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.
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Some such as Wall Street analysts may be unhappy with Costco's business strategy, but I am glad to see that there are companies like Costco out there that are generous to both their customers and employees. Costco is also expected to continuing growing for another 50 and 60 years from now with their different business strategies. Although analyst, Bill Dreher of Deutsche Bank believes at Costco "it's better to be an employee or a customer than a shareholder..." I do not completely agree with him. In the article it also stated that Costco's stock prices has risen over 10 percent over the year, while Wal-Mart slipped down 5.
ReplyDelete-Monica Yip
Costco is one of my favourite companies of all time! I agree with Monica because it is true that there are companies who like Costco's business strategy and some that do not. Personally I am very pleased with their service and supply of goods. They have a wide range of goods to choose from and most of their products are of good quality. I agree with Samson that Costco would be a great business to buy shares from because they provide excellent customer service. I also support the idea that if they were to remove the "members only" policy the consumer’s level would increase, yet I think the reason why they have this policy is so they can provide us with cheap pricing. Overall, if I was to choose a company to invest in, Costco would definitely be a great choice.
ReplyDelete-Leon Cao
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ReplyDeleteI think what Costco is doing is great. They are able to earn money, have reliable employees and satisfied customers. I agree that if Costco got rid of their member fee, they would have even more satisfied customer, but I think it's a reasonable fee. They have low prices, good deals, good service, free samples and a great money back guarantee policy. I agree that Costco is a great company to buy shares in. I think Costco is a wonderful company and has an excellent business strategy. I hope they are able to keep going for another 50-60 years.
ReplyDelete-Sam Hui