Grammar Quiz: Joining Clauses with Semicolons

Take Test: Grammar Quiz: Joining Clauses with Semicolons
QUESTION 1
Review: Below, you should see a sentence fragment, or a
dependent clause masquerading as a complete sentence. Correct
the sentence fragment by eliminating the subordinating
conjunction. Write the corrected sentence in the box provided.
Because the stock market crashed.
13 points
QUESTION 2
Review: This time, correct the sentence fragment by adding an
independent clause. Write the ENTIRE sentence in the box
provided.
After the stock market crashed, . . .
13 points
QUESTION 3
Review: Below, you should see two clauses. Combine them
properly into a single sentence using SUBORDINATION.
Remember to use a comma if necessary.

Bonnie and Clyde blasted their way out of the bank and through
the police blockade.
They barrelled down the highway across the border.
13 points
QUESTION 4
Review: Below, you should see two more clauses. This time,
join them using COORDINATION.
In Mexico, the lovers were safe.
They missed the excitement of their high-crime lifestyle.
13 points
QUESTION 5
Join the clauses using a semicolon.
The couple returned to the United States the following spring.
They were dead before the year was out.
16 points
QUESTION 6
This time, join the clauses with a conjunctive adverb along with
a semicolon. You can put the conjunctive adverb wherever you
like, but remember that where you put the conjunctive adverb
determines the number of commas you need.

Today, Bonnie and Clyde are remembered as romantic figures,
striving for love and freedom.
They are also remembered as America's first homegrown
terrorists, willing to kill for personal pleasure.
16 points
QUESTION 7
Write a sentence that combines two independent clauses using a
semicolon and a conjunctive adverb. Remember to use commas
appropriately, depending on where you place the conjunctive
adverb.
How to Analyze a Case Study
Included in these cases are questions to help you understand and
analyze the case. You may, however, be assigned other case
studies that do not have questions. This Hands-on Guide
presents a structured framework to help you analyze such cases
as well as the case studies in this text. Knowing how to analyze
a case will help you attack virtually any business problem.
A case study helps students learn by immersing them in a real-
world business scenario where they can act as problem-solvers
and decision-makers. The case presents facts about a particular
organization. Students are asked to analyze the case by focusing
on the most important facts and using this information to
determine the opportunities and problems facing that
organization. Students are then asked to identify alternative
courses of action to deal with the problems they identify.
A case study analysis must not merely summarize the case. It
should identify key issues and problems, outline and assess
alternative courses of action, and draw appropriate conclusions.
The case study analysis can be broken down into the following
steps:
1. Identify the most important facts surrounding the case.

2. Identify the key issue or issues.
3. Specify alternative courses of action.
4. Evaluate each course of action.
5. Recommend the best course of action.
Let's look at what each step involves.
1. Identify the most important facts surrounding the case.
Read the case several times to become familiar with the
information it contains. Pay attention to the information in any
accompanying exhibits, tables, or figures. Many case scenarios,
as in real life, present a great deal of detailed information.
Some of these facts are more relevant than others for problem
identification. One can assume the facts and figures in the case
are true, but statements, judgments, or decisions made by
individuals should be questioned. Underline and then list the
most important facts and figures that would help you define the
central problem or issue. If key facts and numbers are not
available, you can make assumptions, but these assumptions
should be reasonable given the situation. The "correctness" of
your conclusions may depend on the assumptions you make.
2. Identify the key issue or issues.
Use the facts provided by the case to identify the key issue or
issues facing the company you are studying. Many cases present
multiple issues or problems. Identify the most important and
separate them from more trivial issues. State the major problem
or challenge facing the company. You should be able to
describe the problem or challenge in one or two sentences. You
should be able to explain how this problem affects the strategy
or performance of the organization.
You will need to explain why the problem occurred. Does the
problem or challenge facing the company comes from a
changing environment, new opportunities, a declining market
share, or inefficient internal or external business processes? In
the case of information systems-related problems, you need to
pay special attention to the role of technology as well as the
behavior of the organization and its management.
Information system problems in the business world typically

present a combination of management, technology, and
organizational issues. When identifying the key issue or
problem, ask what kind of problem it is: Is it a management
problem, a technology problem, an organizational problem, or a
combination of these? What management, organizational, and
technology factors contributed to the problem?
· To determine if a problem stems from management factors,
consider whether managers are exerting appropriate leadership
over the organization and monitoring organizational
performance. Consider also the nature of management decision-
making: Do managers have sufficient information for
performing this role, or do they fail to take advantage of the
information that is available?
· To determine if a problem stems from technology factors,
examine any issues arising from the organization's information
technology infrastructure: its hardware, software, networks and
telecommunications infrastructure, and the management of data
in databases or traditional files. Consider also whether the
appropriate management and organizational assets are in place
to use this technology effectively.
· To determine the role of organizational factors, examine any
issues arising from the organization's structure, culture,
business processes, work groups, divisions among interest
groups, relationships with other organizations, as well as the
impact of changes in the organization's external environment-
changes in government regulations, economic conditions, or the
actions of competitors, customers, and suppliers.
You will have to decide which of these factors—or combination
of factors—is most important in explaining why the problem
occurred.
3. Specify alternative courses of action.
List the courses of action the company can take to solve its
problem or meet the challenge it faces. For information system-
related problems, do these alternatives require a new
information system or the modification of an existing system?
Are new technologies, business processes, organizational

structures, or management behavior required? What changes to
organizational processes would be required by each alternative?
What management policy would be required to implement each
alternative?
Remember, there is a difference between what an organization
"should do" and what that organization actually "can do". Some
solutions are too expensive or operationally difficult to
implement, and you should avoid solutions that are beyond the
organization's resources. Identify the constraints that will limit
the solutions available. Is each alternative executable given
these constraints?
4. Evaluate each course of action.
Evaluate each alternative using the facts and issues you
identified earlier, given the conditions and information
available. Identify the costs and benefits of each alternative.
Ask yourself "what would be the likely outcome of this course
of action? State the risks as well as the rewards associated with
each course of action. Is your recommendation feasible from a
technical, operational, and financial standpoint? Be sure to state
any assumptions on which you have based your decision.
5. Recommend the best course of action.
State your choice for the best course of action and provide a
detailed explanation of why you made this selection. You may
also want to provide an explanation of why other alternatives
were not selected. Your final recommendation should flow
logically from the rest of your case analysis and should clearly
specify what assumptions were used to shape your conclusion.
There is often no single "right" answer, and each option is
likely to have risks as well as rewards.
A Guide to
Case Analysis

I keep six honest serving men
(They taught me all I knew);
Their names are What and Why and When;
And How and Where and Who.
— Rudyard Kipling
A Guide to Case Analysis2
In most courses in strategic management, students use cases
about actual companies to practice strategic
analysis and to gain some experience in the tasks of crafting and
implementing strategy. A case sets forth, in
a factual manner, the events and organizational circumstances
surrounding a particular managerial situation.
It puts readers at the scene of the action and familiarizes them
with all the relevant circumstances. A case on
strategic management can concern a whole industry, a single
organization, or some part of an organization;
the organization involved can be either profi t seeking or not-
for-profi t. The essence of the student’s role
in case analysis is to diagnose and size up the situation
described in the case and then to recommend
appropriate action steps.
Why Use Cases to Practice Strategic Management?
A student of business with tact
Absorbed many answers he lacked.
But acquiring a job,
He said with a sob,
“How does one fi t answer to fact?”
The foregoing limerick was used some years ago by Professor

Charles Gragg to characterize the plight
of business students who had no exposure to cases.1 The facts
are that the mere act of listening to lectures
and sound advice about managing does little for anyone’s
management skills and that the accumulated
managerial wisdom cannot effectively be passed on by lectures
and assigned readings alone. If anything had
been learned about the practice of management, it is that a
storehouse of ready-made textbook answers does
not exist. Each managerial situation has unique aspects,
requiring its own diagnosis, judgment, and tailor-
made actions. Cases provide would-be managers with a valuable
way to practice wrestling with the actual
problems of actual managers in actual companies.
The case approach to strategic analysis is, fi rst and foremost,
an exercise in learning by doing. Because cases
provide you with detailed information about conditions and
problems of different industries and companies,
your task of analyzing company after company and situation
after situation has the twin benefi t of boosting
your analytical skills and exposing you to the ways companies
and mana gers actually do things. Most college
students have limited managerial backgrounds and only frag
mented knowledge about companies and real-life
strategic situations. Cases help substitute for on-the-job
experience by (1) giving you broader exposure to a
variety of industries, organizations, and strategic problems; (2)
forcing you to assume a managerial role (as
opposed to that of just an onlooker); (3) providing a test of how
to apply the tools and techniques of strategic
management; and (4) asking you to come up with pragmatic
managerial action plans to deal with the issues
at hand.
Objectives of Case Analysis

