing Costco

Warehouse Stores, to outsourcing labor. Whenever Costco enters into a new market, they

closely examine many variables such as political condition, purchasing power, economic

stability; however these are only a few. For Costco when entering into global markets

they have four elements that they specifically look at and try to pinpoint right; these are,

right people, right location, right product, and right prices. Anytime a company goes into

another country to do business it is key to incorporate their culture and people in order to

be successful there, for no two countries are a like. To do this Costco specifically brings a

few individuals from the United States who are knowledgeable about Costco, but then

creates the purchasing and operations team solely from the local area. Also, Costco

precisely adapts their products and services to fit not only the countries but local cultures.

This adaptation can be anywhere from changing the labels on the package wrapping to

selling live fish as you will see in the following sections which describe a little bit about

the differences in each country they occupy.

Puerto Rico

       Business involvement with Puerto Rico has some advantages for Costco. First off,

Puerto Rico has a common wealth status with the United States and is considered part of

it. Although Puerto Rico has many of its own laws and regulations some U.S. laws and

regulations apply over such aspects as trade and foreign relations. There are very few

restrictions for trade between the two countries, making it very easy for Costco to transfer

products and employees between the two countries.

       Puerto Rico‟s dominate language is Spanish, with English coming in second.

However, in this culture, language goes far beyond words. Similar to the United States
culture they address individuals by professional title and usually greet with a handshake.

However, unlike United States culture personal space does not really exist. When

interacting socially they stand very close together and stepping away is considered

offensive. Lastly, unlike the United States culture, interrupting another is common and

not considered in-polite.


       The one major difference for Costco when doing business in Canada compared to

the United States is the extremely diverse culture. Canada has many different ethnicities

and a high number in each such as Asian, Portuguese, Indian, Italian, and French.

Therefore, the products chosen for the Canada Costco, is indeed one of the widest

variety. For example, they sell a wide array of foods from different cultures such as milk

in a bag, meat pie, and blueberry chocolate. Also, Costco Canada sells beer, wine and

liquor, in most of their stores. Some U.S. stores allow alcohol beverages in their stores;

however it depends on the laws of each state. For example Nevada sells beer, liqueur, and

wine, yet Washington just sells wine. What‟s unique about Canada Costco selling the

alcohol products is that you cannot find alcohol in any other store except liquor stores.

Another major difference is the need to have bilingual packaging to provide for every

language. Therefore, packaging for Canada Costco products must be done separately

from the United States and is much more costly.

United Kingdom

       When Costco first moved to the United Kingdom, it was seen as a takeover and a

discount threat to the smaller businesses. Yet, Costco was able to establish themselves as

the supplier for the smaller businesses. The packaging of their products is meant for
reselling. Costco also offered to the businesses personal truckload deliveries which saved

time and money for the small business owners. Costco also ran into having to rename a

few of their products because of the culture language differences. Such calling tires

“tyres,” diapers “nappies,” and shopping carts “trolleys.” Another difference is United

Kingdom individuals are very indirect, that is one must pay close attention to the tone of

their voice and body language. This is the complete opposite of the very “get to the

point” directness of United States culture. Also, it is almost an unspoken rule that

business things begin and end with social activity. When it comes to business matters,

individuals highly value teamwork and punctuality.


        The Japanese culture varies a great deal from United States culture. Just as in the

UK culture, the Japanese are very verbally indirect when it comes to communication. A

major aspect of their culture is socially interaction, getting to know each other personally

before even mentioning business and will often prolong their answers. They are long-

term negotiators, this is very different compared to United States culture, where

individuals get down to business right away and are more short term negotiators.

        Also, Costco ran into one particular obstruction in many of the Asian countries, a

lack of the amount of acreage they are used to. Costco revolutionized their floor plans so

instead of going out, they went up. They had compensated for small lots by building

multi level parking garages and companies attached to them.

South Korea

        The major difference in the South Korea Costco compared to any of the other

Costco‟s around the world is live seafood products. If you walk into the food section of a
Costco in Korea you are guaranteed to find large tanks with live fish ready to be

purchased. Such a product is key to success in South Korea, due to their strong culture of

fresh foods. Also, just as mentioned in the section on Japan, South Korea Costco

buildings are mainly stories high due to the small area limitations for buildings.


