Every small or large business requires a structure to grow successfully and in return be profitable. This structure is what defines the way a company and its employees work together to support their common vision. There are different types of organizational structures depending on the type of business (Burke & Litwin, 2002). The main ones that are related to this study are hierarchy, cross-functional and matrix. Costco Wholesale Corporation is the main focus of this research paper. It was founded in Seattle, WA in 1983 but has the headquarters in Issaquah, WA. It was founded by James Sinegal and Jeffery Brotman. Costco operates 698 warehouses in ten countries, Puerto Rico been the recent one. The company also operates an online website as well as receiving revenue from the membership fees. It earns about 3% of its revenue from the e-commerce website, about 2% through membership fees and generates approximately 95% from their in-store sales. It employees about 200,000 full time and part-time staff worldwide. The recent figure of annual revenues $116.2 billion …show more content…
(Corporate-irnet, c2016) The first part of this paper shows the impacts of various organizational functions such as marketing, finance, human resources, and operations on the organizational structure of Costco.
The main body provides in depth study into the comparisons of the three types of organizational structures. Costco Wholesale Corporation has its headquarters in Issaquah, Washington, United States. Considering the sales volume of Costco, it is the second largest membership warehouse club chain in the world according to the reports from 2014 (nrf.com, 2016). Further this paper analyses the organizational designs and gives recommendations on the best suited structure for Costco wholesale to be more progressive in this expanding wholesale market of Canada. In addition, it also explains the effect of an organizational structure on the role of managers and explores the effects of management behavior on the
structure. The Costco Organizational structure introduces the essential capacities to keep up the retail business. These capacities are done beginning at the corporate level and influence the whole association. The Organizational structure for Costco applies to all the geographic divisions. For instance, the Finance group influences all the geographic divisions of Costco around the world. Wholesale clubs in general are simple theoretically, but difficult to put into practice. Costco is well known for the bulk goods and its services are highly valuable. From Health and Life insurance, discounted travel bookings, to Boat and RV Loans, Costco connects large number of their members in number of ways to save money, and collects fees for their effort. The amount of collection is not entirely clear, but the services provided by Costco like E-commerce, Travel, Gas, Food courts, Optical, Pharmacy and other services meet the customer satisfaction (Panmorecom, 2015).
Costco was founded on September 15th, 1983 by Jeffery Brotman and James Sinegal (Chesley). It became renowned for its warehouse club retail model, pioneered by former competitor Price Club. After a major merger in 1993 with Price Club, Costco expanded to 206 locations, doubling the size of the company (“Costco Wholesale Historical Highlights”). The decision was based on the fact Costco and Price Club shared similar business philosophies, operations, and the looming threat of being taken over by Sam’s Club. Operating as PriceCostco, international expansion began with development of stores in Mexico, the opening of two stores in England, and the licensing of a Price Club in South Korea ("Costco Wholesale Corporation").
Costco is one of the companies that have started from humble beginnings to become one of the most recognized institutions in the wholesale industry. Based on the Costco case, there are valuable lessons I have learned and the look of things is that Costco is here to stay. One of the insights I have gained from the Costco case is that organizations should understand their value chains and focus on their strengths to drive competitiveness. Another lesson that I have learned is that information technology can be used by organizations to improve their levels of competitiveness. Also, the Costco case study has enabled me to realize that the management of organizations should constantly evaluate the impacts of the strategies they employ because it is through such evaluations that the best practices can be adopted to improve the performances. Costco has applied these aspects in its different areas of operations, and they have advanced the organization since its inception days to present. From the strategic management practices, the organization has grown from strength to
As an organization develops, it establishes among many things a sense of structure. In this; depending on its purpose of existence and how it carries out processes to meets its goals, it attempts to structure its staff and departments to optimize resource usage and maximize profits. Simply put, it is the way the company is organized to perform work. However as a generally noticeable trend, businesses are changing over the years and as Craig A. Stevens (1995) sites, "There may not even be one right organizational structure in any one company. Chances are, if all your divisions look the same on the organizational chart you have a problem.”
