These strategies are cost leadership, differentiation and focus. It is important that leaders be able to balance the different parts of strategic leadership. As the pragmatic assessment shows Costco are obviously doing something right. It insists that each of its vendors push the innovation envelope and become as efficient as possible. Big box stores are dying. How good is the strategy? Market development: It includes introducing your products and services to new markets or segments.
Traits of a Flexible Leader Leaders should uphold situational responsiveness Responsiveness and awareness involves current knowledge about the internal and external environments that affect the entire organization. Costco also uses its private label brand to develop new products and product categories that compete with the existing brands. Costco has to strategize further in order to survive the increasing competition in their industry. As such Costco follow a cost leadership approach within the Wholesale retail industry. In spite of the tough competition with and local players, Costco remains strong and competitive, thereby showing the effective implementation of its generic competitive strategy and intensive growth strategies.
Need more Case Studies Essay Examples? Specializing helps them work with wholesale distributors to get the best pricing on the standard package they sell to clients. Costco learned by focusing using flexible leadership that has contributed to the success of the organization. Product development: It includes developing and introducing new products to your existing customer base. While many homeowners negotiate this fee down to five or four percent, this is still a high number. Democratic Jim Sinegal was able to assert his vast knowledge of discount retailing through an autocratic approach because he did not take kindly to conflict of his personal views. Top management or strategic leaders have more authority than mid- or lower-level managers or leaders and have the capacity and authority to decide which programs of improvement are to be implemented, what changes to the organizations would be made; and, which growth strategies such as acquisitions and joint ventures, would be enacted Yukl G.
Non-member consumers might feel unwelcome at Costco stores. In addition, Costco remains number one among all U. Efficiency and Process Reliability Efficiency in operations calls for the involvement of effectively utilizing the human resources of an organization that minimizes cost without giving up quality and safety standards. Cost Leadership Basics The cost leadership strategy is an approach companies take where the goal is to be the lowest cost producer or provider or one or more products at a particular level of quality. Both retailers make large purchases and are able to ask their suppliers to the lowest prices possible. Conclusion Costco like other organizations work best when they inculcate this leadership model to their system.
How well is Costco performing from strategic prospective? Today, Costco holds the position of fourth-largest retailer in the United States overall, after Wal-Mart, The Home Depot, and Kroger. Both supplies and labor are costly and there is additional overhead when contractors must consider the insurance and licensing components of the business. To set itself apart from the competition, Costco also partly employs broad differentiation as its secondary generic strategy. Neither you, nor the coeditors you shared it with will be able to recover it again. Costco has to strategize further in order to survive the increasing competition in their industry.
Sinegal, whose company has been called the invests in employees and limits the items he sells. Otherwise they will suffer failure because there will be a risk that discontented members will not renew their membership. It is a membership based warehouse company and retail store that sells only to members. Charging a lower price but selling a larger volume of a good allows a company to maintain its profits and expand its market share. Competitive Advantage Through Information-Intensive Strategies. There are even those who are renovating sheds or garages to make for additional entertaining space.
Costco just as any company must avoid this practice and many companies have failed as a result from cannibalization. Cookie-Cutter Home Renovations Contractors can cost a lot of money. Adaptation and Innovation The external environment constantly changes; threats and opportunities that involve changes in technology, customer demands, economic conditions and others continuously emerge and require organizations to rapidly adapt. It seems their greatest concern is rapid expansion could result in a loss of being able to maintain the valued shopping experience and cannibalization of existing store locations. By limited product lines and limited selection they are offering limited 4000 items which are less as compared to its competitors. Embracing a Cultural Promise: From the time you walk into the warehouse location, you feel the promise that Costco is delivering to its culture. Instead, they offer a highly targeted and subsequently refined shopping experience.
It would collaborate with manufacturers or vendors to create, market and distribute products of high repute. Global Strategy Journal, 4 4 , 292-309. Focusing on price can make the company lose sight of evolving customer tastes and preferences. By 1975, when Price sold the chain to German entrepreneur Hugo Mann, the FedMart seed had grown to forty-five stores. A low-cost provider can optimize profit margins or try to compete as the dominant low cost provider in an industry. Costco has done a great job marketing to business and studies show business customers tend to buy in bulk.
The core of this model presents different organizational processes that ensure organization success Yukl, 2008. Diversification: This is another very important strategy that Costco has used to grow its market share and size. And so one of my first entrepreneurial endeavors found me linked to Costco. There are two things that Costco is known for, one is the low prices for its members and the other is its excellent customer service which is also an exclusive privilege of the members of this membership based wholesale brand. . Costco has diversified into several new areas and the picture below provides a list of the other various kinds of services offered by Costco. Yet has remained strong throughout the recession.