Costco Organizational Theory and Behavior Research Paper

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Costco Organizational Theory and Behavior

1. What is Costco’s competitive advantage?

Costco is incessantly outperforming corporations such as Target and Wal-Mart. The company has reported great and impressive financial results from one financial quarter to the next whereas Target and Wal-Mart are dealing with a lull in business. All of this comes down to Costco’s competitive advantages. One of these competitive advantages is the focus on driving sales (Lutz, 2014). Whereas its rivals spend significant amounts in marketing, Costco does not go to great extents in advertising but rather retails a limited number of items. In spite of the company’s massive store volume, it has been renowned for selling a fraction of the brands in rival companies. The key competitive advantage in this lies in the fact that retailing fewer items leads to an increase in sales volumes and aids in driving discounts. Furthermore, Costco’s concentration on driving sales aids in elucidating why the company offers better remunerations and benefits compared to competitors (Lutz, 2014).

Costco’s competitive advantage is also found in the value gained from membership. The warehouse club's members pay for the pleasure of shopping there and that generates a hard-to-break hoop that profits the company. Essentially, paying for membership reinforces the consumer’s linkages to the brand whereas the underlying value proposition either leads to an increase in usage levels or generates guilt on leaving. As a result, this gives rise to a competitive advantage for Costco that solely a small number of other retailers can rival with (Kline, 2017).

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Costco dies offer consumers low prices, and joining, particularly being part of the Executive Membership, is an ideal approach to save money for numerous individuals. Once the chain has a client, there is a high probability of holding on to him or her, for the reason that there is appeal in the promise of what it offers, and the amplified future savings it signifies (Kline, 2017).

The more an individual partakes in shopping at Costco, the greater he or she will see the value in the membership at the warehouse. However, even if a consumer does not sufficiently shop to obtain $55 or $110 in value, he or she may opt to renew for the reason that the burden for not saving money falls on the individual and not the retailing company. For a competing retailer chain to break this cycle enjoyed by Costco, it would have to offer the same prices devoid of charging a membership fee and at the same time spending funds to communicate that it was doing that. It is challenging for other companies to undertake this approach for the reason that most of the profit generated by Costco, approximately 75 percent, emanates from membership fees (Kline, 2017). The inference of this is that any rival matching the prices set by Costco and at the same time spending to market its brand devoid of taking in membership revenue, would be a losing proposition (Kline, 2017).

In conclusion, the key….....

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