Using cases to learn about the practice of strategic management
is a powerful way for you to accom plish
fi ve things:2
1. Increase your understanding of what mana gers should and
should not do in guiding a business to
success.
2. Build your skills in sizing up company resource strengths and
weaknesses and in conducting strategic
analysis in a variety of industries and competitive situations.
3A Guide to Case Analysis
3. Get valuable practice in identifying strategic issues that need
to be addressed, evaluating strategic
alternatives, and formulating workable plans of action.
4. Enhance your sense of business judgment, as opposed to
uncritically accepting the authoritative
crutch of the professor or “back-of-the-book” answers.
5. Gaining in-depth exposure to different industries and
companies, thereby acquiring something close
to actual business experience.
If you understand that these are the objectives of case analysis,
you are less likely to be consumed with
curiosity about “the answer to the case.” Students who have
grown comfortable with and accustomed to
textbook statements of fact and defi nitive lecture notes are
often frustrated when discussions about a case do
not produce concrete answers. Usually, case discussions
produce good arguments for more than one course

of action. Differences of opinion nearly always exist. Thus,
should a class discussion conclude without
a strong, unambiguous consensus on what do to, don’t grumble
too much when you are not told what
the answer is or what the company actually did. Just remember
that in the business world answers don’t
come in conclusive black-and-white terms. There are nearly
always several feasible courses of action and
approaches, each of which may work out satisfactorily.
Moreover, in the business world, when one elects a
particular course of action, there is no peeking at the back of a
book to see if you have chosen the best thing
to do and no one to turn to for a provably correct answer. The
best test of whether management action is
“right” or “wrong” is results. If the results of an action turn out
to be “good,” the decision to take it may be
presumed “right.” If not, then the action chosen was “wrong” in
the sense that it didn’t work out.
Hence, the important thing for you to understand about
analyzing cases is that the managerial exercise
of identifying, diagnosing, and recommending is aimed at
building your skills of business judgment.
Discovering what the company actually did is no more than
frosting on the cake—the actions that company
managers actually took may or may not be “right” or best
(unless there is accompanying evidence that the
results of their actions were highly positive.
The point is this: The purpose of giving you a case assignment
is not to cause you to run to the library or
surf the Internet to discover what the company actually did but,
rather, to enhance your skills in sizing up
situations and developing your managerial judgment about what
needs to be done and how to do it. The
aim of case analysis is for you to become actively engaged in

diagnosing the business issues and managerial
problems posed in the case, to propose workable solutions, and
to explain and defend your assessments—
this is how cases provide you with meaningful practice at being
a manager.
Preparing a Case for Class Discussion
If this is your fi rst experience with the case method, you may
have to reorient your study habits. Unlike
lecture courses where you can get by without preparing
intensively for each class and where you have
latitude to work assigned readings and reviews of lecture notes
into your schedule, a case assignment
requires conscientious preparation before class. You will not get
much out of hearing the class discuss a case
you haven’t read, and you certainly won’t be able to contribute
anything yourself to the discussion. What
you have got to do to get ready for class discussion of a case is
to study the case, refl ect carefully on the
situation presented, and develop some reasoned thoughts. Your
goal in preparing the case should be to end
up with what you think is a sound, well-supported analysis of
the situation and a sound, defensible set of
recommendations about which managerial actions need to be
taken. The Case-TUTOR soft ware downloads
that accompany the text and that are available on this same Web
site will assist you in preparing the cases—
the Case-TUTOR fi les contain a set of study questions for each
case and step-by-step tutorials to walk you
through the process of analyzing and developing reasonable
recommendations.

To prepare a case for class discussion, we suggest the following
approach:
1. Skim the case rather quickly to get an overview of the
situation it presents. This quick overview should
give you the general fl avor of the situation and indicate the
kinds of issues and problems that you will
need to wrestle with. If your instructor has provided you with
study questions for the case, now is the
time to read them carefully.
2. Read the case thoroughly to digest the facts and
circumstances. On this reading, try to gain full
command of the situation presented in the case. Begin to
develop some tentative answers to the study
questions your instructor has provided or that are provided in
the Case-TUTOR software package which
you can download at the Web site for the text. If your instructor
has elected not to give you assignment
questions or has elected not to use Case-TUTOR, then start
forming your own picture of the overall
situation being described.
3. Carefully review all the information presented in the
exhibits. Often, there is an important story in the
numbers contained in the exhibits. Expect the information in the
case exhibits to be crucial enough to
materially affect your diagnosis of the situation.
4. Decide what the strategic issues are. Until you have identifi
ed the strategic issues and problems in the
case, you don’t know what to analyze, which tools and
analytical techniques are called for, or otherwise
how to proceed. At times the strategic issues are clear—either
being stated in the case or else obvious from
reading the case. At other times you will have to dig them out

from all the information given; if so, the
study questions and the case preparation exercises provided in
the Case-TUTOR software will guide you.
5. Start your analysis of the issues with some number
crunching. A big majority of strategy cases call
for some kind of number crunching—calculating assorted fi
nancial ratios to check out the company’s
fi nancial condition and recent performance, calculating growth
rates of sales or profi ts or unit volume,
checking out profi t margins and the makeup of the cost
structure, and understanding whatever revenue-
cost-profi t relationships are present. See Table 1 for a summary
of key fi nancial ratios, how they are
calculated, and what they show.
6. Apply the concepts and techniques of strategic analysis you
have been studying. Strategic analysis is
not just a collection of opinions; rather, it entails applying the
concepts and analytical tools described
in Chapters 1 through 13 to cut beneath the surface and produce
sharp insight and understanding. Every
case assigned is strategy related and presents you with an
opportunity to usefully apply what you have
learned. Your instructor is looking for you to demonstrate that
you know how and when to use the
material presented in the text chapters. The case preparation
guides on Case-TUTOR will point you
toward the proper analytical tools needed to analyze the case
situation.
7. Check out confl icting opinions and make some judgments
about the validity of all the data and
information provided. Many times cases report views and
contradictory opinions (after all, people don’t
always agree on things, and dif fer ent people see the same

things in different ways). Forcing you to
evaluate the data and information presented in the case helps
you develop your powers of inference
and judgment. Asking you to resolve confl icting information
“comes with the territory” because a great
many managerial situations entail opposing points of view,
confl icting trends, and sketchy information.
8. Support your diagnosis and opinions with reasons and
evidence. The most important things to prepare
for are your answers to the question “Why?” For instance, if
after studying the case you are of the opinion
that the company’s managers are doing a poor job, then it is
your answer to “Why?” that establishes just
how good your analysis of the situation is. If your instructor has
provided you with specifi c study questions
for the case or if you are attempting to complete any one of the
case preparation exercises on Case-TUTOR,
by all means prepare answers that include all the reasons and
number-crunching evidence you can muster
to support your diagnosis. Work through the case preparation
exercises on Case-TUTOR conscientiously or,
if you are using study questions provided by the instructor,
generate at least two pages of notes!
9. Develop an appropriate action plan and set of
recommendations. Diagnosis divorced from corrective
action is sterile. The test of a manager is always to convert
sound analysis into sound actions—actions
that will produce the desired results. Hence, the fi nal and most
telling step in preparing a case is to

develop an action agenda for management that lays out a set of
specifi c recommendations on what to do.
Bear in mind that proposing realistic, workable solutions is far
preferable to casually tossing out off-the-
top-of-your-head suggestions. Be prepared to argue why your
recommendations are more attractive than
other courses of action that are open. You’ll fi nd the case
preparation exercises on Case-TUTOR helpful
in performing this step, too.
Table 1
Key Financial Ratios: How to Calculate Them and
What They Mean
Ratio How Calculated What It Shows
Profi tability ratios
1. Gross profi t margin Sales – Cost of goods sold
Sales
Shows the percentage of revenues available to cover
operating expenses and yield a profi t. Higher is
better and the trend should be upward.
2. Operating profi t margin
(or return on sales)
Sales – Operating expenses
Sales
or
Operating income
Sales
Shows the profi tability of current operations without
regard to interest charges and income taxes. Higher
is better and the trend should be upward.

3. Net profi t margin (or net
return on sales)
Profi ts after taxes
Sales
Shows after tax profi ts per dollar of sales. Higher is
better and the trend should be upward.
4. Return on total assets Profi ts after taxes + Interest
Total assets
A measure of the return on total investment in the
enterprise. Interest is added to after tax profi ts to
form the numerator since total assets are fi nanced by
creditors as well as by stockholders. Higher is better
and the trend should be upward.
5. Return on stockholders’
equity
Profi ts after taxes
Total stockholders’ equity
Shows the return stockholders are earning on their
investment in the enterprise. A return in the 12-15%
range is “average”, and the trend should be upward.
6. Earnings per share Profi ts after taxes
Number of shares of common stock
outstanding
Shows the earnings for each share of common stock
outstanding. The trend should be upward, and the
bigger the annual percentage gains, the better.

Liquidity Ratios
1. Current ratio Current assets – Current liabilities Shows a fi
rm’s ability to pay current liabilities using
assets that can be converted to cash in the near term.
Ratio should defi nitely be higher than 1.0; ratios of 2
or higher are better still.
2. Quick ratio (or acid-test
ratio)
Current assets – Inventory
Current liabilities
Shows a fi rm’s ability to pay current liabilities
without relying on the sale of its inventories.
3. Working capital Current assets – current liabilities Bigger
amounts are better because the company
has more internal funds available to (1) pay its
current liabilities on a timely basis and (2) fi nance
inventory expansion, additional accounts receivable,
and a larger base of operations without resorting to
borrowing or raising more equity capital.
Leverage Ratios
1. Debt-to-assets ratio Total debt
Total assets
Measures the extent to which borrowed funds have
been used to fi nance the fi rm’s operations. Low
fractions or ratios are better—high fractions indicate

overuse of debt and greater risk of bankruptcy.
2. Debt-to-equity ratio Total debt
Should usually be less than 1.0. High ratios
(especially above 1.0) signal excessive debt, lower
creditworthiness, and weaker balance sheet strength.
3. Long-term debt-to-
equity ratio
Long-term debt
Shows the balance between debt and equity in
the fi rm’s long-term capital structure. Low ratios
indicate greater capacity to borrow additional funds
if needed.
4. Times-interest-earned (or
coverage) ratio
Operating income
Interest expenses
Measures the ability to pay annual interest charges.
Lenders usually insist on a minimum ratio of 2.0, but
ratios above 3.0 signal better creditworthiness.
Activity Ratios
1. Days of inventory Inventory
Cost of goods sold ÷ 365
Measures inventory management effi ciency. Fewer
days of inventory are usually better.

