Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code : COM0031

Year : 2004

Industry : Retailing

Region : US

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:Costco, the biggest Warehouse Club chain of stores in the U.S., occupies 29th position in the Fortune 500 list. Setup in 1983 by Jeffrey Brotman and James Sinegal, Costco operates 433 stores worldwide. Its U.S. revenues for the year ended August 2003 were $34.4 billion. Costco stores offer lower-priced goods to its members by following a limited assortment, low-cost, low-inventory, no-frills format. Product categories include groceries, automotive supplies, tires, toys, hardware, sporting goods, jewelry, books, furniture, apparel, health and beauty aids.

Costco started off as a store that served the needs of small businessmen, but in 2003, individual non-business customers outnumbered small business customers by two to one. The company follows a policy of never marking its products by more than 14% of their cost price. It offers one of the best employee compensation packages in the industry and has the lowest turnover rates.

The recent years have seen its leadership challenged by its main competitor, Sam's Club, a division of Wal-Mart. A rejuvenated management team under CEO Kevin Turner is helping Sam's Club cut costs and lower the prices. Analysts feel that these measures are giving Costco a hard fight and forcing it to run its operations tighter than ever. Criticism from Wall Street for neglecting shareholders in favor of customer and employees has been increasing. In addition, market observers have been sending in reports of approaching domestic market saturation in the discounting industry.