Overview of Costco: a Fortune 500 Company

Abstract

Since 1983, Costco has managed to expand its retail outlets globally due to its low prices, the incredible workforce, and customer satisfaction. The philosophy and vision of the company was handed down from one CEO to the next. Due to creating an environment of a culture connection where consumers, suppliers, managers and employees interact with one another, it has recently surpassed the performance of Amazon in terms of customer satisfaction. The company has been able to survive during difficult times whereas other retail companies have not been doing so well. The company will continue to expand worldwide and explore opportunities in the ever-changing market.

History

Costco is one of the most successful wholesale companies based in the United States that includes a huge variety of merchandise for consumers. It also has its retail outlets across the globe and the company operates as a membership-only warehouse club. This company was founded back in 1983 in Seattle. Costco was able to merge with Price Club (a warehouse store which was founded in 1976) and was called PriceCostco after the merger in 1993. The merged companies performed fairly well. Later however, the founder of Price Club left the company and decided to establish an independent unit called Price Enterprises in 1994. In the year of 1997, PriceCostco was renamed as Costco Companies. Several years later, Costco decided to sign an agreement with Retalix (an Israeli software firm that implements, licenses, develops and supports software applications for distributors, wholesalers and retailers). Retalix helped with installing StoreLine Fuel software solutions for retail goods including toys, electronic goods, automotive goods, apparels, jewelry and so on. Costco managed to achieve revenue of $3 billion in less than 6 years and was listed as one of the Fortune 500 in 2004. It would later be recognized as one of the most admired companies by Fortune magazine in 2006 and 2007. Craig Jelinek, CEO of Costco, revealed that the company simply stuck to one strategy. The focus was purely on buying and selling merchandise.

The reason I chose Costco for my paper is because this is not just a particular retail company. A huge number of retail stores have been closing down in the United States for several years now, but Costco has managed to thrive. According to a recent Bloomberg article in 2019, a customer satisfaction survey revealed that consumers actually love Costco more than Amazon. Costco follows a corporate culture that other companies should follow. Its employees are treated well and looked after by the company. The employees are also fairly compensated as compared to Walmart. Lastly, Costco is changing the way people shop.

Mission Statement

Costco’s mission statement is actually quite straightforward. It is essential that it provides customers with quality products and services at the lowest possible prices. The company has four codes of ethics it follows in order to carry out its mission statement. The first is obeying the law, the second is taking care of its members, the third is taking care of its employees, and the fourth is respecting its suppliers. The company makes sure that is conducts its business in compliance with the law of a state or country. The company cannot thrive if its members are not satisfied. Costco membership is not only open to business owners, but individuals as well. The employees are treated as family members. The company prospers because of its suppliers. The company’s ultimate goal is to reward its shareholders. However, the CEO makes sure that he does not put too much focus on satisfying his shareholders only. It is important for him that he balances the need of the shareholders, the employees, the suppliers and the customers equally.

Vision Statement

Costco wants to make sure that the retail wholesale warehouse company is a place where proficient buying and operating practices give members access to unparalleled savings. In other words, it wishes for the organization to help people make ends meet, help businesses to flourish, treat customers with respect, and create a positive environment for everyone. Additionally, the CEO states that, “Our view is we want to have a company for the long haul and continue to grow the sales and grow the profits fairly and make sure there’s always opportunity for our employees to grow” (Garcia, 2018). Furthermore, the company has been able to achieve a vision of a connection culture where everyone works as a family and this is one of the reasons Costco has continued to resonate with its shoppers over the years.

Leadership

Costco’s CEO Craig Jelinek has been with the company for over 30 years. He used to be a warehouse manager back in 1984 and got promoted to various executive positions over the years before becoming the new CEO of Costco in 2012. The company’s leadership has a philosophy: leading by example. The company has always had employees who are kind and always ready to help others. The management team would get to know their employees and not treat them as simply workers. It comes down to the employees and the management team working as family members. At Costco, people feel connected “to their supervisor, colleagues, their work, the organization’s leaders, and the people the organization serves. When people feel these connections, they thrive, individually and collectively”.

