organizational culture analysis costco

In 1983, Costco Wholesale Corporation, the fourth-largest retailer in the United States, was founded by former Price Club executive, Jim Sinegal, and lawyer Jeffrey Brotman. Costco focuses on selling products at low prices in bulk packaging and focuses mostly to large families and small businesses. They sell products like flat-screen TVs, gallon jugs of mayonnaise, and coffins. Costco operates 556 stores worldwide: 405 in the United States, 77 in Canada, 31 in Mexico, 21 in the United Kingdom, 9 in Japan, 7 in South Korea, 6 in Taiwan, and 1 in Australia.

Costco employs 140,000 employees and accumulates $70 billion in annual sales. It became the first company to rise from zero to $3 billion in sales in less than six years, and reached the $1 billion mark in 3 years. Costco saves, enabling them to keep costs low, by not spending money on marketing, only carrying one brand, unless a house brand is offered, of a product, and not stocking bags or packaging materials. Costco has a policy of not marking their products for more than 15% of the supplier price.

Jim Sinegal, founder and CEO of Costco, answers his own phone, sends his own faxes, and visits with his employees and customers. He made Inc. magazine’s 26 Most Fascinating Entrepreneurs list. Sinegal is number 4 on the list “because who knew a big-box chain could have a generous soul.? ” Sinegal only makes $350,000 a year, earning him among the lowest 10% of the CEOs, even though Costco ranks 29th in revenue among all American companies. Sinegal believes that “having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong. Wall Street is unhappy with Sinegal’s “generous soul” and he has been accused of being “too benevolent” by analysts. Sinegal’s goal isn’t pleasing Wall Street, though. He strives to please his customers and employers and to create a company that will still be intact in 50 to 60 years. The 140,000 Costco employees make an average of $17 an hour. Hourly wages start at $10 and over half of the employees earn $18. 32 an hour. Costco has never made major labor cost cuts, even during years when profit was down. Costco offers amazing benefits not only for full-time employees but for part-time employees, as well.

They cover 90% of health care costs for both full-time employees and part time employees. Full-time Costco employees can decide from two different health care options: a Choice Plus plan and a Freedom of Choice plan. They can choose their own medical services, physicians and facilities with these plans. A similar plan like Choice Plus is available for part-time employees, also. Full-time Costco employees may also choose from two different dental plans: a core dental plan, which is offered to part-time employees, and a premium dental plan, which allows for more freedom of choice.

Costco also offers a pharmacy program because of their in-house pharmacies, which make is easy to pick up prescriptions at work. Employees’ co-payments can be as small of an amount as $5 for generic medications and usually will never run any more than 15% co-pay for the most expensive branded drugs. Optical centers are also conveniently located in Costco warehouses making it easy for employees to access. The vision program for employees pays up to $60 toward a refraction eye exam and annual allowances are provided for the purchase of correctional lenses.

Not only are there stellar health benefits at Costco but financial benefits as well. A 401(k) plan was created to help employees plan for a cozy retirement. Costco matches employee contributions 50 cents on the dollar for the first $1,000 each year to maximum company match of $500 a year. When employees meet the requirements to make them eligible, Costco makes a yearly contribution to those employees’ accounts, which they base on the percentage of eligible earnings. The percentage increases as the employees’ years of service increases.

Costco exceeded Sam’s Club sales in 2003 by 21%, even though Sam’s 28% more stores. In 2004, Costco’s 450 stores had sales of $47. 15 billion and in the same year their stock rose 34%, while Wal-Mart’s remained even. Costco’s revenues, in the past 5 years, have rose 70% and their stock has doubled. Jim Sinegal and his partner Jeffrey Brotman have obviously created a company that focuses on not only making their customers happy but their employees as well. Unlike a large mass of companies, Costco focuses on generosity, kindness, and good ethnics to get their business ahead of competitors.

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