E- Business System Report for Costco
Paul S. Medley
MGMT 3005/ISYS 3001 – Information Systems in Enterprises
Instructor: Dr Sherri Braxton-Lieber
November 23, 2012
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TABLE OF CONTENTS
E-Business System Report for Costco
Introduction…………………………………………………………………………………….. 3
Information Resources…………………………………………………………………………3
Role of Information Systems in Costco……………………………………………………... 4
Porter’s Five Forces Model…………………………………………………………………… 5
System Description……………………………………………………………………………...5
Hardware………………………………………………………………………………………… 6
Application Software……………………………………………………………………………. 6
Operating System…………………………………………………………………………………7
Network Infrastructure…………………………………………………………………………… 7
Pricing………………………………………………………………………………………………8
Electronic Business and Commerce…………………………………………………………….8
B2b or B2C………………………………………………………………………………………… 8
E-Commerce Plan…………………………………………………………………………………. 8
REFERENCES………………………………………………………………………………………9
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E- Business System Report for Costco
Introduction
Costco was founded by James Sinegal and Jeffrey H. Brotman, opening its first warehouse in
Seattle, Washington September 15, 1983. Today, Costco Wholesale Corporation is the seventh
largest retailer in the world, and as recent as July 2012 was listed as the fifth largest retailer in the
United States. Costco employs 160,292 full and part-time worldwide, with 107,200 of those
workers making up its U.S. workforce. There are 447 locations worldwide in the United States,
Puerto Rico, Canada, Mexico, Japan, Australia, United Kingdom, Korea, and Taiwan, There are
617 warehouses in their network with an average warehouse size of 143,000 square feet,
generating annual revenues (FY12 - Ended 9/02/12) of $99.1 billion dollars. Costco membership
is made up of 67.4 million cardholders in 36.9 million households. (Costco – Investor Relations
http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome&cm_re=1_en-_-Bottom_Nav-_Bottom_investor&lang=en-US). Retrieved 11/23/12
Information Resources
The Internet is the great equalizer in 21st century business. In order to compete every company
has to establish “game winning” e-commerce/e-business practices encompassing an effective
internet strategy for the internal and external collection and use of data, culminating in efficient
supply chain management, second to none customer experience, and effective marketing and
sales strategies and practices. Companies have to leverage intellectual capital in their unique
practices, processes and areas of expertise adding new value through digital commerce. (Haag &
Cummings, 2009, p. 194-207). Systems need to be adaptable to ever changing business
conditions and suited towards meeting the evolving needs of the customer and the situation.
Hence the use of new technologies in the area of social media in marketing for example. New and
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improved means of using these technologies are being discovered every day. Instrumental in all of
this is the placement of talented people in key positions, state of the art hardware that is capable of
evolving with the business, open sourced software than can be integrated with (works well with)
other programs/systems, and efficient data streams warehoused in secure network environments.
Another business objective here is to attract and retain the brightest people through effective
human resource processes and practices. Empowering them to use available tools in addressing
issues the company has determined to be at the center of its organizational being; thus creating
their unique businesses value proposition. (Haag & Cummings, 2009, p. 11-13) All of which is
directly linked to the company’s ability to provide the best possible experience and outcomes for
customers, company employees and business partners by integrating and automating critical
activities through its systems. These goals are accomplished by providing the most useful
information possible to customers, expanding their choices, developing new services driven by
meeting customer needs, anticipating market trends, streamlining and enhancing purchasing
processes, lowering the cost of doing business when opportunities present themselves, and
providing quality products/services at lower cost to customers. (Haag & Cummings, 2009, p. 3855).
.Role of Information Systems in Costco
I would think that Information Systems will be used to gain competitive advantage every way
possible. In order to accomplish this, systems would need to be scalable and a premium would
need to be placed on integration and consolidation. The system would need to have adequate
access and control hierarchy and the ability to create faster turnarounds on customer orders and
the flow of information to include system statistics and reports. Critical to the information would be
a robust and potent web environment. With these things in place, it is my belief that the system
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will be more efficient and be a competitive differentiator for the business. (Haag & Cummings,
2009, p. 64-80).
Porter’s Five Forces Model
Porter’s Five Forces model comes into play for Costco in the following ways:
Entry of Competitors – Existing barriers to entry is that the business is cash and resource
intensive and the market is well served by surviving competitors.
Threat of Substitutes – It’s not easy to substitute in this business or make costs cheaper.
Bargaining power of buyers – Buyers positions are strong and collective participation leads to
ability to purchase in large volumes.
Bargaining power of suppliers – Many potential sellers exist and there is no threat of monopoly.