       Taiwan individuals have a very high regard for American products. They view

imported products as higher quality than their local products. Therefore, Costco‟s

signature brand, Kirkland, sells very well in Taiwan.


       In Mexico, they have a very strong hierarchal business structure. Those on top are

expected to give orders and make decisions. In fact, employees expect to be told what

they need to do, and if they are not told they will not do that task. In Mexico they highly

value family and friends. Therefore, for them business is based on relationships and who

you know and family always comes first. Lastly, it is very important to be aware that in

Mexico they expect others to take time to show their appreciation of their culture.

       As you will see from the story at in the next section of the paper, when working in

Mexico Costco has taken their culture and values into great consideration. First they tried

to help replenish and preserve the trees on the property that had been neglected for some

time. Second, when they made the purchase there were many murals in the building.

Costco had these murals restore and preserved. They then set up a cultural area for the

public that has a salon with the restored murals. By doing these few things Costco has

shown Mexico their respect for not only their culture, but their architecture as well. This

is something that Mexican‟s view highly in relationships and business deals.
       As it is apparent every country has a different culture. By being aware of the

cultural differences and training employees and managers how to act and handle doing

business with other countries, Costco has been able to and continues to be successful in

various countries outside of the United States.

An Example of Cultural Integration

       Costco might not extensively change the look of their stores or greatly vary their

private label products they carry in their stores to adapt or integrate into new markets and

cultures but they do have their own way of achieving the same goal of market adaptation.

As mentioned previously they focus on their mission statement and make changes as

needed to continue striving for their mission. Many companies may be willing to

compromise their business model to blend in with a new market but Costco holds strong

to their business model, mission statement and code of ethics.

       So one may wonder how does Costco integrate into a new culture and how do

they adapt to so many different markets. One example of how Costco responds to

unforeseen difficulties and unique circumstances is the story of what they have done and

what they have achieved in Cuernavaca, Mexico (

       Cuernavaca is a city with a population of 500,000 people many of which are

retired Americans along with some of Mexico‟s wealthier families that maintain a second

home there. This city seems to draw people from all over the world and the demographics

of Cuernavaca made it very appealing to Costco especially since they had been looking

for a location in that general area(

       Cuernavaca was home to Casino de la Selva or Casino of the forest which was

built in the 1930‟s with the intention of being a hotel, a resort and a casino. By the time
Casino de la Selva opened the Mexican government had outlawed gambling but despite

this set back the resort still became the place to be. There were many artists who earned

their stay by painting fresco murals on the walls which became another „attraction‟ for

the resort. Approximately 15 years ago Casino de la Selva was forced to close its doors

do to financial downfall. When this happened the Mexican government took possession

of the property and in 2001 the governmental agency which was responsible for

liquidating assets acquired by financial default put the property on the auction block


       The downtown location of the property and the size made this location very

appealing for Costco and their 50/50 Mexican partner, Commercial Mexicana. Many

were interested in the property, the minimum bid was approximately $10 million and

many refused to put up the ten percent in order to bid. So in June of 2001 Costco

acquired Casino de la Selva for just above the minimum bid price. Before Costco could

break ground and begin building they had to submit their proposed development plans

which included Costco‟s warehouse, their Mexican partners store and restaurant and

parking lots. When they submitted their plans to the committee the plans went through an

extensive review down to the minuet details. There was an environmental piece to the

review along with an archaeological review which did not turn up any significant

artifacts. Once the entire review was complete and their plans approved they were able to

begin (

   After the review the Mexican Department of Ecology surveyed the lot and identified

more than 300 trees that were of significant worth. Costco did not have to do what they

did but they chose to preserve these trees at their own cost and during construction some
had to be kept at a nursery until the property was ready to receive them back. Besides the

trees that Costco saved and preserved, they donated an extra 30,000 trees which the

government could distribute and plant at their discretion. Some might say that this was

unnecessary or a step farther than what one might expect out of such a big company but

Costco didn‟t stop there.

