Can I get an introduction and conclusion for this assignment

OD IN PRACTICE: THE WAR OF THE WAREHOUSE STORES Costco is one of the few competitors that have been the low-cost strategy favored by Wal-Mart and able to beat Sam's Club (part of Wal-Mart) at its Sam's Club The market's view of Costco, and there- own game. Costco and San's Club are both big-box fore its stock price, says a lot about the so-called membership warehouse stores And Costco and Wal-Martization of the U.S.economy Wal-Mart were started up in 1983. However, that A contrarian view is expressed by a Citi is where the similarities end. group/Smith Barney analyst who says. "Costco de- serves a little more credit than it has been getting COSTCO PAYS ITS WORKERS TOO MUCH lately, since it's one of the most productive compa- According to Wall Street investors Costco pays its of Cresten, James 1). Sinegil, say "We think when nies in the retail industry." The first and only CEO workers too much and provides too many benefits, you take care of your customer and your employ- such as health insurance. A Deutsche Bank analyst says, "At Costco, it's better to be an employee or a ces your shareholders are going to be rewarded in customer than a shareholder." Never mind that the long run. And I'm one of the shareholders: 1 Sum's Club and Wal-Mart have been taking a pub care about the stock priec. But we're not going to lo relations beating for playing poverty level wages, going to destroy the fabric of our company and do something for the sake of one quarter that's offering health insurance for lewer than half of for . their U.S.workers, hiring contractors who emploved what we stand ton" Contoo thinks it has the right undocumented immigrants (currently under fede strategy, and it is one that it tas tieen using for over eral grand jury investigation), and are the subject of 20 years and beating Sam's Club by almost every measure "Paying your employees well is not only lawsuits in 25 states for denying overtime pay to . " those who earned it, and charges of sexual dis the right thing to do but it makes for good busi- nessades Sinegal crimination in employment that have resulted in . the biggest civil-rights class action in U.S. history, The stock market seems to be more impressed by RUNNING THE NUMBERS innovative, Costco looks for ways to repackage Business Week magazine ran the numbers on the goods into bulk items, which reduces stacking and two warehouse stores and came up with some sur checkout labor costs. It speeds up just-in-time in prising results. Costco's high-wage approach actu-ventory. It is innovative in offering new products ally beats Sam's Club on many measures. Business and services. It was the first to offer fresh meat, Week found that by compensating employees gen pharmacies, photo labs, and gasoline. And it even crously to motivate and retain good workers, plans to offer coffins in some of its stores. Costco gets lower turnover and higher productivity. Costco has made a concerted effort to know its Costco's 68.000 hourly workers in the United States customers. It goes after a more sophisticated, generated $34 million in sales, whereas Sam's wealthier, urban customer who may be a small busi- 112,00 employees generated $35 billion. In other ness owner, Shoppers never pay more that 14 per- words, Sam's required about 50 percent more em- cent above the price Cosico pxiys on such diverse ployees than Costco to get less than 3 percent more items as toilet paper, a five-dozen pack of eggs, a in sales. On another measure, Costco had an oper ten-carat diamond ring for $28,000, or a $299 ating profit of $13,647 per employee compared to Chateau Mouton Rothschild Bordeaux, Costco is Sam's $11,039. Comparing the last five years, the biggest seller of line wines in the United States, Costco's operating income grew at an average of $600 million a year, and sells around 60,000 carats a .......... of diamonds a year. of diamonds a year. 10.1 percent annually, slightly more than Sam's 9.8 percent. See Table 16.1 for some of the findings happy with you. you can't be going too far wrong." "When your customers and employees are from Brasiness Week's number crunching In retum for its generosity toward its workers, says Sinegal Costco has one of the most productive and loyal workforces in all of retailing. Turnover costs. for ex- QUESTIONS ample, show up in several ways. New employees are 1. Do you think the Sam's Club strategy or the typically notas productive while they are learning Costco strategy will be more effective? Short the ropes. And training costs are higher with a or long run? higher turnover. Wal-Mart says that it costs $2,500 2. What are some costs at a low-wage strategy? per worker to test, interview and train a new hire. Are there any other costs that were not This cost adds up when Sam's has a turnover 350 mentioned percent higher than Costco's. 3. Does Costco's strategy work but to the detri- ment of the stockholder? MAKING THE COSTCO STRATEGY WORK 4. In which company. Costco or Wal-Mart, In addition to getting a more productive workforce. would you buy stock? Research current stock market conditions in making your decision Cosico's management has to be ever diligent and TABLE 16.1 Comparative Data for Costco and Sam's Club Cacco Com Club SS15 when