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Business: Costco Wholesale Corporation

Essay by   •  March 5, 2013  •  Term Paper  •  395 Words (2 Pages)  •  1,574 Views

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The company that I studied during Essentials of Business Development course is Costco Wholesale Corp. Costco Wholesale Corporation is the seventh largest retailer in the world. As of July 2012 it was the fifth largest retailer in the United States, and the largest membership warehouse club chain in the United States.

During the late-2000s recession, the media filled with companies attempting to reduce their labor cost, laying off salary workers, cutting employee benefits, moving production to places where labor rates or lowing, freezing wages, or some combination of the above to grow business profitability.

Salaries and wages are one of the largest costs of every company. High powered executives used fixed cost in their economic decision to maintain growth for the company. Costco's main competitors, Wal-Mart lay off 11,200 of its Sam's Club workers as it outsources product demonstrations and BJ's Wholesale Club closed five stores in the southeast region. Costco decided to avoid layoffs. Instead they increased its employee healthcare (92% healthcare cost generous by industry standards), and maintained high salaries for their employees.

Costco wanted to stick to their basic principles: treat employees and customers' right, know your customers, model what you what from your employees, and run the business for long-term sustainability. The recession placed employees as a lower-value asset for companies. They moved a lower-value asset to a high-value asset thus, creating wealth. Costco realized to succeed during the recession was to not look merely at the immediate but at the longer effects of their decision to focus on employees.

Including employee wages and salaries in their decision to increase market share and net sales, gave the company a comparative edge. Costco was able to spot a money-making opportunity during this recession. Costco financial performance during 2011:

* Net sales increased over 14%

* Net income increased up to 12%

* Earnings per share rose 13%

* Returned over a billion dollars to shareholders

Tim Sinegal (Chief Executive Officer) stated, "It is only through the concentrated efforts and the constant focus on our mission and core values by all of our dedicated employees that Costco is able to succeed year after year. Based on my reading the only advice I can give to Costco is keep up the good work. I realizing Costco's valuably asset their employees and customers.

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