   The murals that had been painted over the years inside the Casino de La Selva by

many artists had been damaged by water and vandalism. Rather than destroying them

completely Costco made an effort to save them by contacting different groups and

organizations to see if anyone wanted them. When no one was willing to pay for the

restoration Costco could have let this piece of history and culture becomes rubble but

instead they chose to take on the project themselves. Now a cultural center has been

added to the development plans. This cultural center will house all of the murals that

were saved thanks to Costco and their Mexican partner, Commercial Mexicana. But

Costco didn‟t stop after the trees and the murals they kept going determined to save the

history and culture of their new community.

   There is a collection of art called the Gelman collection which is considered the

premier collection of Mexican art by many. When the Gelman family passed, the

collection was left to the Vergel Foundation. Since the Vergal Foundation received the

collection they have been adding to it and show casing the collection around the world.

As the development of the cultural center continued the Vergel Foundation approached

Costco in hopes that the cultural center being built on the Casino de la Selva lot could be

added to in order to permanently house the Gelman collection. Costco made the
adjustments to the plans and now the cultural center is made up of a public plaza, a

restored mural salon and a two story permanent home for the Gelman Collection.

       When Costco was asked if this location was worth everything they ended up

doing that was not anticipated Costco replied absolutely. Costco believes that besides all

of the benefits their company brings to the community the cultural center will become

one of the most popular tourist attractions which will help boost the local economy.

“Costco is proud of its efforts to give back to the communities where it does business… It

is only right that the company take the extra steps to do the right thing, while at the same

time, creating thousands of family-wage jobs.”

   Many have applauded Costco for their responsible citizenship and sensitivity toward

the culture of Mexico. We believe this story of Cuernavaca, Mexico really shows what

degree of cultural integration Costco is willing to work towards and that there are no

concerns of Costco adapting to new markets. In the story you can see Costco‟s degree of

cultural integration by looking at their willingness, determination and initiative they took

in order to preserve Mexico‟s history.

Global Strategies

   So what kind of strategies does a company who is willing to spend millions of dollars

on a community have and utilize? Many other companies most likely could not have

afforded to take on all of the projects in Cuernavaca like Costco has. This seems to lead

to the conclusion that Costco must have some type of strategy and method to their

actions. Costco is obviously a unique company. They first opened their doors in Seattle,

WA and have managed to grow to 544 warehouses in 9 countries. Costco has over

143,000 workers currently in their employment worldwide. Those employees are paid
considerably above minimum wage and over 90 percent of those employees are given full

benefits. So what is Costco‟s strategy that is causing them to do so well?

       Costco outshines its competition because it offers quality products to it‟s

consumers for low prices. To offer such discounts Costco has taken the measures to

greatly reduce overhead and build strong relationships with its suppliers. Costco also has

a unique quality that makes them stand out, they do not advertise. Costco will send out

monthly pamphlets to its current consumers but it never pays out the advertisements costs

to bring in new customers. They rely on the traditional custom known as growth by

“word-of mouth.” By friends telling friends, Costco has grown into a multinational


       As of January 2008, Costco is the 5th largest retailer in the United States, 8th

largest in the world, and listed as 29th on the 500 list. Costco describes their own strengths

to be the loyalty of their customers, pricing authority, qualified employees, quality

products, their “treasure hunt atmosphere,” nimbleness, and their image.

       Costco has built relationships with their own customers through offering the

products people want at astonishing prices. Costco currently has over 53.5 million

cardholders. Their basic membership is $50 per month, which gives their consumers

access to thousands of products. Costco‟s target market is middle to upper class.

Therefore, the products they provide are not low Wal-Mart quality, but rather name

brands such as Ralph Lauren, Kenneth Cole, and Calvin Klein. Along with expanding

globally, Costco has adapted to each target market in each country. For instance, in

Korea, Costco offers small carts that resemble heavy duty rolling backpacks and

oversized reusable bags for purchase. The consumers in Korea do not buy in large
quantities because they don‟t have the transportation to take it with them. Costco has

given consumers in Korea the option to buy more with the small carts and bags because it

now can easily be transported on public transportation.

