MGMT 490 Lecture Notes - Lecture 1: Costco, Coca-Cola Zero Sugar, Pepsis
• Costco definitely has a competitive advantage in most of the categories listed in
Chapter 3.
Human resources knows that a big part of the recruitment process is attracting top
applicants. This means offering a great salary with added perks and benefits. The
starting wage at Costco is close to $15/hour in Michigan and after 6 months,
employees receive full medical coverage, which includes dental, vision, and doctor's
visits. In addition to that, employees receive one month paid vacation and get a
401K plan, that is matched 50 percent. The turnover rate for this company is very
low because of this, breeding motivated and loyal employees.
Costco is very well known for its KIRKLAND brand of products, which are offered at
very low prices (but in bulk). The reason why these top quality products are offered
at such low prices is because the company makes a great portion of its profits
through membership fees. Therefore, it doesn't necessarily need any additional
revenues from the merchandise it sells. However, many members don't realize this,
so they choose Costco over other retailers, such as Sam's Club.
In terms of financial resources, I know about a handful of new locations opened up in
Michigan over the course of the year: East Lansing, Traverse City, etc. This means
that the company's credit ratings are high and its capacity to borrow money is
nowhere near exhausted.
Costco has a competitive advantage with its physical resources, as well. One
excellent example is its Pittsfield location. The store is located between Eastern
Michigan and University of Michigan; students get memberships there all the time
because it is close, convenient, and relatively inexpensive. However, the genius
thing is that new students come in every year, just as soon as students graduate.
This means there is always a flood of new students eager to get their Costco cards,
which equals more business.
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Collapse SubdiscussionJames Parsons
James Parsons
Feb 1, 2018Feb 1 at 1:41pm
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Hi Jane,
Costco is an excellent example of competitive advantage because of the way they
treat their employees. They invest in employees, and in turn their employee base is
always eager to look out for Costco's best interest. Their labor costs may be higher
than their top competitor, Wal-mart, but as you pointed out this is more than
compensated for in other areas. This has caused Costco to be seen more favorably
both by employees and the general public, giving them an advantage over Wal-mart.
-James
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Collapse SubdiscussionKaren Savage
Karen Savage
Feb 3, 2018Feb 3 at 1:42pm
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Hi Jane,
I have memberships at Costco and Sam's Club. I think Sam's Club to be a little
cheaper pricing on most stuff, but Costco has a different selection of items that is
sometimes worth the extra cost. I don't buy black olives at Sam's because they only
sell them in cans. Costco sells yummy Kalamata olives in a large glass jar and they
have gluten free chicken broth that I buy by the case. I go there for niche items at a
good price.
You're right that Costco makes most of their money on memberships. I have an
executive membership which gives me a yearly rebate. If my rebate isn't as high as
the cost of the membership I can go to the service desk and they will increase my
rebate check to make up the difference. That's cool. I found that out when I went to
change my membership level one year.
Costco typically only marks up their products on average 10.6%. That's not
much. They can afford to do that because they make so much on
memberships. They usually only have 1 or 2 choices of an item so it cuts down on
shelf space and increases the buying power on both brands.
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•
Collapse SubdiscussionMorgan Casteleyn
Morgan Casteleyn
Jan 30, 2018Jan 30 at 1:01pm
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A company that I think has sustained competitive advantage is Coca Cola. It is one
the world’s most recognized brand, and even today it still remains a highly sought-
after stock on the New York Stock Exchange.
Although Coca Cola has competitors such as Pepsi, their competitive advantage has
proved its sustainability over the years. I think that this is due to a few reasons: the
secret recipe, their ability to develop product/brand extensions, and their distribution.
The secret recipe for Coca Cola gives them a distinctive competency because no
other cola beverage on the market can imitate that. Over the years, they have
developed new products such as Coke Zero, and/or have reinvented old products.
Lastly, I also think that their distribution gives them a competitive advantage
because Coca Cola products are available to billions of people worldwide.
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Collapse SubdiscussionDavid Schumacher
David Schumacher
Feb 1, 2018Feb 1 at 5:02pm
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I'd say that Coke and Pepsi are similar companies in very close competition, but the
market is definitely hard for anyone else to gain control of by this point. Almost every
type of pop the average person has heard of has either Coke or Pepsi as a parent
company, so the barriers to entry are high.
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Document Summary
Costco definitely has a competitive advantage in most of the categories listed in. Human resources knows that a big part of the recruitment process is attracting top applicants. This means offering a great salary with added perks and benefits. The starting wage at costco is close to /hour in michigan and after 6 months, employees receive full medical coverage, which includes dental, vision, and doctor"s visits. In addition to that, employees receive one month paid vacation and get a. The turnover rate for this company is very low because of this, breeding motivated and loyal employees. Costco is very well known for its kirkland brand of products, which are offered at very low prices (but in bulk). The reason why these top quality products are offered at such low prices is because the company makes a great portion of its profits through membership fees. Therefore, it doesn"t necessarily need any additional revenues from the merchandise it sells.
