Why is Costco so Successful

Why is Costco so Successful

Costco established the warehouse club retail business model, which relies on bargaining power, a no-frills shopping atmosphere, supply-chain efficiencies, and customer-friendly typical markups on branded products. Now, Costco is transforming its no-fuss wholesale business into a global brand.

Membership Fees

Costco has become a significant shopping destination for consumers across all income levels, as well as small businesses. This is foremost because Costco derives approximately 75% of its operating profits from membership fees.

Costco derives nearly all of its profits from membership fees, allowing the firm to sell many of its products at little to no margin, and sometimes at a loss. These loss-leading capacities are reinforced by the firm’s deployment of gasoline to drive store traffic. When blended with membership renewal rates above 85%, these characteristics give Costco a defensible competitive advantage.

Succeeding Overseas

There is little room for more household penetration because Costco already has more than 70 million members; historical sales and earnings growth forecasts may not be justifiable.

In 1985, Costco opened its first warehouse outside the U.S. in Canada. Currently, Costco has 187 locations in Canada, Mexico, the U.K., Japan, Taiwan, Korea, and Australia. Overseas sales more than doubled from 2008 to 2013. While other traditional American retailers grapple to stay competitive in international markets, Costco’s no-fuss warehouse-shopping model is a new experience for international consumers. Remarkably, people in Asian markets are acclimatizing well to shopping in bulk—although it means fastening pallets of toilet paper and enormous teddy bears to the back of their motorbikes as they whizz away from the Costco parking lot.

A Good Living Wage for Employees

Costco has long been known for paying higher wages and offering more liberal benefits than its rivals have—and generating greater sales per square foot, too.

Unlike most retailers, Costco does not see raising employee salaries and growing profits as opposing objectives. While the average hourly wage for a full-time worker at Wal-Mart is $12.81, Costco pays its workers an average of nearly $21. Costco sees the return on this investment in its low employee turnover rates: Just 10% in 2013 and 7% for employees who have worked at least one year. High employee retention permits Costco to reduce considerably on training costs.

Superior Customer Experience

  • A guarantee of quality. Their model promises fundamentally “100% satisfaction” and they mean it. Their return policy stands out among the best in many retail categories and they are exceptionally relaxed about fulfilling it. Costco will take back an empty package of any food, if you are not satisfied, and give you your money back.
  • A extraordinary selection of products that is a bit more refined than most but at a pretty good price. A typical Costco store only carries about 5,000 items, and there is a bunch of those items that rotate regularly.
  • The “treasure hunt” model. The store does have a layout, but within that layout, everything is rotated frequently to keep you looking. This would never work at Walmart or Target —because you’d get frustrated. However, at Costco, it’s part of the fun to “treasure hunt” a new find. They have a very wide selection of very different merchandise types which offers an unique convenience level as a shopper.

CEO Jim Sinegal once said, “If that stuff doesn’t really turn you on, then you’re in the wrong business.” Costco caps margins at a sacrosanct 14% on branded goods, pushes buyers to find creative ways to lower prices and add value, and gets store managers to crank up their efficiency efforts. Under Sinegal’s leadership, Costco has gained a reputation for bargain prices and surprise designer goods.

C/C++ Implementation for Longest Common Substring Algorithm

C++ The longest common substring problem is to find the longest string that is a substring of two or more given strings.

You can build a generalized suffix tree for a set of strings with multiple strings using this implementation. A suffix tree contains all the suffixes of the given text as their keys and positions in the text as their values.

string longestCommonSubstring(const string& str1, const string& str2)
{

  if(str1.empty() || str2.empty())
  {
    return 0;
  }
 
  int *curr = new int [str2.size()];
  int *prev = new int [str2.size()];
  int *swap = NULL;
  int maxSubstr = 0;
   string longest;
 
  for(unsigned int i = 0; i < str1.size(); ++i)
  {
    for(unsigned int j = 0; j < str2.size(); ++j)
    {
      if(str1[i] != str2[j])
      {
        curr[j] = 0;
      }
      else
      {
        if(i == 0 || j == 0)
        {
          curr[j] = 1;
        }
        else
        {
          curr[j] = 1 + prev[j-1];
        }

          if(maxSubstr < curr[j])
        {
          maxSubstr = curr[j];
             longest.clear();             
        }

          if (maxSubstr == curr[j])
          {
            longest += str1.substr(i - maxSubstr + 1, i + 1);
          }
      }
    }
    swap=curr;
    curr=prev;
    prev=swap;
  }
  delete [] curr;
  delete [] prev;
  return longest.substr(0, maxSubstr);
}

United Club Shower: Chicago’s O’Hare Airport (ORD) Terminal 1, Concourse C

United Club Chicago's O'Hare Airport (ORD) Terminal 1, Concourse C

Chicago is a very large metropolitan area that supports a lot of international and domestic visitors. Chicago’s O’Hare Airport (ORD) is one of the few major airports in the world that is a primary hub for two carriers. The only other airport in the US where that is true is John F. Kennedy International Airport (JFK) in New York City.