Cost leadership is a low cost, competitive strategy that aims at the broad mass market and requires “aggressive construction of efficient scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on (Hunger, Wheelen, 2011). Some examples of companies that utilize overall cost leadership are: McDonald’s, Wal-Mart, and Aldi grocery stores. Wal-Mart uses everyday low prices to attract customers, McDonald’s utilizes basic fast food meals at low prices and Aldi grocery stores employ a division of labor strategy and fewer managers to keep labor costs low, thus allowing them to sell their products for less. These businesses are located in close proximity to large population centers, sell the most popular products at all of their locations, and apply standardized pricing throughout their franchises. The application of an overall cost leadership strategy by McDonald’s, Wal-Mart, and Aldi grocery stores results in above average returns on investment (Hunger, Wheelen,
A matrix structure is what crowns Wal-Mart divisional organization structure. Granting that there are some disadvantages of forming teams nonetheless, it has been proving repeatedly that the use of teamwork has more advantages. Market managers run each district and are responsible for a larger number of stores, allowing Wal-Mart to work towards increasing the merchandise poser of the individual markers, which are now based more on the economic landscape of an area, less on the physical
Organisational Structure, Culture, and Management Style of a Business C2 An Analysis of How the Organisational Structure, Culture And Management Style of the Business Affects its Performance and Operation and Help It to Meet Its Objectives The organisation structure of Wednesbury IKEA The organisation structure in the ‘Appendix section’ belongs to the Wednesbury branch of IKEA. Wednesbury IKEA is a large formal organisation and it is best suited to a hierarchical organisational structure. This is because; there are more employees as it goes downwards from each level.
In order for one to evaluate and identify with the diverse business structures, he/she must be aware of the meaning and standards that makes that structure. Various businesses functions in different ways as the world is full of technology and new structures, company cultures and new ways in which companies are run. In order to fully grasp the concepts of Organizational structure and culture in the movies, I will use the Movie Up in the Air and The Devil Wear Prada movies to analyze a business scenario from them.
Business structure is a critical factor to determine a company 's success or failure. Generally, larger organization has a more complex organizational structure. In the case of H&M, they had adopted matrix structure, one of the traditional organizational structure, into their business. As shown in figure 1, range of functional groups is listed horizontally across the table and on the other is product/task with a manager taking control of each. The functional structure is divided
Organizations must operate within structures that allow them to perform at their best within their given environments. According to theorists T. Burns and G.M Stalker (1961), organizations require structures that will allow them to adapt and react to changes in the environment (Mechanistic vs Organic Structures, 2009). Toyota Company’s corporate structure is spelt out as one where the management team and employees conduct operations and make decisions through a system of checks and balances.
Gareth Morgan, Fredrick Taylor and Mary Parker Follett are three individuals whose ideas have contributed to organization theory. Some of their methods are very different, and some of their methods are similar to each other. Many of the methods discussed in this paper are still used in businesses today.
Organizational structure is the way that an organization arranges people and jobs so that work can be performed and goals can be achieved. Good organizational design helps communications, productivity, and innovation. Many organization structures have been created based on organizational strategy, size, technology, and environment. Robbins and Judge (2011, p. 504) listed three common structures: simple, bureaucracy, and matrix. In this post the author will describe the matrix structure, and discuss its advantages and disadvantages.
The structure of a company should enhance and expedite the attainment of the company goals (Robbins, et al., 2013). . When companies are new and young, the structure can be organic to enable a small organization to make quick decisions. As companies grow in size, more rules must be put into place to control costs and regulations. When a company is around 2,000 employees, it has probably already become mechanistic. Technology plays a role in this as well. When a company is using ordinary technology, they have a tendency to become mechanistic as they grow. In opposition, companies wi...
Organizations determine their structure by the various goals the organization wants to achieve; however, organizational structure can facilitate or deter the organizations advancement with regard to the accomplishment of these goals. Both small and larger organizations can attain increased sales and added profits in appropriately matching their structure with their needs to function. The three organizational structure types are, functional, divisional and matrix.
So, organizational structures should be shaped and implemented for the main purpose of facilitating the achievement of organizational goals. Tom Burns and G. M. Stalker identified two basic forms of organizational structure: mechanistic and organic structures. The mechanistic is also known as a bureaucratic structure that can be characterized as hierarchical, clear area of responsibilities, centralized and commands. Companies in a mechanistic structure typically hold strict control, over processes and employees. Rules are implemented and rarely deviated; there is also a very clear chain of conduction to delegate responsibilities and power throughout the organization. It can be observed that the mechanistic structure is best suitable for companies that operate in a stable and certain environment. In short, this structure is no difficult to maintain and rarely needs to be changed when the company has a stable external environment. The mechanistic structure can be reflected in the functional structure and the divisional structure. For example, in a functional structure, there are many separate functions, such as accounting, marketing and HR. Each department is autonomous and has a divisional manager who reports to the company CEO. It is beneficial to be efficiency and emphasize the significance of
Organizational structure within an organization is a critical component of the day to day operations of a business. An organization benefits from organizational structure as a result of all it encompasses. It is used to define how tasks are divided, grouped and coordinated. Six elements should be addressed during the design of the organization’s structure: work specialization, departmentalization, chain of command, spans of control, centralization and decentralization. These components are a direct reflection of the organization’s culture, power and politics.