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Costco Case Study Essay

Within business, performing environmental scans involving the comparison and measurement of external and internal business is extremely important as it helps in the strategy development process which has a direct influence on business success. Environmental Scan Value creation and building is an essential part of any strategy directed at obtaining and sustaining competitive advantages against any company’s rivals. Strategic business planning must focus upon financial record keeping and the modifications required managing the process, also being aware of the actions and status of external sources is imperative.

Keep in mind that the attainment of external business intelligence must adhere to ethical practices and procedures, failing to do so could result in unethical actions and their consequences. It is because of this adherence that certain businesses experience longevity and success and in the process establishment of the foundation upon which legacies are created that lead to industry dominance and prominence. During environmental scanning of a company, there is a thorough assessment into a complete global analysis.

This involves companies, markets, clients, industries, and businesses in the same market. For this study will consider the trends, technological events, successes, and expectations in business. Let us commence by a comparison of Costco’s values versus Sam’s Club values. Costco has developed a brand named Kirkland. The Kirkland brand has the Costco expectation to be equivalent or better than national brands. A continual product improvement is the exact objective for the maximum competing goal. Product quality and price comparison is continuously revisited by the internal Costco research team.

Sam’s club is a division from the Wal-Mart Corporation. Although Sam’s and Costco have a close race, there is an outstanding difference when considering the research that goes into product expectations and supplier preference. Costco is very similar to Sam’s but in resent comparison Costco has beat out many companies in the same bulk market. Costco and Sam’s have excellent programs for their employees and team effort climate has both companies at an outstanding stance to overall organizational performance. Environmental Scanning Costco is known as the anti-Wal-Mart.

As of 2005 research demonstrates that Wal-Mart was unstoppable and created strife for small local businesses and destroyed many small businesses. Wal-Mart is an unstoppable force and revenues of $247 billion with a growth of 15% a year. Wal-Mart is known to drive companies like Kmart to bankruptcy. Enter Costco that is the competitor that has shaken Wal-Mart’s reigning posture and caused a stir in businesses processes. Costco’s is approximately 30% the size of Wal-Mart and Costco competes against Sam’s approach to bulk sales. Sam’s has had quit the strife among battling for a top position.

During the past 20 years Sam’s has had more than 5 CEO’s and has incorporated many strategies in order to try to gain control of top business command. All these ploys have been smothered by Costco’s array of visual space and prestigious options. Consider some figures. Sam’s Club has 71% more U. S. stores than Costco (532 to 312), yet for the year ended Aug. 31, Costco had 5% more sales ($34. 4 billion vs. an estimated $32. 9 billion). The average Costco store generates nearly double the revenue of a Sam’s Club ($112 million vs. $63 million), (Helyar, 2003).

PEST Analysis When considering the Political, Economic, Social, and Technological aspects to Costco and Sam’s Clubs; there are applications and dues that apply to both organizations. In consideration is the necessary attention to the Better Business Bureau regulations that are applicable to both. If there is any violation to a customer’s legal liberties, the Better Business Bureau can step in and provide help for paying back any dues or compensations. Services must also fall under the ethical and humane way of treating anything or anyone with rights.

Recalls are available through many options into a righteous resolution of matters. The Food and Drug Administration will step in to apply righteous and ethical behavior to products, such as food and all types of medications. Regulations in place are always to be followed by both companies. In some instances, companies such as Costco and Sam’s club may be vulnerable to contaminated foods, such as vegetables, fruits, and processed meats. Over the years, Costco has held a responsible advantage over Sam’s when choosing their provider of such items.

When considering quality in goods, Costco outshines Sam’s. Advertised by Costco and often reported is the emphasis on the voluntary attention given to superior goods. Costco boasts providing quality meats that have had humane treatment and the least of growth hormone contamination as possible. The Costco inventory also offers the organic foods categorized as superior quality to Sam’s. Costco and Sam’s offer all sorts of liquors and alcoholic beverages, therefore, the liquor licensing laws and regulations are applied to this matter. In many instances, both offer a competing element to this property.

As with all businesses offering consumable goods; Costco and Sam’s have to comply with the health inspection section of individual states. Because of their stature in business proceedings, both organizations have avoided problems in matters of this nature. James D. Senegal CEO for Costco remains adamant that mistakes will happen but then to recuperate a team effort to improve must be made. This is what has set the progressive result and rising for Costco’s future. According to Senegal (2003), “We think when you take care of your customer and your employees, your shareholders are going to be rewarded in the long run.

And I’m one of them (the shareholders]; I care about the stock price. But we’re not going to do something for the sake of one quarter that’s going to destroy the fabric of our company and what we stand for. ” Effectiveness in Strategies Some Costco practices are often criticized; Costco has proven to survive through customer research and meeting their needs and wants. Moreover, even while Costco was critiqued on certain decisions Senegal decided to meet the challenge by analyzing, improving the product and advertisement of services.

For example, Rotisserie chicken sold by the thousands proved to make a mark on improvements. Small decisions and strategies of this nature proved to elevate Costco over Sam’s. However, a positive image also follows Costco. Recorded are the improvements on health benefits and improvement on job creation. Rather than the recommended wage reduction, a decision toward improving the stakeholder, shareholder, and employee treatment was placed in motion. Therefore, visible, and internal improvements to every Costco aspect are evident by proof of costumer surveyed satisfaction.

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