2. Inventory turnover Cost of goods sold
Inventory
Measures the number of inventory turns per year.
Higher is better.
3. Average collection
period
Accounts receivable
Total sales ÷ 365
or
Accounts receivable
Average daily sales
Indicates the average length of time the fi rm must
wait after making a sale to receive cash payment. A
shorter collection time is better.
Other Important Measures of Financial Performance
1. Dividend yield on
common stock
Annual dividends per share
Current market price per share
A measure of the return that shareholders receive in
the form of dividends. A “typical” dividend yield is
2-3%. The dividend yield for fast-growth companies
is often below 1% (maybe even 0); the dividend
yield for slow-growth companies can run 4-5%.
2. Price-earnings ratio Current market price per share
Earnings per share

P-e ratios above 20 indicate strong investor
confi dence in a fi rm’s outlook and earnings growth;
fi rms whose future earnings are at risk or likely to
grow slowly typically have ratios below 12.
3. Dividend payout ratio Annual dividends per share
Earnings per share
Indicates the percentage of after-tax profi ts paid out
as dividends.
4. Internal cash fl ow After tax profi ts + Depreciation A quick
and rough estimate of the cash a company’s
business is generating after payment of operating
expenses, interest, and taxes. Such amounts can
be used for dividend payments or funding capital
expenditures.
Table 1 continued
As long as you are conscientious in preparing your analysis and
recommendations, and have ample reasons,
evidence, and arguments to support your views, you shouldn’t
fret unduly about whether what you’ve
prepared is “the right answer” to the case. In case analysis there
is rarely just one right approach or set of
recommendations. Managing companies and crafting and
executing strategies are not such exact sciences
that there exists a single provably correct analysis and action
plan for each strategic situation. Of course,
some analyses and action plans are better than others; but, in

truth, there’s nearly always more than one good
way to analyze a situation and more than one good plan of
action. So, if you have carefully prepared the case
by either completing one of the Case-TUTOR case preparation
exercises or developing your own answers to
the assignment questions for the case, don’t lose confi dence in
the correctness of your work and judgment.
Participating in Class Discussion of a Case
Classroom discussions of cases are sharply different from
attending a lecture class. In a case class students
do most of the talking. The instructor’s role is to solicit student
participation, keep the discussion on track,
ask “Why?” often, offer alternative views, play the devil’s
advocate (if no students jump in to offer opposing
views), and otherwise lead the discussion. The students in the
class carry the burden for analyzing the
situation and for being prepared to present and defend their
diagnoses and recommendations. Expect a
classroom environment, therefore, that calls for your size-up of
the situation, your analysis, what actions
you would take, and why you would take them. Do not be
dismayed if, as the class discussion unfolds, some
insightful things are said by your fellow classmates that you did
not think of. It is normal for views and
analyses to differ and for the comments of others in the class to
expand your own thinking about the case.
As the old adage goes, “Two heads are better than one.” So it is
to be expected that the class as a whole will
do a more penetrating and searching job of case analysis than
will any one person working alone. This is
the power of group effort, and its virtues are that it will help
you see more analytical applications, let you
test your analyses and judgments against those of your peers,
and force you to wrestle with differences of
opinion and approaches.

To orient you to the classroom environment on the days a case
discussion is scheduled, we compiled the
following list of things to expect:
1. Expect the instructor to assume the role of extensive
questioner and listener.
2. Expect students to do most of the talking. The case method
enlists a maximum of individual participa–
tion in class discussion. It is not enough to be present as a silent
observer; if every student took this
approach, there would be no discussion. (Thus, expect a portion
of your grade to be based on your
participation in case discussions.)
3. Be prepared for the instructor to probe for reasons and
supporting analysis.
4. Expect and tolerate challenges to the views expressed. All
students have to be willing to submit their
conclusions for scrutiny and rebuttal. Each student needs to
learn to state his or her views without
fear of disapproval and to overcome the hesitation of speaking
out. Learning respect for the views
and approaches of others is an integral part of case analysis
exercises. But there are times when it
is OK to swim against the tide of majority opinion. In the
practice of management, there is always
room for originality and unorthodox approaches. So while
discussion of a case is a group process,
there is no compulsion for you or anyone else to cave in and
conform to group opinions and group
consensus.
5. Don’t be surprised if you change your mind about some

things as the discussion unfolds. Be alert to
how these changes affect your analysis and recommendations
(in the event you get called on).
6. Expect to learn a lot in class as the discussion of a case
progresses; furthermore, you will fi nd that
the cases build on one another—what you learn in one case
helps prepare you for the next case
discussion.
There are several things you can do on your own to be good and
look good as a participant in class
discussions:
Although you should do your own independent work and
independent thinking, don’t hesitate before (and
after) class to discuss the case with other students. In real life,
managers often discuss the company’s
problems and situation with other people to refi ne their own
thinking.
• In participating in the discussion, make a conscious effort to
contribute, rather than just talk. There
is a big difference between saying something that builds the
discussion and offering a long-winded,
off-the-cuff remark that leaves the class wondering what the
point was.
• Avoid the use of “I think,” “I believe,” and “I feel”; instead,
say, “My analysis shows —” and “The
company should do ______.because ______.” Always give
supporting reasons and evidence for your

views; then your instructor won't have to ask you “Why?” every
time you make a comment.
• In making your points, assume that everyone has read the case
and knows what it says; avoid reciting
and rehashing information in the case—instead, use the data and
information to explain your
assessment of the situation and to support your position.
• Bring the printouts of the work you’ve done on Case-TUTOR
or the notes you’ve prepared (usually
two or three pages’ worth) to class and rely on them extensively
when you speak. There’s no way
you can remember everything off the top of your head—
especially the results of your number
crunching. To reel off the numbers or to present all fi ve
reasons why, instead of one, you will need
good notes. When you have prepared thoughtful answers to the
study questions and use them as
the basis for your comments, everybody in the room will know
you are well prepared, and your
contribution to the case discussion will stand out.
Preparing a Written Case Analysis
Preparing a written case analysis is much like preparing a case
for class discussion, except that your analysis
must be more complete and put in report form. Unfortunately,
though, there is no ironclad procedure for
doing a written case analysis. All we can offer are some general
guidelines and words of wisdom—this
is because company situations and management problems are so
diverse that no one mechanical way to
approach a written case assignment always works.
Your instructor may assign you a specifi c topic around which
to prepare your written report. Or, alternatively,

you may be asked to do a comprehensive written case analysis,
where the expectation is that you will
(1) identify all the pertinent issues that management needs to
address, (2) perform whatever analysis and
evaluation is appropriate, and (3) propose an action plan and set
of recommendations addressing the issues
you have identifi ed. In going through the exercise of identify,
evaluate, and recommend, keep the following
pointers in mind.3
Identifi cation It is essential early on in your paper that you
provide a sharply focused diagnosis of
strategic issues and key problems and that you demonstrate a
good grasp of the company’s present situation.
Make sure you can identify the fi rm’s strategy (use the
concepts and tools in Chapters 1–8 as diagnostic aids)
and that you can pinpoint whatever strategy implementation
issues may exist (again, consult the material in
Chapters 9–11 for diagnostic help). Consult the key points we
have provided at the end of each chapter for
further diagnostic suggestions. Review the study questions for
the case on Case-TUTOR. Consider beginning
your paper with an overview of the company’s situation, its
strategy, and the signifi cant problems and issues
that confront management. State problems/issues as clearly and
precisely as you can. Unless it is necessary
to do so for emphasis, avoid recounting facts and history about
the company (assume your professor has
read the case and is familiar with the organization).
Analysis and Evaluation This is usually the hardest part of the

report. Analysis is hard work! Check out the
fi rm’s fi nancial ratios, its profi t margins and rates of return,
and its capital structure, and decide how strong
the fi rm is fi nancially. Table 1 contains a summary of various
fi nancial ratios and how they are calculated.
Use it to assist in your fi nancial diagnosis. Similarly, look at
marketing, production, managerial competence,
and other factors underlying the organization’s strategic
successes and failures. Decide whether the fi rm has
valuable resource strengths and competencies and, if so,
whether it is capitalizing on them.
Check to see if the fi rm’s strategy is producing satisfactory
results and determine the reasons why or why
not. Probe the nature and strength of the competitive forces
confronting the company. Decide whether and
why the fi rm’s competitive position is getting stronger or
weaker. Use the tools and concepts you have
learned about to perform whatever analysis and evaluation is
appropriate. Work through the case preparation
exercise on Case-TUTOR if one is available for the case you’ve
been assigned.
In writing your analysis and evaluation, bear in mind four
things:
1. You are obliged to offer analysis and evidence to back up
your conclusions. Do not rely on unsupported
opinions, over-generalizations, and platitudes as a substitute for
tight, logical argument backed up
with facts and fi gures.
2. If your analysis involves some important quantitative
calculations, use tables and charts to present
the calculations clearly and effi ciently. Don’t just tack the
exhibits on at the end of your report and

let the reader fi gure out what they mean and why they were
included. Instead, in the body of your
report cite some of the key numbers, highlight the conclusions
to be drawn from the exhibits, and
refer the reader to your charts and exhibits for more details.
3. Demonstrate that you have command of the strategic concepts
and analytical tools to which you have
been exposed. Use them in your report.
4. Your interpretation of the evidence should be reasonable and
objective. Be wary of preparing a
one-sided argument that omits all aspects not favorable to your
conclusions. Likewise, try not to
exaggerate or overdramatize. Endeavor to inject balance into
your analysis and to avoid emotional
rhetoric. Strike phrases such as “I think,” “I feel,” and “I
believe” when you edit your fi rst draft and
write in “My analysis shows,” instead.
Recommendations The fi nal section of the written case
analysis should consist of a set of defi nite
recommendations and a plan of action. Your set of
recommendations should address all of the problems/
issues you identifi ed and analyzed. If the recommendations
come as a surprise or do not follow logically
from the analysis, the effect is to weaken greatly your
suggestions of what to do. Obviously, your
recommendations for actions should offer a reasonable prospect
of success. High-risk, bet-the-company
recommendations should be made with caution. State how your
recommendations will solve the problems
you identifi ed. Be sure the company is fi nancially able to carry
out what you recommend; also check to see
if your recommendations are workable in terms of acceptance
by the persons involved, the organization’s

