Costco’s Wholesale’s Mission Statement is to, continually provide their members with quality goods and services at the lowest possible prices. Costco’s has implemented a strategy for a competitive advantage by having a mix of low-cost providers and differentiation. Costco differentiates itself by providing consumers with products in bulk at a low per unit cost, giving rise to a competitive advantage. Costco delivers exceptional value in the products and customer service offer, giving customers the satisfaction that they are getting more for their money.
What keeps customers coming back to Costco, and what is it that makes it so successful? To answer the first question, Costco offers two types of memberships—the regular and executive membership. With an executive membership, Costco gives a 2% reward on annual Costco purchases. A holder of the executive membership receives incentives for shopping there, which leads to more sales and higher customer visits. Costco has made itself a highly successful company by offering quality products and excellent customer service. Not only do they treat their customer’s well but offer their employees a competitive salary, making on average $20 an hour. They receive great benefits and are part of a safe and healthy working environment as well. At Costco they are committed to providing its employees with opportunities for personal and career growth. A satisfied and happy employee translates into a productive working environment. By giving its customers competitive wages, Costco is creating valuable and productive employees, which in turn increases their output per employee, they save money on hiring many merely good employees, and offer quality service.
My family holds a membership, and we primarily go there for most of our groceries, and what I have learned is that, the shopping experience forms part of Costco’s competitive advantage. They offer free samples throughout their store, have a food court, and gasoline station with reduced prices. Their competitive prices and savings keep us coming back. Saving on gas while on a trip to buy groceries is an added benefit that has contributed to Costco’s competitive advantage and differentiation. Costco has competition with companies such as Sam’s Club and Wal-Mart, but so far it has proved to be dominating the wholesale business, being listed at #12 on Fortune’s 2014 most admired companies. I believe that as long as they keep doing what they are doing, and going a step further to satisfy its customers, they will continue to dominate the wholesale business.
Do you or any family members hold a membership at Costco? If so, how satisfied are you with the products and services they offer?
Do you think Costco’s competitive advantage would strengthen or weaken by expanding to continents such as Europe or Asia?
Are there still any areas for improvement at Costco?
9 thoughts on “Dominating on Competitive Advantage”
While I don’t own a Costco membership, my sister does. What I’ve learned from accompanying her during shopping trips is that she often buys more than she needs. The low price of bulk items makes the customers think the products are all a great deal when, in reality, a lot of the customers don’t need such large amounts. I think this is why Costco has been so successful in the United States. If Costco expanded into Europe or Asia, they might encounter problems with the cultures because they don’t buy nearly as much product as America. The choice of selling bulk may not translate into these different cultures. Costco would definitely have to promote differently abroad in order to be profitable.
Great post! My family has a Costco membership and I love it. I am very satisfied with the products and services that Costco provides. One of Costco’s services that I really like is the store’s optical department. The glasses selections are really nice and are really great quality. I am still using the same glasses frame from 5 years ago. I am not sure how Costco’s competitive advantage will be affected by expanding into other continents. I agree with the above comment that the different cultures and the way people shop in other countries could be a problem for Costco.
My family has been members of Costco for as long as I can remember and I have no complaints about anything they offer. Being the youngest of three boys in my family we would go through snacks very quick. With Costco allowing customers to buy in bulk it cut down on the amount of trips my parents had to take to the store. As for expanding over seas I’m not sure how they would respond to that type of store. My experience when visiting other countries is that they shop a lot differently than we do in the U.S. I would be interested to see how other countries respond to it if they do decide to expand.
I have had a membership and both costco and samsclub. I rarely see myself shopping at either location and hold the membership mainly so my parents can go shop there for their own needs (if i didn’t make them one they wouldn’t have it). However, i stayed with costco and left samsclub because of the way costco treats its employees. To me, both stores provide complementary goods and are nearly identical. However one store treats its employees well and one does not. That right there is a competitive advantage because the company won my business.
My family does not have a Costco membership, but instead we are members to Sam’s Club, which is one of Costco’s competitors. I have been grocery shopping at Costco and do enjoy how they give free samples and love how you can buy things in bulk. Stores like these are great for kids who are getting groceries before they go back to college because you can buy everything in bulk. After reading your article, I would have to agree with you when you say Costco is dominating in competitive advantage. They not only provide large amounts of products in large quantities, but they also have a higher morale and satisfaction with their employees. I have had a couple friends who have worked for Costco in the past and they say they loved working for Costco because they treat their employees with respect and also offer a higher wage.
I see that you are talking about Costco and the benefits of holding a membership with this company. This is an interesting post and one that lured my attention since I like buying wholesale when I go shopping for groceries. I do not hold a membership to Costco but hold one to a similar member-only club. I think that there is an opportunity to expand just about anywhere with a wholesale approach. The main thing is strategy and figuring how large the operation would have to be and also where specifically to locate it. Customers are typically always looking for a good deal and bulk purchasing is a great way to get the most for your money.
I do not personally hold a membership but some of my friends do and all they talk about is how much they love Costco and the experience. Costco offers an amazing selection of meats and a wine selection that is rated on a scale of 1-100 that correctly identifies amazing wines. The staff is friendly and the prices are amazing. Nevertheless, there is no clear cut answer to whether of not Costco’s same business model would work in Asia or Europe. Look at Starbucks when they tried to expand to Australia. It turned out to be a flop. That is not to say the same would happen to Costco but intuition would lead you to believe a company as successful as Starbucks could succeed anywhere but they couldn’t in Australia. In addition, I absolutely think there is room for improvement for Costco. I cannot identify exactly what that is but a company that doesn’t see room for improvement is done growing and a company that is done growing will cease to exist before you know it. Sears being the case and point. Costco definitely still has room to grow and will continue to be a thriving company.
Something interesting popped into my mind as I was reading your post. When I first read how much Costco employees earn, I was skeptical that this is really beneficial. If Costco had a little less friendly employees, would you still go there? Then another thought popped into my mind – How much does Costco save on employee thefts because of their higher wages? For Walmart, most of store thefts are by employees. Walmart employees might not be too worried about losing their jobs because it doesn’t pay that well anyways. At Costco, losing your job could mean accepting a job at the local Walmart and making less money. Costco could be greatly decreasing losses from employee thefts, which for others is large, by making their employees positions more valuable.
My mom has a Costco membership, and surprisngly, she doesn’t use it that often! She really only uses her membership to bulk buy things like contacts for me and my sister. With two kids in college, my mom doesn’t really have a use for it anymore. You raise an interesting question about Costco’s expansion into Europe and Asia, and I don’t think that Costco would be as successful across the Atlantic. The main reason I think this is because the United States is such a consumption-based economy, while others are not.