       Costco also works hard with their suppliers to reduce the price as much as

possible. Many brands did not like seeing such low prices associated with their products.

Therefore Costco must have very strong relations with their suppliers. Eventually new

suppliers do realize that their products have a higher turnover when working with Costco

and it also gets their brand name more publicity. Costco works with local companies such

as Tyson, Frito Lay, Dole, Michelin and Tommy Hilfiger and international companies

such as Toshiba, Nikon, Le Creuset, etc. So along with having strong relations with their

suppliers Costco must successfully work with international suppliers as well.

       By offering high wages and great benefits, Costco promises themselves the best

and most loyal employees. This is obvious for Costco being a global company too,

having the best employees in other countries and being able to build trust and loyalty

with them can be difficult, but Costco has created a happy and healthy work environment.

       Another strategy that seems to come naturally to Costco is their “treasure hunt

atmosphere.” Nothing‟s more exciting than walking around and finding a new product for

a great deal. Hunting for new deals is what causes most consumers to leave Costco with a

$100+ receipt in their hands. Costco has a lot of unusual items that may be the latest

technology or a part of the newest trend. They carry different items in every store locally

and globally providing for each individual target market.

       Costco works a lot like shopping in a warehouse and there‟s a reason for that.

Costco watches their overhead like a hawk. They apply to the same standards for all of
their companies, local and global. They keep the products on the shipping crates they are

brought in on for easy turnover and lowering costs for displaying. They use skylights to

reduce electricity bills and offer the boxes their products were shipped in to customers

instead of plastic bags. Oddly enough, this lowers the overhead enough to create a

healthy profit margin and help keep the prices low.

   With all of the many strategies Costco has applied it seems as though they are

unlimited in what they can and will do. But just as with any other business there are flaws

that can be found in Costco.

SWOT Analysis

      Strengths                                       Weaknesses

      1. Diverse products and services                1. Concentration of operations in California
      2. Strong market position                       market
      3. Low cost promoting and market strategy       2. Lax quality control
                                                      3. Weak compliance
      Opportunities                                   Threats

      1. Growing demand of private labels             1. Increase competition
      2. Increase online sales                        2. Low consumer confidence
      3. Expanding market presence


       Costco Wholesale Corporation has three main strengths. The first is their diversity

of products and services. They sell a wide variety of products such as food, produce,

clothes, books, electronics, appliances, and even have their own bakery offering freshly

baked cakes, cookies, etc. Also, they offer an array of services such as, auto financing,

small business loans, and health and life insurance. Their products are sold in various

well known brands as well as their private brand Kirkland. Such a wide variety of
products and services provides customers with the ability to pick up everything they need

in one stop, a one stop shopping experience, which strongly appeals to individuals.

       Secondly, Costco is one of the largest retail chains in the United States. It is 4th in

the U.S. and ranked 8th in the World, having an array of products allows Costco to have

an extensive and diverse target market, reducing their business risk

        Lastly, they have a very low cost marketing strategy. Costco‟s main target market

is small business owners, however, everyone from business owners to parents are Costco

members. Their main promotional and marketing strategy is direct marketing. They do

direct mail market to new customers as well as existing customers. Also, they personally

contact potential wholesale clients. These types of marketing strategies are low cost, yet

very effective for Costco.


       Costco‟s first weakness is their concentration of operations in the California

market. The increase in unemployment and food prices as well as the decline in housing

prices has had an affect on various markets including retail wholesale. Also, California,

has had many new warehouse clubs being created, bringing in many new competitors for

Costco to compete with.

       Secondly, Costco has a very lax quality control; that is they do not have much

control over the quality of products they sell which are produced in foreign countries.

This increases the risk of customers not being satisfied with products, as well as having a

higher risk for product recalls. For example, Costco has already experienced several

product recalls such as a recall by one of their suppliers, Cedarlane Natural Foods of

Carson. In this recall the supplier‟s burrito product contained bad milk that could cause
serious health problems to individuals. Having recalls not only affects the supplier

appearance, but Costco‟s as well.