competence to implement them, and prevailing market and
environmental constraints. Try not to hedge or
weasel on the actions you believe should be taken.
By all means state your recommendations in suffi cient detail to
be meaningful—get down to some defi nite
nitty-gritty specifi cs. Avoid such unhelpful statements as “the
organization should do more planning” or
“the company should be more aggressive in marketing its
product.” For instance, if you determine that
“the fi rm should improve its market position,” then you need to
set forth exactly how you think this should
be done. Offer a defi nite agenda for action, stipulating a
timetable and sequence for initiating actions,
indicating priorities, and suggesting who should be responsible
for doing what.
In proposing an action plan, remember there is a great deal of
difference between, on the one hand, being
responsible for a decision that may be costly if it proves in error
and, on the other hand, casually suggesting
courses of action that might be taken when you do not have to
bear the responsibility for any of the
consequences. A good rule to follow in making your
recommendations is: Avoid recommending anything you
would not yourself be willing to do if you were in
management’s shoes. The importance of learning to develop
good managerial judgment is indicated by the fact that, even
though the same information and operating data
may be available to every manager or executive in an
organization, the quality of the judgments about what
the information means and which actions need to be taken does

vary from person to person.4
It goes without saying that your report should be well organized
and well written. Great ideas amount to
little unless others can be convinced of their merit—this takes
tight logic, the presentation of convincing
evidence, and persuasively written arguments.
Preparing an Oral Presentation
During the course of your business career it is very likely that
you will be called upon to prepare and give a
number of oral presentations. For this reason, it is common in
courses of this nature to assign cases for oral
presentation to the whole class. Such assignments give you an
opportunity to hone your presentation skills.
The preparation of an oral presentation has much in common
with that of a written case analysis. Both
require identifi cation of the strategic issues and problems
confronting the company, analysis of industry
conditions and the company’s situation, and the development of
a thorough, well-thought out action plan.
The substance of your analysis and quality of your
recommendations in an oral presentation should be no
different than in a written report. As with a written assignment,
you’ll need to demonstrate command of the
relevant strategic concepts and tools of analysis and your
recommendations should contain suffi cient detail
to provide clear direction for management. The main difference
between an oral presentation and a written
case is in the delivery format. Oral presentations rely
principally on verbalizing your diagnosis, analysis,
and recommendations and visually enhancing and supporting
your oral discussion with colorful, snappy
slides (usually created on Microsoft’s PowerPoint software).

Typically, oral presentations involve group assignments. Your
instructor will provide the details of the
assignment—how work should be delegated among the group
members and how the presentation should
be conducted. Some instructors prefer that presentations begin
with issue identifi cation, followed by
analysis of the industry and company situation analysis, and
conclude with a recommended action plan to
improve company performance. Other instructors prefer that the
presenters assume that the class has a good
understanding of the external industry environment and the
company’s competitive position and expect
the presentation to be strongly focused on the group’s
recommended action plan and supporting analysis
and arguments. The latter approach requires cutting straight to
the heart of the case and supporting each
recommendation with detailed analysis and persuasive
reasoning. Still other instructors may give you the
latitude to structure your presentation however you and your
group members see fi t.
Regardless of the style preferred by your instructor, you should
take great care in preparing for the
presentation. A good set of slides with good content and good
visual appeal is essential to a fi rst-rate
presentation. Take some care to choose a nice slide design, font
size and style, and color scheme. We
suggest including slides covering each of the following areas:
• An opening slide covering the “title” of the presentation and
names of the presenters.
• A slide showing an outline of the presentation (perhaps with

presenters’ names by each topic).
• One or more slides showing the key problems and strategic
issues that management needs to
address.
• A series of slides covering your analysis of the company’s
situation.
• A series of slides containing your recommendations and the
supporting arguments and reasoning
for each recommendation—one slide for each recommendation
and the associated reasoning
has a lot of merit.
You and your team members should carefully plan and rehearse
your slide show to maximize impact and
minimize distractions. The slide show should include all of the
pizzazz necessary to garner the attention of
the audience, but not so much that it distracts from the content
of what group members are saying to the
class. You should remember that the role of slides is to help you
communicate your points to the audience.
Too many graphics, images, colors, and transitions may divert
the audience’s attention from what is being
said or disrupt the fl ow of the presentation. Keep in mind that
visually dazzling slides rarely hide a shallow
or superfi cial or otherwise fl awed case analysis from a
perceptive audience. Most instructors will tell you
that fi rst-rate slides will defi nitely enhance a well-delivered
presentation but that impressive visual aids, if
accompanied by weak analysis and poor oral delivery, still adds
up to a substandard presentation.
Researching Companies and Industries via the Internet
and Online Data Services
Very likely, there will be occasions when you need to get

additional information about some of the assigned
cases, perhaps because your instructor has asked you to do
further research on the industry or company or
because you are simply curious about what has happened to the
company since the case was written. These
days it is relatively easy to run down recent industry
developments and to fi nd out whether a company’s
strategic and fi nancial situation has improved, deteriorated, or
changed little since the conclusion of the
case. The amount of information about companies and industries
available on the Internet and through
online data services is formidable and expanding rapidly.
It is a fairly simple matter to go to company Web sites, click on
the investor information offerings and
press release fi les, and get quickly to useful information. Most
company Web sites allow you to view or
print the company’s quarterly and annual reports, its 10K and
10Q fi lings with the Securities and Exchange
Commission, and various company press releases of interest.
Frequently, a company’s Web site will also
provide information about its mission and vision statements,
values statements, codes of ethics, and
strategy information, as well as charts of the company’s stock
price. The company’s recent press releases
typically contain reliable information about what of interest has
been going on—new product introductions,
recent alliances and partnership agreements, recent acquisitions,
summaries of the latest fi nancial results,
tidbits about the company’s strategy, guidance about future
revenues and earnings, and other late-breaking
company developments. Some company Web pages also include
links to the home pages of industry trade
associations where you can fi nd information about industry
size, growth, recent industry news, statistical
trends, and future outlook. Thus, an early step in researching a

company on the Internet is always to go to
its Web site and see what’s available.
Online Data Services
Lexis-Nexis, Bloomberg Financial News Services, and other on-
line subscription services available in many
university libraries provide access to a wide array of business
reference material. For example, the web-
based Lexis-Nexis Academic Universe contains business news
articles from general news sources, business
publications, and industry trade publications. Broadcast
transcripts from fi nancial news programs are also
available through Lexis-Nexis, as are full-text 10-Ks, 10-Qs,
annual reports, and company profi les for more
than 11,000 U.S. and international companies. Your business
librarian should be able to direct you to the
resources available through your library that will aid you in
your research.
Public and Subscription Websites with Good Information
Plainly, you can use a search engine such as Google or Yahoo!
or MSN to fi nd the latest news on a company
or articles written by reporters that have appeared in the
business media. These can be very valuable in
running down information about recent company developments.
However, keep in mind that the information
retrieved by a search engine is “unfi ltered” and may include
sources that are not reliable or that contain
inaccurate or misleading information. Be wary of information
provided by authors who are unaffi liated with

reputable organizations or publications and articles that were
published in off-beat sources or on Web sites
with an agenda. Be especially careful in relying on the accuracy
of information you fi nd posted on various
bulletin boards. Articles covering a company or issue should be
copyrighted or published by a reputable
source. If you are turning in a paper containing information
gathered from the Internet, you should cite your
sources (providing the Internet address and date visited); it is
also wise to print Web pages for your research
fi le (some Web pages are updated frequently).
The Wall Street Journal, Business Week, Forbes, Barron’s, and
Fortune are all good sources of articles on
companies. The Wall Street Journal Interactive Edition contains
the same information that is available daily
in its print version of the paper, but also maintains a searchable
database of all Wall Street Journal articles
published during the past few years. Fortune and Business Week
also make the content of the most current
issue available online to subscribers as well as provide archives
sections that allow you to search for articles
related to a particular keyword that were published during the
past few years.
The following Websites are particularly good locations for
company and industry information:
Securities and Exchange Commission EDGAR
database (contains company 10-Ks, 10-Qs, etc.)
http://www.sec.gov/cgi-bin/srch-edgar
CNN Money http://money.cnn.com
Hoover’s Online http://hoovers.com
The Wall Street Journal Interactive Edition http://www.wsj.com
Business Week http://www.businessweek.com
Fortune http://www.fortune.com

MSN Money Central http://moneycentral.msn.com
Yahoo! Finance http://fi nance.yahoo.com/
Some of these Internet sources require subscriptions in order to
access their entire databases.
Learning Comes Quickly With a modest investment of time,
you will learn how to use Internet sources
and search engines to run down information on companies and
industries quickly and effi ciently. And it
is a skill that will serve you well into the future. Once you
become familiar with the data available at the
different Web sites mentioned above and with using a search
engine, you will know where to go to look for
the particular information that you want. Search engines nearly
always turn up too many information sources
that match your request rather than two few; the trick is to learn
to zero in on those most relevant to what you
are looking for. Like most things, once you get a little
experience under your belt on how to do company and
industry research on the Internet, you will fi nd that you can
readily fi nd the information you need.
Th e Ten Commandments of Case Analysis
As a way of summarizing our suggestions about how to
approach the task of case analysis, we have compiled
what we like to call “The Ten Commandments of Case
Analysis.” They are shown in Table 2. If you observe
all or even most of these commandments faithfully as you
prepare a case either for class discussion or for a
written report, your chances of doing a good job on the assigned

cases will be much improved. Hang in there,
give it your best shot, and have some fun exploring what the
real world of strategic management is all about.
Table 2
The Ten Commandments of Case Analysis
To be observed in written reports and oral presentations, and
while participating in class discussions.
1. Go through the case twice, once for a quick overview and
once to gain full command of the facts;
then take care to explore the information in every one of the
case exhibits.
2. Make a complete list of the problems and issues that the
company’s management needs to
address.
3. Be thorough in your analysis of the company’s situation
(either work through the case preparation
exercises on Case-TUTOR or make a minimum of 1 to 2 pages
of notes detailing your diagnosis).
4. Look for opportunities to apply the concepts and analytical
tools in the text chapters—all of the
cases in the book have very defi nite ties to the material in one
or more of the text chapters!!!!
5. Do enough number crunching to discover the story told by the
data presented in the case. (To help
you comply with this commandment, consult Table 1 in this
section to guide your probing of a
company’s fi nancial condition and fi nancial performance.)

