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Copy of Jim Sinegal’s leadership style and Costco’s strategy

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Sarah Moranville

on 25 June 2014

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Transcript of Copy of Jim Sinegal’s leadership style and Costco’s strategy

Jim Sinegal’s leadership style and Costco’s strategy
Costco's Background
International membership Wholesaler

Operates in over 600 locations worldwide

Wide selection of merchandise

Focussed on discount pricing

Mission Statement:

‘’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
Leadership Styles
Kurt Lewin suggests there are three main leadership styles:

Autocratic Leader
: Decisions are made without consulting team members even if their input is likely to be of benefit.

Democratic Leader
: Makes final decisions but consults team members beforehand and includes them in the decision making process.

Laissez-Faire Leader
: 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

Satisfied employees
Full transcript