Analysis of an International Organization
Nature of the Organization
Costco’s business strategy is different from their competitor’s in the wholesale retail industry because their purpose is to keep overhead down and pass the savings to their customers. They do this by choosing not to advertise, sell fewer brands and having an innovative approach by having their own manufacturing facilities for a variety of merchandise. Costco does not market their warehouses and their marketing is through word of mouth from current customers who also must have a membership to shop at Costco. When compared to Walmart Costco sells four brands of toothpaste and Walmart sells sixty brands of toothpaste. Costco can buy more for less from the manufacturer of the four brands of toothpaste and pass the savings on to their customers. Costco’s strategy is to sale a limited number of items because this strategy according to (Lutz, 2013) “increases sales volume and helps drive discounts.” Because of Costco’s profitability in the retail market they have managed to continue to be profitable even in an oppressed economy. Costco’s focus is on high-end customers indicated by some of the brands they carry such as Coach Handbags. Costco offers three different levels of membership and is only open to customers who have a membership. Costco’s philosophy is they do not advertise or markup items more than 15% in order to save their customer’s money. These practices lowers the overhead costs and continues passing the savings to the customer. Costco is an international company and has (Costco Wholesale Corporation, n.d.) “462 locations in 43 U.S. States & Puerto Rico; 87 locations in nine Canadian provinces; 25 locations in the United Kingdom; 10 locations in Taiwan; 9 locations in Korea; 18 locations in Japan; 5 locations in Australia; 33 locations in 18 Mexican states” with this many locations Costco has a strong international presence.
Human Resource Challenges
The first common HR challenge is determining compensation for employees especially in the retail industry because it is known that retail workers are paid very low wages. These low wages make it difficult for companies in the retail industry to retain employees. They experience a high turnover of employees, higher incidences of employee theft and lower employee productivity. It is important for Costco to continue developing their Compensation strategy to remain competitive in the retail market. For example, Costco starts their employees at $11.00 per hour and that same employee, four years later will be earning as much as $19.50 per hour. Compared to Walmart’s employees who start at $9.00 per hour and that same employee four years later will be at $10.50 per hour. Costco providing higher wages in the retail industry has experienced employee loyalty, lower instances of employee theft and high productivity from their workers. It is known that Walmart has a low compensation plan for their employees and experience high...