       Lastly, Costco has a weak compliance system in tact. They are involved in many

legal accusations regarding discrimination towards women, labor practices, and payment

of employee overtime. Such accusations could not only cause Costco to loose customers

but employees as well.


       Costco has several opportunities within arms reach. First, is the growing demand

for their private label, Kirkland which offers everything from clothes to food products.

Their private label provides larger profit for the company as well as savings for the

customer. Currently Costco is experiencing one product out of every five sold is a

product from their private label and they expect this to continue to rise in the near future.

Such an increase in Costco‟s private label would have a positive impact on their profits.

       Secondly, with today‟s technology, online shopping has and still is becoming a

major trend. Costco offers their in-store products for sale online as well. Online shopping

offers customers convenience which strongly appeals to them. In 2006 the online retail

grew 32.8% and is estimated to continue to grow even more between now and 2011. A

growth in online shopping will help the company decrease their operating costs.

       Finally, Costco has a huge opportunity in expanding market presence. In today‟s

world a company going global is practically a must. Costco has aggressively already gone

global and continues to expand. In 2007 they opened 31 new warehouses both

domestically and globally and by the end of 2008 they will have opened 35 more. They
are currently in Puerto Rico, Canada, United Kingdom, Japan, Korea, and Taiwan as

discussed earlier.


       There are two main threats to Costco Wholesale Company, the first being the

increase in competitors. Costco‟s wide variety of services and products means they

compete with a large array of companies. They compete with supermarkets, gas stations,

other retail wholesalers, etc. Some such companies are Wal-Mart, BJ‟s Wholesale

Company, and Target.

       Secondly, Costco is threatened by a low consumer confidence. The main factor

for this is ethics. Now, today more than ever customers are concerned with topics such as

how a company treats their employees, where the products they are buying come from

and how those products are made. Seeing as Costco has experienced legal accusations in

regard to employee treatment and labor practices, this could reduce customer confidence

in Costco Corporation.

       The story of Cuernavaca is one great example of Costco‟s code of ethics and the

type of business they run. Their story is something that Costco is proud of and should

maybe share with their customers to help limit the threat of low consumer confidence.

Another way to address this threat may be to show off their human resource policies

which contain many details and are highly polished. These policies seem to cover the

entire spectrum of business including how to interact with others and all policies include

the elements of trust and relationship building.

Human Resources
       The first on Costco‟s list of their code of ethics is obeying the law. At first this

seems to be an obvious rule of business and has little to do with person to person

relations. As you look closer to the details defined by Costco you find that they have

considered it all. Costco begins by stating that „we must conduct our business in total

compliance with the laws of every community where we do business.‟( The

details that follow „obey the law‟ for Costco are as follows:

      Comply with all laws and other legal requirements.

      Respect all public officials and their positions.

      Comply with safety and security standards for all products sold.

      Exceed ecological standards required in every community where we do business.

      Comply with all applicable wage and hour laws. Comply with all applicable anti-

       trust laws.

      Conduct business in and with foreign countries in a manner that is legal and

       proper under United States and foreign laws.

      Not offer, give, ask for, or receive any form of bribe or kickback to or from any

       person or pay to expedite government action or otherwise act in violation of the

       Foreign Corrupt Practices Act.

      Promote fair, accurate, timely, and understandable disclosure in reports filed with

       the Securities and Exchange Commission and in other public communications by

       the Company.(

   These details of „obey the law‟ really help create an environment for respect, trust and

   strong relationships with the community and public officials.
    The second code of ethics Costco has is „take care of our members‟, this shows that

Costco realizes without their customers they would not be successful and would not be

here. This company also understands that by charging their members a fee to shop in their

stores they are asking for a level of trust. In order to continue earning the trust of their

customers and keep them choosing Costco as their store over competitors Costco is

willing to:

       Provide top-quality products at the best prices in the market.

       Provide high quality, safe and wholesome food products by requiring that both

        vendors and employees be in compliance with the highest food safety standards in

        the industry.

       Provide our members with a 100% satisfaction guaranteed warranty on every

        product and service we sell, including their membership fee.

       Assure our members that every product we sell is authentic in make and in

        representation of performance.

       Make our shopping environment a pleasant experience by making our members

        feel welcome as our guests.

