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Copy of Jim Sinegal’s leadership style and Costco’s strategy
Transcript of Copy of Jim Sinegal’s leadership style and Costco’s strategy
International membership Wholesaler
Operates in over 600 locations worldwide
Wide selection of merchandise
Focussed on discount pricing
‘’To continually provide our members with quality goods and services at the lowest possible price’’
Jim Sinegal's Background
Born in 1936
Co-founder and CEO of Costco (retired in 2011)
Effective strategy and leadership style transformed Costco into one of the most successful retailers in the world.
Also, the driving force behind leading Costco to become the fourth largest retailer in the US.
Identify Jim Sinegal’s leadership style
Evaluate the effectiveness of Sinegal’s leadership style
Evaluate how Sinegal’s leadership style has helped to craft and execute Costco’s strategy
Identify how successful Sinegal’s approach has been
Describe and evaluate Jim Sinegal’s leadership style
Kurt Lewin suggests there are three main leadership styles:
: Decisions are made without consulting team members even if their input is likely to be of benefit.
: Makes final decisions but consults team members beforehand and includes them in the decision making process.
: Tends to give their team members more freedom as to how they do their work such as setting their own deadlines.
Value Chain Analysis - Firm Infrastructure
Jim Sinegal's Leadership Style
Sinegal’s philosophy is similar to Theory Y
Demonstrates a democratic leadership style in terms of the way in which he manages his employees.
Evaluate how effective Sinegal has been in leading the process of crafting and executing Costco’s strategy
Value Chain Analysis - HRM
The Experience Curve
Value Chain Analysis – Inbound Logistics
Value Chain Analysis – Marketing, Sales and Service
Value Chain Analysis - Operations
Strategy with Cost Leadership position
Porter’s Generic Strategies
In almost all activities throughout the value chain there appears to be consideration towards Costco reducing costs.
As such Costco follow a cost leadership approach within the Wholesale retail industry.
How did Sinegal’s leadership style influence the Cost leadership approach?
Autocratic vs. Democratic
Jim Sinegal was able to assert his vast knowledge of discount retailing through an autocratic approach because he did not take kindly to conflict of his personal views.
Sinegal’s delegation of authority to warehouse managers
How successful has Sinegal’s (Costco’s) approach been?
Pragmatic Assessment of KSF’s
Key Success Factors of the US wholesale retailer industry
Relative cost position
Geographical spread (US)
Wholesaler’s buying power
Product range economics
Employee satisfaction (remuneration)
Number of stores
Number of members
Cost of membership
Value Chain Analysis
Though Costco’s policy stipulates that 86%
of senior positions must be hired internally…
98% of Senior positions filled internally
Relatively cheap warehouse production
with basic fixtures and fittings
Value Chain – Procurement
Costco drive down costs and will only procure products that can be
sold so cheap that they will ‘fly off the shelves’.
No one supplier supplied a significant proportion of products.
Cross depot docking facilitated efficient inventory levels, thus reducing costs associated with stock surplus
Costco’s reduced opening hours –
low labour cost to sales volume ratio
Jim Sinegal’s mixture of leadership styles appears to be working successfully for Costco.
As the pragmatic assessment shows Costco are obviously doing something right.
However in order to sustain this they need to adopt the Lugus Principles because Sam’s Club could materialise into a larger threat based on their performance against the KSF’s identified.
Jim Sinegal's Leadership Style
Sinegal also shows signs of following an autocratic leadership style.
Merchandise is stored on racks above the
sales floor e.g ‘no frills’ merchandising
Restricted marketing spend, instead relying heavily on WOM
through their customers and employees who act as brand advocates.
Appealing returns policy