Business Model the Company Essay

Pages: 10 (3207 words)  ·  Style: MLA  ·  Bibliography Sources: 10  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business


The company also rapidly pays off its debts, thereby preventing long-term debts from building up and providing Costco with limited interest surcharges. Since 2004, therefore, Costco's interest expenses decreased by $24 million. Costco pays its suppliers immediately and procures its supplies at cheap prices.

Atypical, too, to its competitors (certainly in contrast to Sam's Club) is the competitive prices that Costco pays its laborers and the highly motivating conditions its supplies them with. Competitive benefits and salaries are offered, with employee turnover being low and employees many times staying on until retirement.


Although Costco sells products that span into 5 product categories, its percentage of sale per category has been decreasing. It has attempted too to go into other markets in order to strengthen its competition, but these have failed.

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Costco may be able to effectively manage internal factors, but external factors may be, occasionally, beyond its control. Take the years 2005 to 2006, for instance, although the company attempts to predict ahead by having a high turnover of inventory, the company lost significant net income during that year with growth being slightly over 3% compared to the previous 20% of former years. Part of the reason was due to the 33% increase in income taxes paid in 2006, as well as increase in total revenues by 10% during the last years. Increasing taxes and overhead caused Costco to lose during those years, a situation aggravated by its investments in its furniture business that eventually had to fold on 2009. Costco too has had problems with its fluctuating cash flow that increased by only 3% in 2006, but fell by 15% in 2005 (Fortune., 2010.). This fluctuation discomfits its shareholders.

Business model evolution

I will take an advantage- relationship-based approach to evaluating changes for Costco's performance. This combined approach will consider (I) how Costco can gain an advantage over its competitors and, (2) how it can change its business model.

TOPIC: Essay on Business Model the Company Is Assignment

Loyal to its employees with a strong cultural model, Costco's managers prefer to develop their talent / employee labor from within their organization rather than bringing in new people. A Harvard gradate, therefore, looking for a job in Costco has to start at the very bottom rung working his way up until he reaches managerial level. Although admirable in some ways, this also prevents Costco from benefiting from experienced business personnel (hired from other companies), and from innovative ways of thinking that may work for the benefit oft its company. Altogether, the company's locked-in demeanor deters it from seeing things in a fresh new way that may move it ahead of its competitors. Jim Senegal, clinging to Costco's traditional values at all costs and rejecting extern, or contradictory opinions, may be putting the company at risk especially during periods when it may most need to hear an alternate perspective.

Hiring graduate students at higher levels -- offering them a fast-track program - may help Costco capitalize from the theoretical training of these graduates. Although it may be true that business experience precedes all and that Costco's employees prove their loyalty through many years of hard work gaining an advantage and familiarity with the business that no recent university graduate (howsoever specializes his or her university) can introduce, theoretical insights may bring a new level of originality to the company.

Similarly, too, outsiders from other fields can also help by expanding the company's perspectives, or helping them see in other ways.

This problem also leads to a similar one where the company, allegedly eager to please its customers, only features products that sell quickly, therefore refusing to stock certain products. Although this is positive in that the high inventory turnover allows the company to stabilize its assets, limited and constantly stable merchandise impels customers to turn to other warehouses, such as Sam's Club and BJ's Warehouse (which carries 7,500 products), for a greater selection.

It is this inflexibility to its philosophy and approach that precedes that of customer's needs and requirements that may also corrupt some f the customer loyalty to the store. Customers seek the store out for its low prices. Inflexibility in product change, however, may cause some consumers to seek newer pastures or, at least, procure some of their products elsewhere leading them then to employ competitive stores more often.

By featuring as little as an additional 50 different items, Costco will have a greater diversity than Sam's Club and will keep satisfied customers coming back fro more. This should not prove too expensive for Costco and it can always spend some inexpensive research (such as observing or browsing amongst customers, interviewing them for their reaction to new products and assessing their reaction with the introduced product) in order to prevent risk from occurring to its company. Cautious and gradual introduction of new products with frequent turnover of these items may even be able to provide Costco with uniquely profitable items that will benefit the company in a peak manner. Doing so will not only bring interest into the company, but will also stimulate consumers to return in the hope of finding something new.

As net income continues to fall, though ahead of its competitors, Costco will benefit by relaxation of its locked-in traditional thinking by breaching in at least two ways: (1) by introducing new blood at higher positions and from diverse ways of thinking in its company (b) by diversifying the products on its shelves.

Role of IT

In order to implement and evaluate the recommendation suggested in section 5, Costco is recommended to develop a computer an information system that will track introduced products and new employees over time and place. This will enable me to see whether introducing diversification in items and putting graduates and others with a fresh approach through a fast-track program actually introduces improvement to Costco.

Costco will need to set up a database to answer these questions. The entire 'experimental' employee's names as well as 'experimental' product items will have to be entered, and there will be a hypothetical 4 categories with subcategories for evaluative purposes (items, for instance will be graded according to their impact and marketability; and employees will be graded (perhaps using performance matrices) according to their performance and idea outcome). The latter will be the entities or, in technical language 'field names'; their description (and subcomponents) will be their attributes. I will need to brainstorm with stakeholders / board expectations of employees and introduced items in order to have some idea of expectations and in order to accurately fill out the information. The whole will be reduced to discrete data elements (i.e. atomic-level data) related to answering the questions. These data elements can be routine, such as name and date of employee or product admitted, and/or they can be detailed, such as customer reactions to a certain appliance. There will be 'primary' key fields and 'foreign' key fields with the former representing, for instance, the new employee's name foreign key fields refer to the keys that represents the value of a primary key in a related category. Field types are the techical tools created to assist in tracking the data and will vary between dates (as e.g. For employee's entry); numbers (as e.g. code data for experiemntal product); radio buttons (as, for instance, by age in regards to employee); text (e.g. employee's name); Textarea can be used for longer pieces of text (e..g description of product); URL (e.g., the fiscal details related to product; or suppliers).

Costco is recommended to approach their implementation of this system cautiously since, according to Davidson (2007), poor prior planning and impulsive designing often results in problems later on with the lack of time to go back and fix these problems properly. More so, far more expense and time would be taken up in having to later redo and correct the job, and, if left uncorrected, "hacking" starts with the database left in its incomplete state. Details should be complete with, for instance, provision of resources provided in exhaustive (although not elaborative or exaggerated) detail. (Henry, 2008)

Costco is, further, recommended to start by approaching the subject from the perspective of a naive but concerned prospective client, to slant questions that this client is most likely to ask that are central to the topic, and then to proceed to fill in those questions.

One of the main problems in designing relational databases is that the information often changes. So, for instance, Costco can spend much expense and time gathering a team and working on the base and just as they have put completed the system, the data of as food item (for instance) may have changed. Data values, too, may be unintentionally duplicated. To deal with these problems, programmers have developed a method called 'normalization' where data consistency and stability is ensured, redundancy is kept at bay, anomalies are eliminated, and maintainability and current ness of the database is worked out (Bostrup, n.d). Other external developments may… [END OF PREVIEW] . . . READ MORE

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How to Cite "Business Model the Company" Essay in a Bibliography:

APA Style

Business Model the Company.  (2011, November 7).  Retrieved December 6, 2021, from

MLA Format

"Business Model the Company."  7 November 2011.  Web.  6 December 2021. <>.

Chicago Style

"Business Model the Company."  November 7, 2011.  Accessed December 6, 2021.