James Sinegal, former CEO, understood that “it’s not just wages that motivate people. How much they are respected, and whether they feel they can have a career at a company, are also important” (Cascio, 2006). The current CEO recognized a part of his company’s success was due to the trust and satisfaction he has with his employees. His methods are valuing the quality of life and making sure that the opportunity of growth is always there. The CEO makes sure that the company does not hire new buyers because he wants it to be set up as a family community, where over 90% of the employees are promoted from within. Interestingly enough, people who worked part-time at Costco ended up staying and became full-time employees. Costco has treated its employees so well with generous compensation along with benefits that Wall Street once criticized it. The leaders of Costco continued to look after their workers. It becomes clear that “Costco’s policies are indicative of a culture that values people” (Porath, 2016). Friendships among long-time employees at Costco have led to the boost in employee engagement and performance. The company continues to listen to the ideas and opinions of its employees worldwide to “identify ways to improve its delivery of goods and services to members and improve efficiencies that reduce costs”. Everyone works with each other at Costco since it is meant to be seen as a connection culture and this contributes to the friendly environment of the workplace. Here is an actual quote from one of Costco’s employees: “I love the fact that while I’m at work, I don’t feel like I’m working. Most of my colleagues are having fun doing what they do every day, which makes for an extremely happy work atmosphere”.

Ron Vachris, EVP of Merchandising at Costco, revealed that the company is run by being in the field and it helps to be aware of what is the response from the members, what the managers are saying, what the employees are saying, how is the packaging, the sizing and colors etc. The CEO states that, “I can go in apparel and watch people and tell you what is going to be a hot item. If you see something that hasn't been touched, you know the colors are wrong or we have an issue with the item and pricing. We are simple folks. The more stuff you have to analyze, the bigger problem you are going to have'. As long as everyone is properly communicating with the relevant departments, a company runs smoothly. It also leads to a healthy and happy working environment. Jelinek believes that helping people with good wages and health benefits puts more money back into the economy. The CEO has always lived by his principles and highlights that, “If you treat consumers with respect and treat employees with respect, good things are going to happen to you”.

Conclusion

The company always thrives on helping its members, managers, and employees to build up their self-esteem and create a network. It is about all of them working together as a single team. The CEO wishes that Costco’s leadership team leads for the long run. Jilenik encourages leaders to connect with people in order to create a welcoming environment for employees, consumers, and other stakeholders because that is how Costco has managed to survive and thrive, even during difficult times. This company is only expected to expand in the years ahead.

References

1. Garcia, A. (2018, March 11). CEO Spotlight: Costco’s Craig Jelinek. Retrieved from https://born2invest. com/articles/ceo-spotlight-costcos-craig-jelinek/
2. Stallard, M. L. (2017, November). Wholesale Connections: Costco’s culture helps its employees thrive. TD Magazine. Retrieved from https://www. worldhrdcongress. com/images/T_D_Magazine. pdf
3. Cascio, W. F. (2006). Decency Means More than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club. Academy of Management Perspectives, 20(3), 26-37. Retrieved from https://www. ou. edu/russell/UGcomp/Cascio. pdf
4. Porath, C. (2016). Creating a More Human Workplace Where Employees and Business Thrive. Retrieved from SHRM Foundation Website: https://www. shrm. org/hr-today/trends-and-forecasting/special-reports-and-expert-views/Documents/Human-Workplace. pdf
5. Montanez, R. (2018, December 13). The Best Companies For Corporate Culture In 2018. Retrieved from https://www. forbes. com/sites/rachelmontanez/2018/12/13/the-best-companies-for-corporate-culture-in-2018/#488edc7d3ee4
6. Troy, M. (2017, January 9). Keepin' It Simple. Retrieved from https://retailleader. com/keepin-it-simple
7. Stone, B. (2013, June 8). Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World. Retrieved from https://www. bloomberg. com/news/articles/2013-06-06/costco-ceo-craig-jelinek-leads-the-cheapest-happiest-company-in-the-world