       Provide products to our members that will be ecologically sensitive.

       Provide our members with the best customer service in the retail industry.

       Give back to our communities through employee volunteerism and employee and

        corporate contributions to United Way and Children's Hospitals. (

    They way Costco approached taking care of their members as if they are guests is a

    wonderful way to treat customers and build relationships with them.
   After taking care of their members and recognizing them, Costco makes sure to put

their employees next. That is why Costco‟s third code of ethics it „take care of our

employees‟. Costco understands that without their members they would not be successful

but they also recognize in order to achieve success they need their employees, which is

why they are considered Costco‟s most important asset. Costco claims they are

committed to providing their employees with rewarding challenges and ample

opportunities for personal and career growth. In order to achieve this they have promised

to provide:

      Competitive wages

      Great benefits

      A safe and healthy work environment

      Challenging and fun work

      Career opportunities

      An atmosphere free from harassment or discrimination

      An Open Door Policy that allows access to ascending levels of management to

       resolve issues

      Opportunities to give back to their communities through volunteerism and


   We agree with the rules and promises that have been set forth by Costco. They seem

   to create happy and dedicated workers.
   The fourth code of conduct for Costco is „respect or suppliers‟. The reason for this is

Costco is aware that many businesses depend on each other and one can not grow and

continue to have success without the other which is why Costco works hard to:

      Treat all suppliers and their representatives as you would expect to be treated if

       visiting their places of business.

      Honor all commitments.

      Protect all suppliers' property assigned to Costco as though it were our own.

      Not accept gratuities of any kind from a supplier.

      Avoid actual or apparent conflicts of interest, including creating a business in

       competition with the Company or working for or on behalf of another employer in

       competition with the Company. (

   The most important detail presented by Costco when working with suppliers is the

   Golden Rule. If all businesses applied the Golden Rule many wonderful

   interdependent relationships would exist.

   Finally the last on the list of Costco‟s code of ethics is „reward our shareholders‟. The

reason that this is at the end of the list is because Costco believes if they can achieve the

first four codes of ethic than they will be able to achieve this.

      As a company with stock that is traded publicly on the NASDAQ stock exchange,

       our shareholders are our business partners.

      We can only be successful so long as we are providing them with a good return on

       the money they invest in our company.
   This, too, involves the element of trust. They trust us to use their investment

    wisely and to operate our business in such a way that it is profitable.

   Over the years Costco has been in business, we have consistently followed an

    upward trend in the value of our stock. Yes, we have had our ups and our downs,

    but the overall trend has been consistently up.

   We believe Costco stock is a good investment, and we pledge to operate our

    company in such a way that our present and future stockholders, as well as our

    employees, will be rewarded for our efforts.(

The shareholders are Costco‟s business partners and deserve to be treated as such. We

believe these details show that they are considerate of their shareholders and work

hard for them.

    So we have looked at many great aspects of Costco but now let us compare them

to stores like Wal-Mart or Sam‟s club. First Costco‟s wages and benefits for their

employees are much better. Costco offers 14 different benefit programs, such as long

term health care, for there workers along with an average wage of approximately

$16/hr. Because of these facts many have looked at Costco‟s costs for their

employees and attempt to persecute them for it. If you look at Wal-Mart or Sam‟s

club you will find that their turnover rate is much higher and therefore the costs for

the employees training is much higher because they are constantly training new

employees. So we consider costs for employees a wash. Looking at products is a

different story though. We don‟t believe you can really compare brand name products

that both carry but let us look at the private labels, clothing for example. Both stores

manufacture their own clothing. When you buy a shirt from Wal-Mart you will find
that the fabric is of poor quality and with in a few weeks of wearing it you begin to

see holes, tares and many spots that are wearing down. This is not the case with

Costco‟s private brand of clothing; it is high quality with comparability to other

brands like Tommy Hilfiger.

   We could continue to go on about the qualities Costco has that make them so

different but much of it would be covering things we have already mentioned like the

warehouse feeling rather than a retail store. The point is that Costco is a great

company with many wonderful qualities and lots of sustainable growth opportunities


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