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Costco Wholesale Corporation

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Indiana University Purdue University Indianapolis
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Running head: PROJECT REPORT PART 1 1
Project Report Part 1
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Institutional Affiliation
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PROJECT REPORT PART 1 2
Costco Wholesale Corporation
Description of the Business
Costco Wholesale Corporation is a leading retailer operating membership warehouse
clubs in more than ten countries across the world. Headquartered in Issaquah, Washington, the
company was named the world’s second-biggest retailer after Walmart in 2015, and in 2016, it
was the world’s biggest retailer of organic foodstuffs, prime as well as choice beef, and wine
(Gonzalez, 2015). With more than 540 locations in the United States and over 780 warehouses
globally, the company is truly a behemoth in the retail industry.
Costco’s corporate history stretches back from 1976 when Price Club, its formers rival,
was established in San Diego, California. In 1983, James D. Sinegal and Jeffrey H. Brotman
established Costco in Seattle. On December 5, 1985, Costco became a publicly owned company,
offering its stock for $10.00 per share prior to stock splits. In 1993, it merged with the Price
Club’s corporate parent, the Price Company, and became PriceCostco. Later, it changed its
corporate name to Costco Companies Inc. before adopting its present corporate (Costco
Wholesale, n.d.).
Costco earns revenue by operating warehouse clubs wherein bulk amounts of
commodities are retailed at hugely cheap prices to members of the clubs. Notably, a membership
business model is employed, whereby consumers who want to purchase merchandise at the store
are required to purchase a membership. Currently, the cost of a standard membership card is $60
per year, which should be renewed after the end of one’s period. These costs make up for the
provision of lower, wholesale prices for products. While Costco is not the first company to
employ this kind of business model, its model is different from the models implemented by
several other businesses in that here, customers are purchasing membership for a service and not
goods. The service that the company offers is the capacity to utilize scale economies to bulk
purchase products at lower prices so as to sell them to consumers at cheaper prices (Bowman,
2015). The overall implication of this business model is the production of high sales volume and
rapid turnover of inventory.
Corporate Governance Discussion
The primary actors of Costco’s corporate governance are the board of directors, executive
officers, and shareholders. The board of directors comprises of eleven members. Nine of these
are independent directors, while two of them, particularly W. Craig Jelinek and Richard A.
Galanti, are inside directors. W. Craig Jelinek is the company’s present and CEO, while Richard
A. Galanti is a CFO and an executive vice president of the company. The board of directors is
generally charged with directing the management of the company’s business as well as affairs.
They are expected to discharge various duties including the selection of the company’s CEO,
supporting the CEO, supervising his/her performance, overseeing the succession plan for the
CEO, and evaluating the compensation of executive officers. Led by its nominating and
governance committee, the board also nominates new directors and members of its different
committees and oversees the composition (including diversity and independence), activities as
well as the assessment of the board along with its committees. Moreover, under the guidance of
relevant committees, the board also oversees the compliance program of the company and is
continuously kept up to date about any major issues related to compliance that may come up
(Costco Wholesale, n.d.).

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1 Running head: PROJECT REPORT PART 1 Project Report Part 1 Name Institutional Affiliation Date PROJECT REPORT PART 1 2 Costco Wholesale Corporation Description of the Business Costco Wholesale Corporation is a leading retailer operating membership warehouse clubs in more than ten countries across the world. Headquartered in Issaquah, Washington, the company was named the world’s second-biggest retailer after Walmart in 2015, and in 2016, it was the world’s biggest retailer of organic foodstuffs, prime as well as choice beef, and wine (Gonzalez, 2015). With more than 540 locations in the United States and over 780 warehouses globally, the company is truly a behemoth in the retail industry. Costco’s corporate history stretches back from 1976 when Price Club, its formers rival, was established in San Diego, California. In 1983, James D. Sinegal and Jeffrey H. Brotman established Costco in Seattle. On December 5, 1985, Costco became a publicly owned company, offering its stock for $10.00 per share prior to stock splits. In 1993, it merged with the Price Club’s corporate parent, the Price Company, and became PriceCostco. Later, it changed its corporate name to Costco Companies Inc. before adopting its present corporate (Costco Wholesale, n.d.). Costco earns revenue by operating warehouse clubs wherein bulk amounts of commodities are retailed at hugely cheap prices to members of the clubs. Notably, a membership business model is employed, whereby consumers who want t ...
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