6. Support any and all off-the-cuff opinions with well-reasoned
arguments and numerical evidence;
don’t stop until you can purge “I think” and “I feel” from your
assessment and, instead, are able
to rely completely on “My analysis shows.”
7. Prioritize your recommendations and make sure they can be
carried out in an acceptable time
frame with the available resources.
8. Support each recommendation with persuasive argument and
reasons as to why it makes sense
and should result in improved company performance.
9. Review your recommended action plan to see if it addresses
all of the problems and issues you
identifi ed—any set of recommendations that does not address
all of the issues and problems you
identifi ed is incomplete and insuffi cient.
10. Avoid recommending any course of action that could have
disastrous consequences if it doesn’t
work out as planned; therefore, be as alert to the downside risks
of your recommendations as you
are to their upside potential and appeal.
1 Charles I. Gragg, “Because Wisdom Can’t Be Told,” in The
Case Method at the Harvard Business School,
ed. M. P. McNair (New York: McGraw-Hill, 1954), p. 11.
2 Ibid., pp. 12–14; and D. R. Schoen and Philip A. Sprague,
“What Is the Case Method?” in The Case

Method at the Harvard Business School, ed. M. P. McNair, pp.
78–79.
3 For some additional ideas and viewpoints, you may wish to
consult Thomas J. Raymond, “Written
Analysis of Cases,” in The Case Method at the Harvard
Business School, ed. M. P. McNair, pp. 139–63.
Raymond’s article includes an actual case, a sample analysis of
the case, and a sample of a student’s
written report on the case.
4 Gragg, “Because Wisdom Can’t Be Told,” p. 10.
Endnotes
tho75109_case04_C17-C40.indd C-17 12/14/18 05:16 PM
Costco Wholesale in 2018: Mission,
Business Model, and Strategy
Arthur A. Thompson Jr.,
The University of Alabama
Six years after turning the leadership of Costco Wholesale over
to then-president, Craig Jelinek, Jim Sinegal, Costco’s co-
founder and chief exec-
utive officer (CEO) from 1983 until year-end 2011,
had ample reason to be pleased with the company’s
ongoing revenue growth and competitive standing as
one of the world’s biggest and best consumer goods
merchandisers. Sinegal had been the driving force
behind Costco’s 35-year evolution from a startup entre-
preneurial venture into the third largest retailer in the

United States, the seventh largest retailer in the world,
and the undisputed leader of the discount warehouse
and wholesale club segment of the North American
retailing industry. Since January 2012, when Craig
Jelinek took the reins as Costco Wholesale’s president
and CEO, the company had prospered, growing from
annual revenues of $89 billion and 598 membership
warehouses at year-end fiscal 2011 to annual revenues
of $126.2 billion and 741 membership warehouses
at year-end fiscal 2017. Costco’s growth continued
in the first nine months of fiscal 2018; 9-month rev-
enues were $95.0 billion, up 12.0 percent over the first
9 months of fiscal 2017, and the company had opened
four additional warehouses. As of June 2018, Costco
ranked as the second largest retailer in both the United
States and the world (behind Walmart).
COMPANY BACKGROUND
The membership warehouse concept was pioneered
by discount merchandising sage Sol Price, who
opened the first Price Club in a converted airplane
hangar on Morena Boulevard in San Diego in 1976.
Price Club lost $750,000 in its first year of opera-
tion, but by 1979 it had two stores, 900 employees,
200,000 members, and a $1 million profit. Years ear-
lier, Sol Price had experimented with discount retail-
ing at a San Diego store called Fed-Mart. Jim Sinegal
got his start in retailing at the age of 18, loading mat-
tresses for $1.25 an hour at Fed-Mart while attending
San Diego Community College. When Sol Price sold
Fed-Mart, Sinegal left with Price to help him start
the San Diego Price Club store; within a few years,
Sol Price’s Price Club emerged as the unchallenged
leader in member warehouse retailing, with stores
operating primarily on the West Coast.

Although Price originally conceived Price Club
as a place where small local businesses could obtain
needed merchandise at economical prices, he soon
concluded that his fledgling operation could achieve
far greater sales volumes and gain buying clout with
suppliers by also granting membership to individuals—a
conclusion that launched the deep-discount warehouse
club industry on a steep growth curve.
When Sinegal was 26, Sol Price made him the
manager of the original San Diego store, which had
become unprofitable. Price saw that Sinegal had a
special knack for discount retailing and for spotting
what a store was doing wrong (usually either not
being in the right merchandise categories or not sell-
ing items at the right price points)—the very things
that Sol Price was good at and that were at the root
of Price Club’s growing success in the marketplace.
Sinegal soon got the San Diego store back into the
black. Over the next several years, Sinegal continued
to build his prowess and talents for discount merchan-
dising. He mirrored Sol Price’s attention to detail and
absorbed all the nuances and subtleties of his mentor’s
CASE 4
Copyright ©2019 by Arthur A. Thompson. All rights reserved.
Final PDF to printer
C-18 PART 2 Cases in Crafting and Executing Strategy

style of operating—constantly improving store opera-
tions, keeping operating costs and overhead low,
stocking items that moved quickly, and charging ultra-
low prices that kept customers coming back to shop.
Realizing that he had mastered the tricks of running a
successful membership warehouse business from Sol
Price, Sinegal decided to leave Price Club and form
his own warehouse club operation.
Sinegal and Seattle entrepreneur Jeff Brotman
founded Costco, and the first Costco store began
operations in Seattle in 1983—the same year that
Walmart launched its warehouse membership for-
mat, Sam’s Club. By the end of 1984, there were
nine Costco stores in five states serving over 200,000
members. In December 1985, Costco became a public
company, selling shares to the public and raising addi-
tional capital for expansion. Costco became the first
ever U.S. company to reach $1 billion in sales in less
than six years. In October 1993, Costco merged with
Price Club. Jim Sinegal became CEO of the merged
company, presiding over 206 PriceCostco locations,
with total annual sales of $16 billion. Jeff Brotman,
who had functioned as Costco’s chairman since
the company’s founding, became vice chairman of
PriceCostco in 1993 and was elevated to chairman of
the company’s board of directors in December 1994,
a position he held until his unexpected death in 2017.
In January 1997, after the spin-off of most of its non-
warehouse assets to Price Enterprises Inc., PriceCostco
changed its name to Costco Companies Inc. When the
company reincorporated from Delaware to Washington
in August 1999, the name was changed to Costco
Wholesale Corporation. The company’s headquarters

was in Issaquah, Washington, not far from Seattle.
Jim Sinegal’s Leadership Style
Sinegal was far from the stereotypical CEO. He dressed
casually and unpretentiously, often going to the office
or touring Costco stores wearing an open-collared cot-
ton shirt that came from a Costco bargain rack and
sporting a standard employee name tag that said, sim-
ply, “Jim.” His informal dress and unimposing appear-
ance made it easy for Costco shoppers to mistake him
for a store clerk. He answered his own phone, once tell-
ing ABC News reporters, “If a customer’s calling and
they have a gripe, don’t you think they kind of enjoy the
fact that I picked up the phone and talked to them?”1
Sinegal spent considerable time touring Costco
stores, using the company plane to fly from location
to location and sometimes visiting 8 to 10 stores daily
(the record for a single day was 12). Treated like a
celebrity when he appeared at a store (the news “Jim’s
in the store” spread quickly), Sinegal made a point of
greeting store employees. He observed, “The employ-
ees know that I want to say hello to them, because
I like them. We have said from the very beginning:
‘We’re going to be a company that’s on a first-name
basis with everyone.’”2 Employees genuinely seemed
to like Sinegal. He talked quietly, in a commonsensi-
cal manner that suggested what he was saying was
no big deal.3 He came across as kind yet stern, but
he was prone to display irritation when he disagreed
sharply with what people were saying to him.
In touring a Costco store with the local store
manager, Sinegal was very much the person-in-
charge. He functioned as producer, director, and

knowledgeable critic. He cut to the chase quickly,
exhibiting intense attention to detail and pricing,
wandering through store aisles firing a barrage of
questions at store managers about sales volumes and
stock levels of particular items, critiquing merchan-
dising displays or the position of certain products in
the stores, commenting on any aspect of store opera-
tions that caught his eye, and asking managers to
do further research and get back to him with more
information whenever he found their answers to his
questions less than satisfying. Sinegal had tremen-
dous merchandising savvy, demanded much of store
managers and employees, and definitely set the tone
for how the company operated its discounted retail-
ing business. Knowledgeable observers regarded Jim
Sinegal’s merchandising expertise as being on a par
with Walmart’s legendary founder, Sam Walton.
In September 2011, at the age of 75, Jim Sinegal
informed Costco’s Board of Directors of his intention
to step down as CEO of the company effective January
2012. The Board elected Craig Jelinek, President and
Chief Operating Officer since February 2010, to suc-
ceed Sinegal and hold the titles of both President and
CEO. Jelinek was a highly experienced retail executive
with 37 years in the industry, 28 of them at Costco,
where he started as one of the Company’s first ware-
house managers in 1984. He had served in every
major role related to Costco’s business operations and
merchandising activities during his tenure. When he
stepped down as CEO, Sinegal retained his position
on the company’s Board of Directors and, at the age
of 79, was re-elected to another three-year term on
Costco’s board in December 2015; he retired from
Costco’s Board at the end of his term in January 2018.

