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Costco- Labor Markets Analysis & Report

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Free «Costco- Labor Markets Analysis & Report» Essay Sample

Costco- Brief Company Profile

Costco Company is attributed to be among the top ten retailers in the world, having been placed at the seventh position(Costco website, 2012). The company was founded by James Sinegal and Jeffrey Brotman in 1983 and has risen to become the fifth largest retailer in the United States of America competing in the same league ofother giants in the industry such as Wal-Mart, Kroger and Target. The company products range from house hold appliances to sporting goods. It is said to produceeverything anaverageman would need under theroof. With a sales volume estimated at over $88 billion and a profit margin of $ 3 billion in the year 2011, Costco has established itself as one of the major forces in the membership warehouses in the United States of America. The headquarters of the company are found at Issaquah, Washington D.C

Current Labor Demand in This Industry

From the statistics gathered about the Costco Company, the current demand for labor in this industry seems to be on an upward precipitated course. The company from Costco database is deemed to have an employee status and numbers in excess of 142,000 both fulltime and part-time employees (Costco website, 2012). The part timers are employed when the season is in peak to help the company cope with monumental demands from its clients all over the state and beyond. With the current expansionist policies of the companies in this industry, it is evident that the demand for labor can only be on an upward trend. With other giants like Wal- Mart stores in the picture, which has an employee base in excess of two million under its chains, the labor demanded in this industry can described as overwhelming (Wal-Mart stores Inc website, 2012).

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Current Supply of Labor in This Industry

According to Karakaya and Canel (1998), for this retail market or industry to be in equilibrium, the demand for labor should equate the supply of the same. From the statistics analyzed from the top 100 major wholesalers and retailers in the United States of America, these wholesalers have employed more than  100 million people in the USA and other states in which they operate. Wilson (2012), notes that despite the increased economic empowerment and rapid growth of various sectors and industries in the USA economy, a vast number of people are still wallowing in the miasma of unemployment and poverty. This vice is more evidentamong the ‘less privileged class’ of people: the ones living in the ghetto and the so called underclass. Despite the large vacuum in labor demand in the above mentioned industries, people still find it hard to access jobs. The labor supply for the non-skilled type of jobs would behuge and lucrative if the industries could tap personnel from these classes of people.

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Government Factor

More often than not, in numerous nations of the world, the government of those nations is charged with the prerogative of deciding which policies to adapt to foster growth of the players in the industries. The kind of policies that the leaders of these nations make influence largely to the way the players in this industry behave.

In this case scenario, the government of the United States, though passing and making of some policies has an influence whether direct or not on the supply and demand of labor in the industry.  The USA government has been very instrumental towards helping many people receivejobs in these industries. The major way this has been achievedis by making sure that the levels of imports are minimized. The utilities that are used by the various government agencies, departments and ministries are bought from the companies situated in the USA. Very little is imported.  This gives a boost to the companies in the state allowing them to have enough resources for expansion, and the latter is directly correlated to increment in the number of employees. The unemployed and able bodied people are encouraged to seek jobs, though menial from these big stores. To enable the stores to employ big number of people, the government sometimes offers them tax breaks. This way, the money that would otherwise be channeled to the government coffers is used for expansion purposes and creating new working places.

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The policies that the government creates and implements are geared towards the promotion of peaceful trading between the state and its neighbors. This peaceful environment enables the stores and players in the industry expand their network and sales into allied states and which  increases the volume of sales. Incrementation in the sales volume is translated to an increased labor force.

Other External Factors

Some other factors that are beyond the control of the participants in this industry as well as beyond the control of the government, may in one way affect the demand and supply of labor in this industry. A typical example would be the trade unions and unions of workers influence. Trade unions between the state and other nations may bring about policies that either inhibit the addition of more workers or encourage such. More often, the unions of workers demand for the pay rise and better remuneration packages of the current workers as opposed to advocating for a flexibility that would allow employment of other workers. The players in the industry are faced with no other option apart from increasing the benefits and packages for the current workers at the expense of the new recruitment. The resources that could have been channeled towards the recruitment of more workers are funneled back to take better care of the current ones. This affects the supply of labor by limiting the number of workers employed in this industry.

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Costco Organizational Goals and Their Effect on Labor Supply

The Costco’s organization structure and the goals set by this company make it most endeared company in the wholesale and retail business in the USA. The company employs a number of mechanisms to make sure that its overhead costs are kept at a maximum. The long term goals of the organization are expansion into other markets and states. To be able to achieve the goals effectively, the company has made sure that the policies it makes are geared towards the reduction of costs in all the Costco’s stores. For example, they do not stock many competing brands which enables the customers to get a good pricing since the sales volume is high. The goal of expanding into other territories and increasing the number of outlets and the volume of sales will necessitate the increase of the workforce. Labor will be needed to work in these additional stores, and hence, the demand for the same will increase.

