Structure And Strengthal Strategy: Costco's Organizational Structure

Costco has weak matrix organizational structure, which attempts to capitalize efficiency of benefits from functional groupings, such as H-R-M, operations, R&D, finance, merchandisings, construction, I-T, legal, accounting, and e-commerce & publishing. Costco also attempts to capitalize effectiveness of benefits from geographic national divisions (474) and global divisions such as, Canada (89), United Kingdom (26), South Korea (12), Mexico (34), Taiwan (10), Japan (20), Australia (8), and Spain (2). The functional feature of Costco applies to all the geographic divisions, so, each division has functional authority and geographical authority. Costco’s organizational structure presents the advantage of flexibility to adjust regional market condition,

This strategy requires low costs reflected through low prices because customers expect significant savings when they buy from Costco. Wal-mart also uses cost leadership generic competitive strategy. To distinguish a part from the Wal-mart’s cost leadership strategy, Costco partly employs broad differentiation as its secondary generic strategy. The secondary generic strategy make the business stand out based on value and quality by using Kirkland Signature, which known as house brand (m.koreatimes.co.kr).

Costco’s intensive growth strategy is to remain strong despite of the tough competition with Wal-Mart and local players such as E-Mart, Carrefour, and Sam’s Club. Twelve years ago, 1994, Costco entered a joint venture Shinsegae Department Store for learning. Costco learned Korean retailing with Korean customers; Shinsegae learned wholesale discount business for profit. Nevertheless, two companies had divided apart by Costco buying out most of Shinsegae interests for $94 million. Later Shinsegae Department Store, now E-Mart in Korea, bought Wal-Mart in Korea for approximately $825 million. Wal-Mart was located in Metropolitan Area in Seoul and used the tall shelving and bulk packaging products market. Since most Koreans used public transportations or walking, the Metropolitan Area was scarce as ever. That means Wal-Mart’s planning, economies of scale didn’t go through plus Koreans

Costco’s organizational culture optimizes employee morale and customer satisfaction. Costco spends little as possible on advertising, but Costco communicates with its customers in newsletters by not using comparative words like “best,” or “lowest,” or “cheapest,” in advertizing. On refund policy, when customers bring something back, they get their money right up at the front register without red tape (www.coriolisresearch.com/pdfs/coriolis_understanding_Costco.pdf). It is expected that Costco would continue to grow with that positive culture that has helped the company withstand the strong competitor like Walmart. According to Renee Dudley (www.bloomberg.com), “Costco profit advances as revenue; growth outpaces Wal-Mart.” While Wal-Mart enjoyed a 1.5% rise in sales, Costco Wholesales’ 2015 earnings report shows on 8% sales increase without 2% currency fluctuation and gas price deflation in 2015 and an almost $70 million rise in membership