CAse 4 Costco Wholesale in 2018: Mission, Business Model,
and Strategy C-19
members per day. Annual sales per store averaged
about $170 million ($3.3 million per week) in 2017,
over 70 percent higher than the $99.2 million per year
and $1.9 million per week averages for Sam’s Club,
Costco’s chief competitor. In 2014, 165 of Costco’s
warehouses generated sales exceeding $200 million
annually, up from 56 in 2010; and 60 warehouses had
sales exceeding $250 million, including two that had
more than $400 million in sales.4 In 2018, Costco was
the only national retailer in the history of the United
States that could boast of average annual revenue in
excess of $170 million per location.
Exhibit 1 contains a financial and operating
summary for Costco for fiscal years 2000, 2005, and
from 2014 through 2017.
COsTCO WHOLesALe IN 2018
In June 2018, Costco was operating 750 membership
warehouses, including 520 in the United States and
Puerto Rico, 98 in Canada, 38 in Mexico, 28 in the
United Kingdom, 26 in Japan, 14 in South Korea, 13
in Taiwan, 9 in Australia, 2 in Spain, 1 in France, and
1 in Iceland. Costco also sold merchandise to mem-
bers at websites in the United States, Canada, the
United Kingdom, Mexico, South Korea, and Taiwan.
Over 90 million cardholders were entitled to shop at

Costco as of January 2018; in fiscal year 2017, mem-
bership fees generated over $2.85 billion in revenues
for the company. Headed into 2018, on average, traf-
fic at Costco’s warehouse locations averaged 3 million
EXHIBIT 1 selected Financial and Operating Data for Costco
Wholesale Corp., Fiscal
Years 2000, 2005, and 2014–2017 ($ in millions, except for per
share data)
Fiscal years ending on Sunday closest to August 31
Selected Income
Statement Data 2017 2016 2015 2014 2005 2000
Net sales $126,172 $116,073 $113,666 $110,212 $51,862
$31,621
Membership fees 2,853 2,646 2,533 2,428
1,073 544
Total revenue 129,025 118,719 116,199 112,640 52,935
32,164
Operating expenses
Merchandise costs 111,882 102,901 101,065 98,458 46,347
28,322
Selling, general and
administrative
12,950 12,068 11,445 10,899 5,044 2,755
Preopening expenses 82 78 65 63 53 42

Provision for impaired assets
and store closing costs
——— ——— ——— ——— 16 7
Total operating expenses 124,914 115,047 112,575 109,420
51,460 31,126
Operating income 4,111 3,672 3,624 3,220 1,474 1,037
Other income (expense)
Interest expense (134) (133) (124) (113) (34) (39)
Interest income and other, net 62 80 104
90 109 54
Income before income taxes 4,039 3,619 3,604 3,197 1,549
1,052
Provision for income taxes 1,325 1,243 1,195 1,109 486
421
Net income $ 2,714 $ 2,350 $ 2,377 $ 2,058 $ 1,063 $
631
Diluted net income per share $ 6.08 $5.33 $5.37 $4.65
$2.18 $ 1.35
Dividends per share (not including
special dividend of $7.00 in
2017 and $5.00 in 2015)
$ 1.90 $1.70 $1.51 $1.33 0.43 0.00
Millions of shares used in

per share calculations
440.9 441.3 442.7 442.5 492.0 475.7
(Continued)
2017 2016 2015 2014 2005 2000
Balance Sheet Data
Cash and cash equivalents $ 4,546 $ 3,379 $ 4,801 $ 5,738 $
2,063 $ 525
Merchandise inventories 9,834 8,969 8,908 8,456 4,015 2,490
Current assets 17,317 15,218 16,779 17,588 8,238 3,470
Current liabilities 17,485 15,575 16,539 14,412 6,761 3,404
Net property and equipment 18,161 17,043 15,401 14,830 7,790
4,834
Total assets 36,347 33,163 33,017 33,024 16,514 8,634
Long-term debt 6.573 4,061 4,852 5,093 711 790
Stockholders’ equity 10,778 12,079 10,617 12,515 8,881 4,240

Cash Flow Data
Net cash provided by operating
activities
$ 6,726 $ 3,292 $ 4,285 $3,984 $ 1,773 $ 1,070
Warehouse Operations
Warehouses in operation at
beginning of yeara
715 686 663 634 417 292
New warehouses opened
(including relocations)
28 33 26 30 21 25
Existing warehouses closed
(including relocations)
(2) (4) (3) (1) (5) (4)
Warehouses at end of year 741 715 686 663 433 313
Net sales per warehouse open at
year-end (in millions)
$ 170 $ 162 $ 166 $ 166 $ 120 $ 101
Average annual growth at
warehouses open more than a year
(excluding the impact of changing
gasoline prices and foreign
exchange rates)

4% 4% 7% 6% 7% 11%
Members at year-end
Businesses, including add-on
members (000s)
10,800 10,800 10,600 10,400 5,000 4,200
Gold Star members (000s) 38,600 36,800 34,000 31,600 16,200
10,500
Total paid members 49,400 47,600 44,600 42,000 21,200
14,700
Household cardholders that both
business and Gold Star members
were automatically entitled to
receive
42,600 42,600 40,200 34,400 n.a. n.a.
Total cardholders 90,300 86,700 81,300 76,400 ———
———
a At the beginning of Costco’s 2011 fiscal year, the operations
of 32 warehouses in Mexico that were part of a 50 percent-
owned joint ven-
ture were consolidated and reported as part of Costco’s total
operations.
Note: Some totals may not add due to rounding and to not
including some line items of minor significance in the
company’s statement of
income.

Sources: Company 10-K reports for fiscal years 2000, 2005,
2015, 2016, and 2017.
and Strategy C-21
Big sales volumes and rapid inventory turnover—
when combined with the low operating costs achieved
by volume purchasing, efficient distribution, and
reduced handling of merchandise in no-frills, self-
service warehouse facilities—enabled Costco to oper-
ate profitably at significantly lower gross margins
than traditional wholesalers, mass merchandisers,
supermarkets, and supercenters. Membership fees
were a critical element of Costco’s business model
because they provided sufficient supplemental rev-
enues to boost the company’s overall profitability
to acceptable levels. Indeed, Costco’s revenues from
membership fees typically exceeded 100 percent of
the company’s net income, meaning that the rest of
Costco’s worldwide business operated on a slightly
below breakeven basis (see Exhibit 1)—which trans-
lated into Costco’s prices being exceptionally com-
petitive when compared to the prices that Costco
members paid when shopping elsewhere.
Another important business model element was
that Costco’s high sales volume and rapid inventory
turnover generally allowed it to sell and receive cash

for inventory before it had to pay many of its mer-
chandise vendors, even when vendor payments were
made in time to take advantage of early payment
discounts. Thus, Costco was able to finance a big
percentage of its merchandise inventory through the
payment terms provided by vendors rather than by
having to maintain sizable working capital (defined
as current assets minus current liabilities) to enable
timely payment of suppliers.
Costco’s Strategy
The key elements of Costco’s strategy were ultra-
low prices, a limited selection of nationally branded
and top-quality Kirkland Signature products cov-
ering diverse merchandise categories, a “treasure
hunt” shopping environment that stemmed from a
constantly-changing inventory of about 900 “while-
they-last specials,” strong emphasis on low operating
costs, and ongoing expansion of its geographic net-
work of store locations.
Pricing Costco’s philosophy was to keep custom-
ers coming in to shop by wowing them with low
prices and thereby generating big sales volumes.
Examples of Costco’s 2015 sales volumes that con-
tributed to low prices in particular product cat-
egories included 156,000 carats of diamonds, meat
sales of $6.4 billion, seafood sales of $1.3 billion,
COsTCO’s MIssION,
BUsINess MODeL, AND
sTRATeGY
Costco’s stated mission in the membership warehouse
business was: “To continually provide our members
with quality goods and services at the lowest possible
prices.”5 However, in a “Letter to Shareholders” in

the company’s 2011 Annual Report, Costco’s three
top executives—Jeff Brotman, Jim Sinegal, and Craig
Jelinek—provided a more expansive view of Costco’s
mission, stating:
The company will continue to pursue its mission of
bringing the highest quality goods and services to mar-
ket at the lowest possible prices while providing excel-
lent customer service and adhering to a strict code of
ethics that includes taking care of our employees and
members, respecting our suppliers, rewarding our share-
holders, and seeking to be responsible corporate citizens
and environmental stewards in our operations around
the world.”6
In the company’s 2017 Annual Report, Craig
Jelinek elaborated on how environmental sustainabil-
ity fit into Costco’s mission:
Sustainability to us is remaining a profitable business
while doing the right thing. We are committed to less-
ening our environmental impact, decreasing our carbon
footprint, sourcing our products responsibly, and work-
ing with our suppliers, manufacturers, and farmers to
preserve natural resources. This will remain at the fore-
front of our business practices. 7
The centerpiece of Costco’s business model was
a powerful value proposition that featured a combi-
nation of (1) ultra-low prices on a limited selection
of nationally branded and Costco’s private-label
Kirkland Signature products in a wide range of mer-
chandise categories, (2) very good to excellent prod-
uct quality, and (3) intriguing product selection that
included both everyday items and ongoing special
purchases from a big variety of merchandise suppli-

ers that turned shopping at Costco into a money-
saving treasure hunt. Ever since the company’s
founding, Costco management had strived diligently
to ensure that shopping at Costco delivered enough
value to keep existing members returning frequently
to a nearby warehouse and spur membership growth
every year, thereby generating high sales volumes and
rapid inventory turnover at each warehouse and cre-
ating opportunities to open new warehouses.
compete somewhere else.” Some years ago, we were sell-
ing a hot brand of jeans for $29.99. They were $50 in a
department store. We got a great deal on them and could
have sold them for a higher price but we went down to
$29.99. Why? We knew it would create a riot.8
At another time, he said:
We’re very good merchants, and we offer value. The tra-
ditional retailer will say: “I’m selling this for $10. I won-
der whether we can get $10.50 or $11.” We say: “We’re
selling this for $9. How do we get it down to $8?” We
understand that our members don’t come and shop with
us because of the window displays or the Santa Claus or
the piano player. They come and shop with us because
we offer great values.9
Indeed, Costco’s markups and prices were so

