Chapter 12: Costco's Initial Public Offering

Costco was founded in 1976, under the name Price Club. It originally was only open to small businesses, but realized it would have greater success allowing non-business customers to shop also. Costco went public with its initial public offering (IPO) on December 5, 1985, with a stock price of $10.00 per share. The first dividend of  $0.10 per share wasn't issued until May 31, 2004, nearly 19 years later. Since then, every dividend issues has been less than $1 per share with one exception. In December 2012, a dividend of $7.00 per share was issued. After this one incident the price went back to normal. The most recent dividend issued was $0.35 per share.

Chapter 11: Costco's Organization Structure

Costco has what we would consider a multidivisional structure for its company. It has a President and CEO, but it also has directors and Vice Presidents for different regions and different departments. Needless to say, its list of directors and executive officers is very, very long. It also has 6 committee members that are a part of 3 different committees: the Audit Committee, Compensation Committee, and Nominating and Governance Committee. All 6 people are members of at least one committee, but not all committees.

Chapter 10: No Acquisitions for Costco

Costco doesn't rely on mergers or acquisitions; it doesn't have to. As I mentioned in a previous post, Costco is like a one stop shop; there is something in there for everyone. It can offer deep discounts by selling in bulk. Because there are not many like it out there, there are fewer chances for mergers and acquisitions. It is a retail powerhouse and remains that way without mergers and acquisitions.

Chapter 9: Costco's "Alliance"

While Costco and Amazon may not have a true alliance between them, they do have mutual respect for one another. Costco founder Jim Sinegal bought a Kindle with a defective screen from Amazon in 2008 , and was remarkably impressed with its swift customer service and action in replacing the item. He wrote to Amazon CEO Jeff Bezos to let him know how impressed he was with the service. Rumor has it that Amazon Prime may have even been inspired by the membership factor of Costco's success, but that hasn't been confirmed.

Chapter 8: Costco's International Market

Over the last few years, Costco has been growing its international presence. It has multiple locations in the UK, Mexico, and Canada, with more to open as well. There are a newly opened stores in the lower income areas of Japan, Spain, and Korea, which will help the long term growth of the company. It will still have to compete with some of the same giants as it does in the Us such as Target and Wal-Mart, but it has done well nonetheless.

Chapter 7: Costco's Diversification

While Costco may not own several different businesses in different industries, it has its own version of a conglomerate. Inside of its warehouse store are several mini-industries under the same roof. They offer an optical center, automotive service, bakery, grocery, florist, pharmacy, photo center, cellular phone service kiosks, and a gas station. It is almost like a mini conglomerate under one roof. This allows it to compete in many different industries without having to have a separate storefront for each one.

Chapter 6: Sustaining Costco's Competitive Advantage

Despite a 6% rise in membership fees, Costco's membership renewal rate is at a whopping 90.6%. With its business doing so well in the United States, it has been focusing on establishing itself internationally. While they don't have as much presence overseas as they do in the US, margins are much larger overseas. Costco has adapted to the changing economy quite well, with its main focus being to increase foot traffic in the stores.

Chapter 5: Costco and Differentiation

Costco has come under fire in the past for paying its workers above minimum wage as well as giving other nonessential benefits. Wall Street analysts feel that the profit margin is too low to offset the cost of the higher wages. However, this is how Costco and other companies like Starbucks choose to differentiate themselves from their competition. Very few companies view their employees as an investment these days. Rather, they view their workforce as a cost that they try to keep as low as possible. Not Costco. It believes that if you invest in the people that come in contact with the customers on a daily basis, you get a better employee and therefore a better experience for the customer. This tends to create repeat business and in turn revenue for the company.

Chapter 4: Costco's Competition

If we consider the specific industry that Costco is in, warehouse membership retailer, there is really only one big competitor, Sam's Club. Both were founded in 1983. They have a very similar set-up and similar products. However, they are only similar. The stores tend to carry different brands and different variations on similar items. Some things that are sold at Costco may or may not have a similar item that can be substituted for at Sam's. If there is no brand loyalty, a consumer could shop at either store and get similar deals. They both have auto centers, optical centers, gas stations, and groceries, making it almost a one stop shop for consumers. Each has to constantly monitor the other for specials and new products to keep up with consumer demand.

Chapter 3: Costco's Resource Controversy

It was recently discovered that a supplier used by Costco and retail giant Wal-Mart has a connection to forced labor in Thailand. A supplier of shrimp sold by both stores is reported to have bought feed from boats with enslaved laborers. Costco jumped into action once the information was discovered, requiring its suppliers to take corrective action in order to remain affiliated with the company. In order to enforce this, Costco is sending members of its buying team to Thailand to ensure no affiliation with forced labor, and it's also beginning discussions with the Thai government in order to eradicate human trafficking and slave labor.

Chapter 2: Costco's Mission

Costco Wholesale's mission is bringing its members low prices on quality items, but the warehouse giant is also dedicated to education. In fact, Costco has helped over 1000 students attain their dream of educations by providing them with scholarships. One in particular is a man by the name of Ramon Penaranda. Ramon grew up in Cucuta, Colombia, in a very poor and violent community. His mother always emphasized the importance of education, and once they moved to the United States he was accepted into Seattle University. Once accepted, he was awarded a scholarship provided by Costco, which made his education possible.

Chapter 1: Costco's Strategy

Costco Wholesale is a warehouse retail giant that sells items in bulk at a discount. The reason they are so successful in this respect is the strategy they use. They have their members pay a membership fee to shop at the store, and in return the customers get deep discounts on the items they buy. Costco offers different levels of membership which bring their own respective benefits. The higher the membership the more rewards that are given. This strategy gets new members in the door, and keeps them coming back for the discounts.