Ch1: Overview of Corporate Financial Reporting

http://www.nytimes.com/2005/07/17/business/yourmoney/17costco.html

Summary: This article is talking about how Costco, being one of the nations fifth largest retailer, is too overly generous towards their customers and employees, possibly more than their shareholders. By doing this it keep Costco's customers loyal and lowers the chances of employees stealing products from the warehouses. The owner, Mr. Sinegal, works very different than how Wall Street businesses these days operate. He doesn't think about earning as much money possible from today until next week, he wants to keep his business going for another 50-60 years. At Costco, they only mark up merchandise by 10-15%, but in supermarkets they mark up by around 25%, and in department stores they mark up by 50%. In the previous 12 months, Costco's stock prices have risen 10%, while Wal-Mart has decreased 5%.

Connection: This article relates to chapter one because it shows how this particle business has differed from other companies and how it has succeeded. Although Costco could earn a lot more profit if it marked up higher on its merchandise, it refuses to do so, which makes the customers happy. By having this low price and good quality merchandise strategy, Costco is a top contender in the retail industry. The business can also check on how other companies are doing so it could adjust its own selling strategy accordingly. The financial documents mentioned in this chapter like the balance sheet, income statement, and etc. can greatly aid Costco in knowing their position in the industry.

Reflections: I think that if in the future I think about buying shares, I would definitely consider Costco. Customers like it when they charge low prices on merchandise which makes their customers happy and loyal, so as long as Costco doesn't change this about their business, customers will keep coming back. Compared to other supermarkets and department stores in the industry, Costco doesn't have any trouble competing with them. For example in this article it revealed that Costco shareholders gained a 10% increase in value in their stocks while Wal-Mart stocks plummeted 5%. Although I think if Costco got rid of their members only policy, they would definitely see more satisfied customers.