fractionally above the level needed to cover company-
wide operating costs and interest expenses that Wall
Street analysts had criticized Costco management
for going all out to please customers at the expense
of increasing profits for shareholders. One retailing
analyst said, “They could probably get more money
for a lot of the items they sell.”10 During his tenure
as CEO, Sinegal had never been impressed with Wall
Street calls for Costco to abandon its ultra-low pric-
ing strategy, commenting: “Those people are in the
business of making money between now and next
Tuesday. We’re trying to build an organization that’s
going to be here 50 years from now.”11 He went on
to explain why Costco’s approach to pricing would
remain unaltered during his tenure:
When I started, Sears, Roebuck was the Costco of the
country, but they allowed someone else to come in
under them. We don’t want to be one of the casualties.
We don’t want to turn around and say, “We got so fancy
we’ve raised our prices, and all of a sudden a new com-
petitor comes in and beats our prices.”12
Product Selection Whereas typical supermar-
kets stocked about 40,000 items and a Walmart
Supercenter or a SuperTarget might have 125,000 to
150,000 items for shoppers to choose from, Costco’s
merchandising strategy was to provide members with
a selection of approximately 3,800 active items that
could be priced at bargain levels and thus provide
members with significant cost savings. Of these,
about 75 percent were quality brand-name products
and 25 percent carried the company’s private-label
Kirkland Signature brand. The Kirkland Signature
label appeared on everything from men’s dress shirts
to laundry detergent, pet food to toilet paper, canned

television sales of $1.8 billion, fresh produce sales of
$5.8 billion (sourced from 44 countries), 83 million
rotisserie chickens, 7.9 million tires, 41 million pre-
scriptions, 6 million pairs of glasses, and 128 million
hot dog/soda pop combinations. Costco was the
world’s largest seller of fine wines ($965 million out
of total 2015 wine sales of $1.7 billion).
For many years, a key element of Costco’s pric-
ing strategy had been to cap its markup on brand-name
merchandise at 14 percent (compared to 25 percent
and higher markups for other discounters and most
supermarkets and 50 percent and higher markups
for department stores). Markups on Costco’s private-
label Kirkland Signature items were a maximum of
15 percent, but the sometimes fractionally higher mark-
ups still resulted in Kirkland Signature items being
priced about 20 percent below comparable name-brand
items. Except for Walmart, Costco’s prices for fresh
foods and grocery items ranged 20 to 30 percent below
of the leading supermarket chains. Aside from being
lower-priced, Costco’s Kirkland Signature products—
which included vitamins, juice, bottled water, coffee,
spices, olive oil, canned salmon and tuna, nuts, laundry
detergent, baby products, dog food, luggage, cookware,
trash bags, batteries, wines and spirits, paper towels
and toilet paper, and clothing—were designed to be of
equal or better quality than national brands.
As a result of its low markups, Costco’s prices
were just fractionally above breakeven levels, produc-
ing net sales revenues (not counting membership
fees) that exceeded all operating expenses (mer-
chandise costs + selling, general and administrative
expenses + preopening expenses and store relocation

expenses) by only $1.0 billion to $1. 2 billion in fiscal
years 2017, 2016, and 2015 and by just $400 million
to $800 million dollars in fiscal years 2014, 2005 and
2005. As can be verified from Exhibit 1, Costco’s
revenues from membership fees accounted for 69 to
75 percent of the company’s operating profits in fis-
cal years 2014 to 2017 and exceeded the company’s
net income after taxes in every fiscal year shown in
Exhibit 1 except for fiscal year 2000—chiefly because
of the company’s ultra-low pricing strategy and prac-
tice of capping the margins on branded goods at
14 percent and private-label goods at 15 percent.
Jim Sinegal explained the company’s approach
to pricing:
We always look to see how much of a gulf we can cre-
ate between ourselves and the competition. So that the
competitors eventually say, “These guys are crazy. We’ll
and Strategy C-23
limited to fast-selling models, sizes, and colors. Many
consumable products like detergents, canned goods,
office supplies, and soft drinks were sold only in big-
container, case, carton, or multiple-pack quantities. In
a few instances, the selection within a product category
was restricted to a single offering. For example, Costco
stocked only a 325-count bottle of Advil—a size many

shoppers might find too large for their needs. Sinegal
explained the reasoning behind limited selections:
If you had 10 customers come in to buy Advil, how
many are not going to buy any because you just have
one size? Maybe one or two. We refer to that as the intel-
ligent loss of sales. We are prepared to give up that one
customer. But if we had four or five sizes of Advil, as
most grocery stores do, it would make our business more
difficult to manage. Our business can only succeed if we
are efficient. You can’t go on selling at these margins if
you are not.13
In the last several years, organics had become
a fast-growing category in both the fresh produce
section and the grocery items section, and Costco
buyers were devoting increased attention to growing
the selection of organic items. In the fresh meats cat-
egory, Costco was pursuing increased vertical inte-
gration, constructing a meat plant in Illinois and a
poultry plant in Nebraska. The approximate percent-
age of net sales accounted for by each major category
of items stocked by Costco is shown in Exhibit 2.
Costco had opened ancillary departments within
or next to most Costco warehouses to give reasons
foods to cookware, olive oil to beer, automotive prod-
ucts to health and beauty aids. According to Craig
Jelinek, “The working rule followed by Costco buyers
is that all Kirkland Signature products must be equal
to or better than the national brands, and must offer
a savings to our members.” Management believed
that there were opportunities to increase the number
of Kirkland Signature selections and gradually build
sales penetration of Kirkland-branded items to at

least 30 percent of total sales—in 2017 Kirkland-brand
sales exceeded 27 percent of total sales. Costco exec-
utives in charge of sourcing Kirkland Signature prod-
ucts constantly looked for ways to make all Kirkland
Signature items better than their brand name coun-
terparts and even more attractively priced. Costco
members were very much aware that one of the great
perks of shopping at Costco was the opportunity to
buy top quality Kirkland Signature products at prices
substantially lower than name brand products.
Costco’s product range covered a broad
spectrum—rotisserie chicken, all types of fresh meats,
seafood, fresh and canned fruits and vegetables, paper
products, cereals, coffee, dairy products, cheeses, fro-
zen foods, flat-screen televisions, iPods, digital cam-
eras, fresh flowers, fine wines, caskets, baby strollers,
toys and games, musical instruments, ceiling fans,
vacuum cleaners, books, apparel, cleaning supplies,
DVDs, light bulbs, batteries, cookware, electric tooth-
brushes, vitamins, and washers and dryers—but the
selection in each product category was deliberately
EXHIBIT 2 Costco’s sales by Major Product Category, 2005–
2017
2017 2016 2010 2005
Food (fresh produce, meats and fish, bakery and deli products,
and dry and institutionally packaged foods)
35% 36% 33% 30%
Sundries (candy, snack foods, tobacco, alcoholic and
nonalcoholic
beverages, and cleaning and institutional supplies)

20% 21% 23% 25%
Hardlines (major appliances, electronics, health and beauty
aids,
hardware, office supplies, garden and patio, sporting goods,
furniture, cameras, and automotive supplies)
16% 16% 18% 20%
Softlines (including apparel, domestics, jewelry, housewares,
books, movie DVDs, video games and music, home furnishings,
and small appliances)
12% 12% 10% 12%
Ancillary and Other (gasoline, pharmacy, food court, optical,
one-hour photo, hearing aids, and travel)
17% 16% 16% 13%
Source: Company 10-K reports, 2005, 2011, 2016, and 2017.
mattresses, and Dom Perignon champagne. Many of
the featured specials came and went quickly, some-
times in several days or a week—like Italian-made
Hathaway shirts priced at $29.99 and $800 leather
sectional sofas. The strategy was to entice shoppers

to spend more than they might by offering irresistible
deals on big-ticket items or name-brand specials and,
further, to keep the mix of featured and treasure-hunt
items constantly changing so that bargain-hunting
shoppers would go to Costco more frequently rather
than only for periodic “stock up” trips.
Costco members quickly learned that they
needed to go ahead and buy treasure-hunt specials
that interested them because the items would very
likely not be available on their next shopping trip.
In many cases, Costco did not obtain its upscale
treasure hunt items directly from high-end manu-
facturers like Calvin Klein or Waterford (who were
unlikely to want their merchandise marketed at deep
discounts at places like Costco); rather, Costco buy-
ers searched for opportunities to source such items
legally on the gray market from other wholesalers
or distressed retailers looking to get rid of excess or
slow-selling inventory.
Management believed that these practices kept
its marketing expenses low relative to those at typical
retailers, discounters, and supermarkets.
Low-Cost Emphasis Keeping operating costs at
a bare minimum was a major element of Costco’s
strategy and a key to its low pricing. As Jim Sinegal
explained:
Costco is able to offer lower prices and better values by
eliminating virtually all the frills and costs historically
associated with conventional wholesalers and retailers,
including salespeople, fancy buildings, delivery, billing,
and accounts receivable. We run a tight operation with
extremely low overhead which enables us to pass on dra-

matic savings to our members.14
While Costco management made a point of locat-
ing warehouses on high-traffic routes in or near upscale
suburbs that were easily accessible by small businesses
and residents with above-average incomes, it avoided
prime real estate sites in order to contain land costs.
Because shoppers were attracted principally
by Costco’s low prices and merchandise selection,
most warehouses were of a metal pre-engineered
design, with concrete floors and minimal interior
décor. Floor plans were designed for economy
and efficiency in use of selling space, the handling
to shop at Costco more frequently and make Costco
more of a one-stop shopping destination. Some loca-
tions had more ancillary offerings than others:
2015 2010 2007
Warehouses having stores with
Food Court 680 534 482
One-Hour Photo Centers 656 530 480
Optical Dispensing Centers 662 523 472
Pharmacies 606 480 429
Gas Stations 472 343 279
Hearing Aid Centers 581 357 237
Note: The company did not report the number of ancillary

offerings
for its warehouses at year-end 2016 and 2017, but the company
did increase the number of gas stations to 508 in 2016 and to
536 in 2017. Costco did not sell gasoline at its warehouses in
France and South Korea.
Source: Company 10-K reports, 2007, 2011, 2015, and 2017.
Costco’s pharmacies were highly regarded by
members because of the low prices. The company’s
practice of selling gasoline at discounted prices at
those store locations where there was sufficient
space to install gas pumps had boosted the frequency
with which nearby members shopped at Costco and
made in-store purchases (only members were eligible
to buy gasoline at Costco’s stations). Almost all new
Costco locations in the United States and Canada
were opening with gas stations; globally, gas stations
were being added at locations where local regulations
and space permitted.
Treasure-Hunt Merchandising While Costco’s
product line consisted of approximately 3,800 active
items, some 20 to 25 percent of its product offerings
were constantly changing. Costco’s merchandise buy-
ers were continuously making one-time purchases of
items that would appeal to the company’s clientele
and likely to sell out quickly. A sizable number of these
featured specials were high-end or luxury-brand prod-
ucts that carried big price tags; examples included
$1,000 to $4,500 big-screen Ultra HD LCD and LED
TVs, $800 espresso machines, expensive jewelery and
diamond rings (priced from $10,000 to $200,000+),
Omega watches, Waterford Crystal, exotic cheeses,
Coach bags, cashmere sports coats, $1,500 digi-
tal pianos, $800 treadmills, $2,500 memory foam

