TPGS Case #2, Costco Wholesale in 2012: Mission, Business Model, and Strategy

GENERAL INSTRUCTIONS: 1.The exam is based on TPGS Case #2, Costco Wholesale in 2012: Mission, Business Model, and Strategy.The exam is comprehensive in that you will have to draw on some concepts covered in TPGS Chapters 1 thru 6, and related Instructor Notes. [The weekly modules for weeks 1 thru 4 have been re-opened so that you can review the Instructor Notes, if you wish to do so.] 2.Please write complete, yet concise, responses to the questions below. Your responses must be based only on the facts in the case, not on your own personal experiences as a shopper in Costco, Sam’s Club, or BJ’s Wholesale. 3.Please cut-and-paste the entire question, or number your answers to correspond to the question that you are addressing. When answering a question that requires you to address several points, list and bullet them, rather than stringing them together in a lengthy paragraph. 4.Please prepare your exam as a Word document, that is double-spaced, and in a 12-point font. CASE EXAM QUESTIONS 1.What is Costco’s overall strategy? 2.Describe the key elements of each of the following functional strategies, policies, and practices that support Costco’s overall strategy: 1.Pricing 2.Product Selection 3.Low-Cost Emphasis 4.Marketing and Advertising 5.Supply Chain and Distribution 6.Costco’s Membership Policy 7.Warehouse Management 8.Compensation and Workforce Practices 3.What are the chief components of Costco’s business model? Is the company’s business model appealing? Explain why or why not. 4.Drawing on Porter’s Five-Forces of Competition framework, describe competition in North American wholesale club industry, by answering the following questions: 1.What is your assessment of the intensity of rivalry among Costco, Sam’s Club, and BJ’s Wholesale? Strong, moderate, or weak? Explain and support your answer. 2.What is your assessment of the strength of competitive pressures from the potential threat of new entrants into the North American wholesale club market? Strong, moderate, or weak? Explain and support your answer. 3.What is your assessment of the strength of competitive pressures from substitutes for shopping at wholesale clubs? Strong, moderate, or weak? Explain and support your answer. 4.What is your assessment of the strength of competitive pressures from suppliers to each of the three competitors (Costco, Sam’s Club, BJ’s Wholesale)? Strong, moderate, or weak? Explain and support your answer. 5.What is your assessment of the strength of competitive pressures from customers or members of each of the three competitors (Costco, Sam’s Club, BJ’s Wholesale)? Strong, moderate, or weak? Explain and support your answer 5.How well is Costco performing from a financial perspective? Do some number-crunching using data in case Exhibit 1 to support your answer. Use some the financial ratios presented in Table 4.1 of TPGS Chapter 4 to help diagnose Costco’s financial performance. [You may also refer to text and notes from the require Accounting courses you took earlier.] 6.How well is Costco performing from a strategic perspective? Does Costco have a competitive advantage over Sam’s Club? If so, what is the nature of its competitive advantage? 7.What core values or business principles has CEO Jim Sinegal stressed at Costco? What is your assessment of the impact of those principles on Costco’s success? 8.Do you think Jim Sinegal has been an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? [Refer to the “tasks” in Figure 2.1 in Chapter 2 in developing your answers]. 9.What recommendations would you make to Costco’s top management regarding how to best sustain the company’s growth and improve its financial performance? 10. Personal Reflection Question: Describe at least two (2) ways in which your understanding of strategy and strategic management (NOT about Costco, Sam’s or BJ’s) was enhanced as a result of having completed this exam.