Case 4- Costco - MANDATORY CASE STUDY. PDF

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MANDATORY CASE STUDY. ...

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Question: What do you think of Costco’s compensation practices? Does it surprise you that Costco employees apparently are rather well-compensated? Answer: In our opinion, compensation practices at Costco suggest that this membership warehouse values it employees as much as it values its customers. The mission statement of the corporation enumerates that it not only wishes to provide its customers with high quality product at lower prices, but also be ethical in terms of taking care of its employees. In a bid to do the same, this wholesale chain has established valuable compensation practices. Some of these include a good base pay to both full time and parttime employees, benefits such as dental plan, hearing aid benefits, 401(k) plan, disability coverage and numerous other beneficial plans to ensure employee satisfaction and instil in them a sense of belongingness. While discount retailing is often characterised by lower wages and lesser benefits for employees, Costco Wholesale Corporation follows a different route. The corporation believes that a good compensation plan is instrumental in ensuring successful implementation of Costco’s business strategy. Well paid employees work to the greatest advantage of this wholesaler resulting in lower rates of employee turnover- about 6-7% after one year’s employment. In essence, Costco’s employee compensation pack is regarded way better than that of its competitors such as Walmart which perhaps is inclusive of fewer benefits and less pay. For a corporation that intends to offer high quality product at the lowest possible prices, the compensation practices at Costco are rather surprising. With the warehouse striving for cost efficiency, a good employee compensation plan is a challenge that Costco has successfully tackled. In our opinion, Costco’s strategy of cost reduction by way of eliminating the need of maintaining exuberant stores with extravagant décor compensates for good wages and benefits to the employees. Besides, it also saves on marketing and promotional expenditure. Marketing campaigns are more or less an unnecessary expenditure for Costco given that the lower prices of high quality products manage to garner a strong customer base. The funds saved on this front can therefore be directed towards employee pay thereby making their compensation practices appealing....