and Strategy C-25
in fiscal 2011, 6 percent in both fiscal 2013 and 2014,
7 percent in fiscal 2015, and 4 percent in 2016 and
2017 (see Exhibit 1).
Costco had been aggressive in opening new
warehouses and entering new geographic areas. As
of December 2000, the Company operated a chain
of 349 warehouses in 32 states (251 locations),
9 Canadian provinces (59 locations), the United
Kingdom (11 locations, through an 80 percent-
owned subsidiary), South Korea (four locations),
Taiwan (three locations, through a 55 percent-owned
subsidiary) and Japan (two locations), as well as 19
warehouses in Mexico through a 50 percent joint
venture partner. Ten years later, in December 2010,
Costco was operating 585 warehouses in 42 states
(425 locations), 9 Canadian provinces (80 loca-
tions), Mexico (32 locations), the United Kingdom
(22 locations), Japan (9 locations), South Korea (7
locations), Taiwan (6 locations), and Australia (1
location). Since then, Costco had opened an addi-
tional 165 warehouses and entered 2 more states and
3 additional countries. In 2017, Costco opened 28
new warehouses, including its first ones in Iceland
and France. Costco expected to open 20 to 25 new
warehouses and relocate up to six warehouses in fis-

cal year 2018 beginning September 4, 2017.
Exhibit 4 shows a breakdown of Costco’s geo-
graphic operations for fiscal years 2005, 2010, 2015,
2016, and 2017.
Marketing and Advertising
Costco’s low prices and its reputation for making
shopping at Costco something of a treasure-hunt
of merchandise, and the control of inventory.
Merchandise was often stored on racks above the
sales floor and/or displayed on pallets containing
large quantities of each item, thereby reducing labor
required for handling and stocking. In-store signage
was done mostly on laser printers; there were no
shopping bags at the checkout counter—merchandise
was put directly into the shopping cart or sometimes
loaded into empty boxes. Costco warehouses ranged
in size from 73,000 to 205,000 square feet; the aver-
age size was about 145,000 square feet. Newer units
were usually in the 150,000- to 205,000-square-foot
range, but the world’s largest Costco warehouse was
a 235,000 square-foot store in Salt Lake City that
opened in 2015. Images of Costco’s warehouses are
shown in Exhibit 3.
Warehouses generally operated on a 7-day,
70-hour week, typically being open between 10:00
a.m. and 8:30 p.m. weekdays, with earlier closing
hours on the weekend; the gasoline operations out-
side many stores usually had extended hours. The
shorter hours of operation as compared to those of
traditional retailers, discount retailers, and super-
markets resulted in lower labor costs relative to the
volume of sales. By strictly controlling the entrances

and exits of its warehouses and using a membership
format, Costco had inventory losses (shrinkage) well
below those of typical retail operations.
Growth Strategy Costco’s growth strategy was to
increase sales at existing stores by 5 percent or more
annually and to open additional warehouses, both
domestically and internationally. Average annual
growth at stores open at least a year was 10 percent
EXHIBIT 3 Images of Costco’s Warehouses
©Casiohabib/Shutterstock ©a katz/Shutterstock
EXHIBIT 4 selected Geographic Operating Data, Costco
Wholesale Corporation,
Fiscal Years 2005–2017 ($ in millions)
United States
Operations
Canadian
Operations
Other International
Operations Total
Year Ended September 3, 2017

Total revenue (including membership fees) $93,889 $18,775
$16,361 $129,025
Operating income 2,644 841 626 4,111
Capital expenditures 1,714 277 511 2,502
Number of warehouses (as of December 31,
2017)
518 98 130 746
Year Ended August 30, 2016
$15,112 $118,719
Number of warehouses 501 91 123 715
$14,507 $116,199

Total revenue (including membership fees) $59,624 $12,501 $
6,271 $ 77,946
Capital expenditures 804 162 89 1,055
Total revenue (including membership fees) $43,064 $ 6,732 $
3,155 $ 52,952
Capital expenditures 734 140 122 995
Note: The dollar numbers shown for the “Other International”
categories represent only Costco’s ownership share, since all
foreign opera-
tions were joint ventures (although Costco was the majority
owner of these ventures). Countries with warehouses in the
Other International
category as of year-end 2017 included Mexico (37), United
Kingdom (28), Japan (26), South Korea (13), Taiwan (13),
Australia (9), Puerto
Rico (2), Spain (2), Iceland (1), and France (1); Costco’s two
warehouses in Puerto Rico were included in the United States
Operations cat-
egory. The warehouses operated by Costco Mexico in which
Costco was a 50 percent joint venture partner were not included
in the data

for “Other International” until Fiscal Year 2011.
Source: Company 10-K reports, 2017, 2016, 2015, 2010, and
2007.
made it unnecessary to engage in extensive advertis-
ing or sales campaigns. Marketing and promotional
activities were generally limited to monthly coupon
mailers to members, weekly e-mails to members from
Costco.com, occasional direct mail to prospective
new members, and regular direct marketing pro-
grams (such as The Costco Connection, a magazine
published for members), in-store product sampling,
and special campaigns for new warehouse openings.
For new warehouse openings, marketing teams
personally contacted businesses in the area that were
potential wholesale members; these contacts were
supplemented with direct mailings during the period
immediately prior to opening. Potential Gold Star
and Strategy C-27
delivery times. New offerings were added at Costco
Travel, and the company introduced hotel-only book-
ing reservations. Costco Travel’s rental car rates were
consistently some of the lowest in the marketplace
and in 2017 car rentals became available to members

in Canada and the United Kingdom. Additionally,
the annual 2 percent reward for Executive members
was extended to apply to Costco Travel purchases in
the United States and Canada. Lastly, the company
launched Costco Grocery, a two-day delivery on dry
grocery items, and a same-day delivery offering both
fresh and dry grocery items through partnering with
Instacart.
Supply Chain and Distribution
Costco bought the majority of its merchandise
directly from manufacturers, routing it either directly
to its warehouse stores or to one of the company’s
cross-docking depots that served as distribution
points for nearby stores and for shipping orders to
members making online purchases. In early 2018,
Costco had 24 cross-docking depots with a combined
space of approximately 11 million square feet in the
United States, Canada, and various other interna-
tional locations. Depots received container-based
shipments from manufacturers, transferred the goods
to pallets, and then shipped full-pallet quantities of
several types to goods to individual warehouses via
rail or semi-trailer trucks, generally in less than 24
hours. This maximized freight volume and handling
efficiencies. Depots were also used to ship bulky
merchandise to members that had been ordered
online; members typically picked up online orders
that would fit in their vehicles at nearby warehouses.
When merchandise arrived at a warehouse, fork-
lifts moved the full pallets straight to the sales floor
and onto racks and shelves (without the need for
multiple employees to touch the individual packages/
cartons on the pallets)—the first time most items
were physically touched at a warehouse was when

shoppers reached onto the shelf/rack to pick it out
of a carton and put it into their shopping cart. Very
little incoming merchandise was stored in locations
off the sales floor in order to minimize receiving and
handling costs.
Costco had direct buying relationships with
many producers of national brand-name mer-
chandise and with manufacturers that supplied its
Kirkland Signature products. Costco’s merchandise
buyers were always alert for opportunities to add
(individual) members were contacted by direct mail
or by promotions at local employee associations and
businesses with large numbers of employees. After a
membership base was established in an area, most
new memberships came from word of mouth (exist-
ing members telling friends and acquaintances about
their shopping experiences at Costco), follow-up
messages distributed through regular payroll or other
organizational communications to employee groups,
and ongoing direct solicitations to prospective busi-
ness and Gold Star members.
Website Sales
Costco operated websites in the United States,
Canada, Mexico, the United Kingdom, Taiwan, and
South Korea—both to enable members to shop for
many in-store products online and to provide mem-
bers with a means of obtaining a much wider vari-
ety of value-priced products and services that were
not practical to stock at the company’s warehouses.
Craig Jelinek was committed to a website strategy
that provided exceptional service and value to Costco
members who wanted to shop online. In recent years,
online merchandise offerings had expanded signifi-

cantly, and the company was continuously explor-
ing opportunities to deliver added value to members
via a broader array of online offerings. Examples of
value-priced items that members could buy online
included sofas, beds, mattresses, entertainment cen-
ters and TV lift cabinets, outdoor furniture, office
furniture, kitchen appliances, billiard tables, and
hot tubs. Members could also use the company’s
websites for such services as digital photo process-
ing, prescription fulfillment, travel, the Costco auto
program (for purchasing selected new vehicles with
discount prices through participating dealerships),
and other membership services. In 2015, Costco
sold 465,000 vehicles through its 3,000 dealer part-
ners; the big attraction to members of buying a new
or used vehicle through Costco’s auto program was
being able to skip the hassle of bargaining with the
dealer over price and, instead, paying an attractively
low price pre-arranged by Costco. At Costco’s online
photo center, customers could upload images and
pick up the prints at their local warehouse in little
over an hour. Website sales accounted for 4 percent
of Costco’s total net sales in fiscal 2017 and 2016,
versus 3 percent in 2015 and 2014.
In 2017, Costco made improvements in web-
site functionality, search capability, checkout, and

Grammar Quiz: Joining Clauses with Semicolons

Grammar Quiz: Joining Clauses with Semicolons

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Grammar Quiz: Joining Clauses with Semicolons