please provide me with introduction and conclusion for this case study..

OD IN PRACTICE: THE WAR OF THE WAREHOUSE STORES 19 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 Business Week's number crunching. says Sinegal. In return for its generosity toward its workers, Costco has one of the most productive and loyal QUESTIONS workforces in all of retailing. Turnover costs, for ex- ample, show up in several ways. New employees are 1. Do you think the Sam's Club strategy or the typically not as 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 of 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. Costco's management has to be ever diligent and 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 Sam'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 nies in the retail industry." The first and only CEO workers too much and provides too many benefits . of Costco, James D. Sinegal, says, "We think when such as health insurance. A Deutsche Bank analyst you take care of your customer and your employ- 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; I Sam's Club and Wal-Mart have been taking a pub care about the stock price. But we're not going to lic-relations beating for paying poverty-level wages, do something for the sake of one quarter that's offering health insurance for fewer than half of going to destroy the fabric of our company and their U.S. workers, hiring contractors who employed what we stand for." Costco thinks it has the right undocumented immigrants (currently under fed- strategy, and it is one that it has been using for over eral grand jury investigation), and are the subject of 20 yearsand beating Sam's Club by almost every lawsuits in 25 states for denying overtime pay to measure. Paying your employees well is not only those who earned it, and charges of sexual dis- the right thing to do but it makes for good busi- crimination in employment that have resulted in ness," adds Sinegal. the biggest civil-rights class action in U.S. history. The stock market seems to be more impressed by a Sam's Club TABLE 16.1 Comparative Data for Costco and Sam's Club Costco Average hourly wage $15.97 Annual health cost per worker $5,735 Covered by health plan 82% Covered by retirement plans 91% Annual retirement costs per worker $1,330 Labor and overhead costs 9.8% of sales Employee turnover/year 6% Sales per square foot $795 Excludes 25 percent of workforce that is lower-paid part-timers. bThose on the job for less than a year are not covered. For all of Wal-Mart, Sam's Club data not broken out. $11.52 $3,500 47% 64% $747 17% of sales 21% $516 C RUNNING THE NUMBERS innovative. Costco looks for ways to repackage Business Week magazine ran the numbers on the goods into bulk items, which reduces stocking 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 erously 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 wealthier, urban customer who may be a small busi- customers. It goes after a more sophisticated, generated $34 million in sales, whereas Sam's 102,000 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 Costco pays on such diverse ployees than Costco to get less than 3 percent more ten-carat diamond ring for $28.000, or a $299 items as toilet paper, a five-dozen pack of eggs, a in sales. On another measure, Costco had an oper Chateau Mouton Rothschild Bordeaux. Costco is ating profit of $13,647 per employee compared to the biggest seller of fine wines in the United States, Sam's $11,039. Comparing the last five years, $600 million a year, and sells around 60,000 carats Costco's operating income grew at an average of of diamonds a vear. 10 1. -1:-1... .LOAD