Toiletries at United Club Shower

United Club Shower at Chicago's O'Hare Airport

United Club at Chicago's O'Hare Airport

Both United Airlines and American Airlines battle for passengers at the airport—both have noteworthy O&D traffic as well as being a primary connecting point for passengers from other parts of their network.

United Club Shower Area at Chicago's O'Hare Airport

United Club Shower Area at Terminal 1, Concourse C

Bath Towels United Club Shower Area

Koch Industries’ Market-Based Management

Koch Industries

Koch Industries employs a rigorous approach called the Market-Based Management philosophy to run the business. CEO Charles Koch has perfected his management playbook over the decades, and in 2007, published a book called “The Science of Success”, explaining how the system works at Koch.

MBM, as Koch employees call it, lies at the heart of how Koch operates every day. MBM is significant for the reason that it unites Koch’s employees, giving them a common language and a common goal. There is not a lot of art on the walls in Koch’s headquarters, but everywhere you turn, there is a copy of MBM’s 10 guiding principles hanging from the wall. When employees get a free cup of Starbucks coffee in the break room, the principles are printed on the disposable cup.

Five Dimensions of Koch Industries’ Market-Based Management

Companies owned by Koch Industries strive to bring the productive power of the free market into their operations by systematically applying Koch’s market based management philosophy through these five dimensions:

  1. Vision: Determining where and how the organization can create the greatest long-term value.
  2. Virtue and Talents: Helping ensure that people with the right values, skills and capabilities are hired, retained and developed.
  3. Knowledge Processes: Creating, acquiring, sharing and applying relevant knowledge, and measuring and tracking profitability. (Read, “Knowledge sharing in action,” from Discovery newsletter.)
  4. Decision Rights: Ensuring the right people are in the right roles with the right authority to make decisions and holding them accountable.
  5. Incentives: Rewarding people according to the value they create for the organization.

The Kochs Brothers consists of Charles Koch and David Koch. Two other brothers, William and Frederick, cashed out in 1983 and no longer have a stake in the company. The Koch brothers became heir to their father’s company in Kansas, and Koch Industries into the second-largest privately held company in the nation. The conglomerate makes a gamut of products including Dixie cups, chemicals, jet fuel, fertilizer, electronics, toilet paper and much more.

Kochs Brothers: Charles Koch and David Koch

Guiding Principles of Koch Industries’ Market-Based Management

'The Science of Success: How Market-Based Management Built the World's Largest Private Company' by Charles G. Koch (ISBN 0470139889) Market-Based Management has ten guiding principles that set the standards for evaluating policies, practices and conduct, establishing norms of behavior and building the shared values that guide individual actions. These guiding principles also serve as rules of just conduct along with shared values and beliefs. Koch’s focus and hard nosed thinking combined with his application of economics to management decision making, have enabled his firm to grow into a nimble, large company that keeps performing excellently.

  1. Integrity: Conduct all affairs with integrity, for which courage is the foundation.
  2. Compliance: Strive for 10,000% compliance with all laws and regulations, which requires 100% of employees fully complying 100% of the time. Stop, think and ask.
  3. Value Creation: Create long-term value by the economic means for customers, the company and society. Apply MBM to achieve superior results by making better decisions, pursuing safety and environmental excellence, eliminating waste, optimizing and innovating.
  4. Principled Entrepreneurship: Apply the judgment, responsibility, initiative, economic and critical thinking skills, and sense of urgency necessary to generate the greatest contribution, consistent with the company’s risk philosophy.
  5. Customer Focus: Understand and develop relationships with customers to profitably anticipate and satisfy their needs.
  6. Knowledge: Seek and use the best knowledge and proactively share your knowledge while embracing a challenge process. Develop measures that lead to profitable action.
  7. Change: Anticipate and embrace change. Envision what could be, challenge the status quo and drive creative destruction through experimental discovery.
  8. Humility: Exemplify humility and intellectual honesty. Constantly seek to understand and constructively deal with reality to create value and achieve personal improvement. Hold yourself and others accountable.
  9. Respect: Treat others with honesty, dignity, respect and sensitivity. Appreciate the value of diversity. Encourage and practice teamwork.
  10. Fulfillment: Find fulfillment and meaning in your work by fully developing your capabilities to produce results that create the greatest value.

C/C++ Implementation of Levenshtein Distance Algorithm for Approximate String Matching

C++ The Levenshtein is a measure of how costly it is to adapt a string into another one. If you assign a cost to adding a single character, switching one character for another, and removing a character then you can compute the cost between any two given strings.