Predicted Areas for Organizational Growth, Downsizing and Effect on Labor

Costco only sells their products to their members or friends of their members. The membership is applied in advance and a number of privileges are given to these members depending on the class of membership. Here, an avenue of growth could present itself. If the stores could open doors to all classes of clients, irrespectively of whether they are members or not, perhaps new channels of revenue could start streaming in.  As noted, an increase in the volume of sales could necessitate an expansion policy and an expansion is synonymous to a higher demand for labor. There is also a possibility of growth if the company could start exploring other areas of investment, as it was done with Costco travels.  Diversification into other fields will also raise the company demand for labor.

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Downsizing could occur where the company may decide to adopt the use of technology in its stores. Technology would lead to some of the workers getting laid off.

Analysis of the Current Workforce in Costco

The current workforces in the company are not unionized. The company conducts a review of the workers’ remuneration, as well as their salaries every three years, and offers them one of the best margins the industry. Most of the workers, over eighty five percent of the Costco are offered health insurance and other benefits. This does not however guarantee the absolute job security of the employees in the Costco warehouses and stores. The company may revise the contract withanemployees any time that it feels right to do so. In this context, the employees who are facing arisk of getting downsized would be those that have no special skills- those who do menial jobs like packaging in the Costcos warehouses and stores.  If the company decides to adopt the use of technology in its operations, these would be most likely, the first people to go. A single machine would do the work that normally takes a number of people to do. The ones who would have some sense of job security would be those employees in management capacities in the warehouses and stores, as well as those who would be responsible for the management and upkeep of the technological systems. With the implementation of this expansion policy and the introduction and use of technology in the stores, the workers in administrative capacities such as managers,and those in the information and technology departments would becomevery important and the impact of their shortage may be felt in the company.

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Dealing with the Excess Shortage of Staff

The company would have to implement some policies to ensure that this shortage of workers in the company stores and warehouses, upon the implementation of the expansion policy and adaptation of the use of technology in their stores is dealt with the satisfaction of the company without resulting to loss of business. The company could decide to source out and hire qualified personnel from other states since all the stores are branded the same way and they operate in the same manner. Stores with excess of workers could transfer some of the workers to the other stores lacking the wokingforce.

Areas with High Staff Turnover

In the company, there are two areas that are said to be having a high number of staff employed. These are the workers who stock the shelves, workers in the packaging department inside the stores, as well as those in administrative positions. A plan should be formulated to ensure that only required minimum of workers to run the stores are in place at any given time. This leads to a reduction in costs as well as minimization of congestion in the stores. The maximum number of staff only required to run particular departments should be hired. Hiring of additional workers will result in congestion and unwarranted costs.

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Strategies to Retain the Key Staff

According to Obisi (2011), it is important to make sure that the well performing employees in any company, business and sector are retained and appraised since they are the key drivers to profit. The key staff in the Costco Company should be retained by following a simple strategy of better payment and appraisal. They should be treated with respect and their value in the company should be appreciated,thus,ensuring they don’t feel the necessity to look for a better package elsewhere.

Succession Strategy for 4-7 Main Positions

The succession module of the company should be based on the performance levels and the quality of work these professionals offer. The more hardworking a person is, the faster should he or she rise among the ranks and the more destined to success.

Recommendations to provide a more effective management of the organizations labor market

A number of recommendations aimed at the provision of a more effective management of the organizations labor market for this company are discussed in the following sentences;

  • The company should tap into an endless labor supply in the industry by conducting head hunting to identify the workers who would add value to the company. Once they identify them, they should conduct a follow up and hire them according to the company’s current or future labor demand.
  • The company should ensure that all the employees within its group are treated fairly and given good remuneration packages so that their retention can become guaranteed.
  • The company should ensure that only the best and the skilled in this industry are employed so as to create a strong team of personnel who are capable of realizing the set goals of the company.
  • Training programs should be conducted on scheduled basis to ensure that the personnel employed in the company are up to the latest standards.


Costco Company is destined for greatness. With the current availability of much skilled labor in the market for the company to hire its personnel from, the company is spoilt for choice. The only determinant factors would be the company’s labor needs at a specific time as well as the kind of labour that will be in supply then.

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