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Business Analysis: Costco's Business Strategy

905 Words4 Pages

3.0 Concepts 3.1 Resources and Capabilities In order to achieve and sustain competitive advantage, a business needs both resources and capabilities. Resources are assets that are owned or employed by an organization. The organization utilizes and uses these assets to carry out their business operations. Resources can be grouped either tangible assets or intangible assets. Capabilities are complex skills or ability that a firm develops with time to perform business operations competently and utilize their resource effectively. Costco earned reputation for serving highest quality regional and national brand goods for the lowest possible prices. This reputation is the biggest resource for Costco. Also, Costco has strong financial resources that …show more content…

Costco has developed number of operational excellence that helped to achieve low cost operations. Costco’s operational excellences are efficient management of inventory and distribution, minimum merchandise handling, and bulk purchasing to reduce the price of the products. Also, Costco has the ability to offer leading national brands at low prices by getting great discounts from the manufacturers. In addition, Costco generates high sales volume and quick inventory turnover helps in reducing inventory-handling costs and increases the liquidity of cash. Quick realization of cash helped them to pay off their vendors and receive additional discounts for early settlement. Moreover, James D. Sinegal is the co-founder and former CEO of Costco mentioned that the “employees were the company’s main core competency” (Makroon). Costco pays their employees well above the minimum wage rate and more than competitive pay rate in the market. Their employees make average wage about $21 per hour (Makroon). Since Costco pays high wages to their employees, their employees are highly satisfied and motivated to show positive attitudes and provide excellent customer …show more content…

It is an approach that gives more value to the customers by satisfying their expectations on key quality/service/features/performance attributes while exceed their price expectations by providing at low costs. Companies that offer products/services relatively at low prices and offer substantial differentiation on

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