Management at Costco and Sam’s Club

Project: find out which business model works best in different respects
Costco: represents the stakeholder theory:

  1. They take their employees seriously and want them to feel good at what they are doing, higher (reasonable) wages, health benefits.
  2. The workers are more productive: innovative, think outside the box, encourage an inspiring environment, make workers feel that their contributions are important.
  3. The employees are more willing to assist customers: they believe in better service. Their success in selling their products depends on their service to customers. When there are more customers Costco hires more employees to help them check out fast. Wall street: more employees mean less revenue for the shareholders.

Sinegal: he has to look at his business in the long term, not from one week to the next. Therefore, the decision to hire more employees was right.
4.The CEO’s status: Sinegal makes $350.000.
Walmart’s CEO makes $35.000.000.
Low salary: Sinegal wants to tell his employees that they are important too. Therefore, a modest salary is a way of paying respect to their work. It is important that they feel that they can connect to the CEO.
Sinegal knows that a higher salary would just mean less revenue as a shareholder.

  1. Their relationship to suppliers. Requirement: do not sell the same product under the price they agreed.
  2. Theft: less shrink, i.e. theft, in Costco: lower cost. They are more loyal because they feel treated in a fair way.
  3. Turn-over rate: this is lower in Costco.
  4. Profits: Costco makes the most profits.

Sam’s Club: represents the shareholder theory
Why does Sam’s Club not learn from Costco?
1.Initially it could be costly. For some time they would make less profit.
2.Ideology is different.
3.CEO: hired for a short time, he does not know when he has to leave his position. Therefore he wants to show good quarters, to show that they are making money.
4.The size of business: there are more Sam’s Club stores than Costco stores.

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