Changing a character can be seen as removing a char and adding another one so when adding has cost 1 and removing has cost of one a modification has cost of 2.

The difference between two strings can also be measured in terms of the Levenshtein distance: the distance measure if you think the cost as the “distance” between two strings.

Text comparison is becoming an ever more relevant matter for many fast growing areas such as information retrieval, computational biology, online searching. Levenshtein distance can be used mostly to edit distance, explaining the problem and its relevance.

int levDistance(const std::string source, const std::string target)
{

  // Step 1

  const int n = source.length();
  const int m = target.length();
  if (n == 0) {
    return m;
  }
  if (m == 0) {
    return n;
  }

  // Good form to declare a TYPEDEF

  typedef std::vector< std::vector > Tmatrix; 

  Tmatrix matrix(n+1);

  // Size the vectors in the 2.nd dimension. Unfortunately C++ doesn't
  // allow for allocation on declaration of 2.nd dimension of vec of vec

  for (int i = 0; i <= n; i++) {
    matrix[i].resize(m+1);
  }

  // Step 2

  for (int i = 0; i <= n; i++) {
    matrix[i][0]=i;
  }

  for (int j = 0; j <= m; j++) {
    matrix[0][j]=j;
  }

  // Step 3

  for (int i = 1; i <= n; i++) {

    const char s_i = source[i-1];

    // Step 4

    for (int j = 1; j <= m; j++) {

      const char t_j = target[j-1];

      // Step 5

      int cost;
      if (s_i == t_j) {
        cost = 0;
      }
      else {
        cost = 1;
      }

      // Step 6

      const int above = matrix[i-1][j];
      const int left = matrix[i][j-1];
      const int diag = matrix[i-1][j-1];
      int cell = min( above + 1, min(left + 1, diag + cost));

      // Step 6A: Cover transposition, in addition to deletion,
      // insertion and substitution. This step is taken from:
      // Berghel, Hal ; Roach, David : "An Extension of Ukkonen's 
      // Enhanced Dynamic Programming ASM Algorithm"
      // (http://www.acm.org/~hlb/publications/asm/asm.html)

      if (i>2 && j>2) {
        int trans=matrix[i-2][j-2]+1;
        if (source[i-2]!=t_j) trans++;
        if (s_i!=target[j-2]) trans++;
        if (cell>trans) cell=trans;
      }

      matrix[i][j]=cell;
    }
  }

  // Step 7

  return matrix[n][m];
}

Visit the Jain Temples of Ranakpur, Rajasthan, India

Ranakpur's Jain Temple

Deep in the Aravali hills of the northwestern state of Rajasthan in India, between Udaipur and Jodhpur, stands the stunning fifth-century Jain temple of Ranakpur. Carved exclusively out of white marble and surrounded by green forest, the temple surveys its surroundings in each of the cardinal directions from its chaumukha, or “four faces”. Fortress-solid, great slabs of stone rise out of the ground to hold up the bulk of the temple’s extravagant exterior, a flamboyant edifice of cupolas, domes and turrets of soft grey marble.

In the interior, 1,444 intricately carved pillars hold up the roof, each one unique in its design. Soft light filters through the marble, changing its color from grey to gold, as the sun moves across the sky. Only the saffron and red fabrics of robes brighten up the surroundings as the monks and pilgrims pass between the pillars, through pools of light into shadow.

Temple to Adinath the first Tirthankara In the 15th century a Jain businessman named Dharma Shah had a vision that he should build a magnificent temple in honor of Adinath, the first Tirthankara (enlightened being) and founder of Jainism, also known as Rishabhadeva. He approached the local monarch, Rana Kumbha, to ask him for land on which to build. The king obliged him, and the temple was named “Ranakpur” in gratitude for his munificence.

The result is one of the most pleasant religious edifices in India. The temple is still in constant use and visitors are welcome, although, according to the Jain principle of ahimsa (non-violence to all things), they are asked not to bring any leather into the temple, including shoes. As you walk through Ranakpur, past delicate marble carvings and solemnly praying monks, the loving artisanship of so many individual souls is striking, and the atmosphere of devotion utterly absorbing.

The Four Filters of Warren Buffett and Charlie Munger

Charlie Munger and Warren Buffett, Berkshire Hathaway

Countless portfolio managers, hedge fund managers, investment analysts, mutual funds, institutional pools of capital and individual investors have grown up devouring everything that’s been said or written by or about Warren Buffett and Charlie Munger over the years.

In the 2007 letter to Berkshire Hathaway shareholders, Warren Buffett wrote, “Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.” Based on this sage advice, value investors must look for:

  • A business that we can understand. A business within your circle of competence.
  • A business with favorable long-term prospects. A business with a line of business that is not easy to duplicate. A business with excellent cash flow profile: excellent ability to generate and invest cash.
  • A business led and perated by honest and competent people.
  • A business available for sale at a very attractive price.

The Economic Impact of Aging Japan

The Economic Impact of Aging Japan

The saving rates in Japan will fall dramatically by 2024 and make Japan’s financial wealth decline. There are two direct reasons for this fall: one is that by 2024, more than a third of Japan’s population will be over the age of 65, which will lead the retired household to outnumber households in their prime saving years. Another reason is that the younger generation is saving far less than older generations have, and this truth will amplify the effects of a decline in the number of savers.

This trend will decrease the accumulation of wealth and erode Japanese living standards. What’s more, since Japan has played an important role in financing the massive US current-account deficit, as Japanese funding dries up, this damage may extend to other countries and bring negative impact for economic system of America. For example, if other rapidly industrializing countries could not step up to fill the gap in savings as Japan’s savings rate declines, the United States will probably be forced to trim its trade deficit and this could have enormous repercussion for the global economy.

There are only two ways to mitigate the coming demographic pressure in a meaningful way: increasing household savings and boosting the returns earned on them.

  • Increasing savings: Given the significant increase in average life spans during the past 50 years, rising the retirement age is a way to extent the period when households are most prone to save. In addition, encouraging younger Japanese households to save more is also a helpful step to increase household savings.
  • Raise the rates of return: The most effective change for Japan would be to raise the rates of return on its financial assets. To do so, Japan will have to raise productivity throughout the economy and increase the efficiency of the financial system in allocating capital.

On one hand, basic structural reform, such as elimination of market regulations that would increase competition and spark innovation, tax policies protecting inefficient companies, and ease zoning and land regulations that reduce large companies’ expanding and creating jobs to protect start-ups to do business, could increase the economic-wide productivity.

On the other hand, increasing the financial system’s efficiency ensures the savings are channeled to the most productive investments and improves legal protection for investors and creditors. The diversification of Japan’s household financial assets is also an important means of increasing the efficiency of capital allocation.

Drink your Tea the Turkish way in this beautifully ornate Gold- and Sapphire-Colored Turkish Tea Set

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

There’s nothing like a Turkish tea to set you up for the day.

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

It’s the right time to drink a cup of turkish tea at this cold weather to feel warm.

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Turkish Tea Set. Beautiful at home or work. We love this colorful set!

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Gold and Sapphire Colored Turkish Tea & Coffee Cups

Visiting the Boeing Renton 737 Plant

Visiting the Boeing Renton 737 Plant

Boeing Renton Plant from Logan Avenue and Park Street

Boeing does not offer any tours of its Renton, Washington factory where, most prominently, Next-Generation Boeing 737 airliners are built today, and the Boeing 737-MAX will be built in the near future.

Boeing has had the following operations at the Renton plant, which is conveniently adjacent to the Renton Municipal Airport.

  • The Renton factory built B-29 Superfortress, a four-engine propeller-driven heavy bomber.
  • After the second world war Boeing closed the Renton plant. In 1948, Boeing re-opened the Renton facilities to build the Boeing C-97 Stratofreighter for the United States Air Force.
  • Starting from the 1950s, the Boeing 367-80 and the Boeing 707 were built in Renton. The first production Boeing KC-135 Stratotanker first flew in August 1956 and the first production Boeing 707 rolled out of Renton in October 1957. Boeing produced 707s until April 1991.
  • Boeing also used the Boeing 707 final assembly building to manufacture the Boeing 727 three-engined aircraft between 1963 and 1982.
  • The Boeing 737 aircrafts built have their first flight out of the adjacent Renton Municipal Airport and then flown to Boeing Field for final preparation and delivery. Randy Tinseth, Vice President of Marketing at Boeing Commercial Airplanes offers great photo gallery flashback to celebrate the 737’s past, present and future.
  • The Renton plant refurbished the first four 747s ever built.
  • The Renton plant built Boeing 757, the revered twin-engine short-to-medium-range airliner.

Glimpse of Boeing Renton Plant from Cedar River Path

Visiting the Boeing Renton Plant: Cedar River Path & Logan Avenue

Google Maps for Boeing Renton 737 Plant: Cedar River

If you sincerely just want to glimpse at the plant itself, you can see it acceptably from Logan Avenue right outside of The Landing Mall. At the intersection of Logan Avenue and Park Street (map), if you cross the street there is a small grassy area right where Gate D-9 is.

Google Maps for Boeing Renton 737 Plant: Logan Avenue

There’s also a jogging / walking path along the Cedar River near the Renton Stadium where you can get pretty close to some parked 737s in various stages of manufacturing. The GPS coordinates are 47.49029,-122.211635.

Visiting Other Boeing Facilities in and around Seattle