Rivalry amongst the existing players – There is strong competition amongst key competitors,
with Costco being the most dominant player. (Michael E. Porter. "The Five Competitive Forces
that Shape Strategy" Harvard Business Review January 2008, p.86-104) and (Haag & Cummings,
2009, p. 17-22)
System Description
The system is made up of components that address the specific needs of the organization.
Internal and external general needs of a business can be met in industry standard type software
like Microsoft Office, which has word processing, spreadsheet, database, e-mail, presentation
software, and one note for organizing ideas, thoughts, and information. Software for other critical
area’s like web-based (e.g. Internet, Intranet, Extranet), client access areas, lead generation,
marketing, sales, supply chain management, customer relationship management, inventory and
service management integration, data mining, human resources, billing, payroll and such are also
included and used in rounding out a system capable of meeting the demands of 21st century
business.
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Hardware
I would be very interested in running thin client computers, as Costco currently does. Thin client
computers primarily depend on servers to carry out computational roles. The use of thin-clients
creates great opportunities to have computational services at reduced cost of ownership.
I would propose the use of Wyse X class mobile thin clients for mobile field staff that are power
users because it is highly customizable product, powerful and mobile, possessing a highly touted
dual core AMD G-series processor with graphics acceleration. It is extremely secure because
there is no hard disk, which leads to no risk involved as far as disk crashes, data loss, lost, stolen,
damaged, or destroyed. These systems are also advertised as being very flexible, capable of
running Windows Embedded Standard 2009, Windows Embedded Standard 7, or Wyse-enhance
SUSE Linux for easy integration with existing desktops and applications. (VMware Solution
Exchange, retrieved at https://solutionexchange.vmware.com/store/category_groups/desktopvirtualization on 11/23/12)
In an office environment I would propose the use of Wyse R class mobile thin clients because
they are expandable and support various displays and peripherals. Again, these clients are
secure as all data is secured on servers, and hardware involves a minimal amount of
management. Another thing I like about these clients is that they are eco friendly. They only draw
12-15 watts of power normally which reduces the release of carbon emissions. (Haag &
Cummings, 2009, p. 281-302)
Application Software
Application software can be categorized as personal productivity software, or vertical and
horizontal market software. Vertical market software is unique to a specific industry and horizontal
market software for use in a more diverse mix of industries. Horizontal software is used for tasks
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that apply to all businesses in general, like payroll, human resources, billing and inventory
management. Good example being Enterprise Resource Planning (ERP) systems. Integrated
ERP systems replace the myriad of separate software packages that might be used for several
functions like financials and human resources for example. In addition to types of software
discussed previously under System Description I would focus on and incorporate web based
applications wherever possible, in a manner that flows with and feels intuitive with our business
model. I think proper use of web based applications through web browsers in critical areas can
greatly reduce or eliminate platform compatibility and software installation issues. In particular I
like the Visibility solutions which can be viewed at www.visibility.com. (Haag & Cummings, 2009,
p. 197,198,199)
They can also be accessed from anywhere by staff and customers without intricate equipment and
setups. All you need is internet access and a web browser. Customized web base solutions built
around core principles and key areas in our business model, have the potential to take a business
to the “next level”. Web based applications portability and ease of use are critical factors to
be considered.
Operating System
Operating system would be dependent on final selection choices but would most likely be MS
Windows, UNIX, or Linux due to compatibility, security, and performance considerations.
Network Infrastructure
Network Infrastructure will be broken down as follows:
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Local Area Network (LAN) – Headquarters personnel
Wide Area Network (WAN) – International locations and main U.S. corporate
Virtual Private Network (VPN) – Executive level staff plus access to all others
Wireless – Appropriate personnel by position
Intranet – Internal, all staff
Internet – Appropriate by department and position
Extranet – Customers as well as partners, vendors and suppliers
(Haag & Cummings, 2009, p. 309-325)
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Pricing
Functionality will drive this decision not price. The question to be answered is will the chosen
system do what we need it to do compared to their competitors, and how much will the best
solution cost. Costs for company-wide computer systems can only be knowledge of organizational
chart. I would be looking for best service delivery, customer service, technical support, and
favorable service agreement terms and warrantee details and conditions.
Electronic Business and Commerce
B2B or B2C
Our electronic business model is primarily B2C as revenues are largely generated by consumer
memberships (36.9 million households). Business memberships are 6.5 million and an additional
3.6 million business add on’s. (Costco – Investor Relations http://phx.corporateir.net/phoenix.zhtml?c=83830&p=irol-irhome&cm_re=1_en-_-Bottom_Nav-_Bottom_investor&lang=en-US)
E-commerce Plan
Our electronic business model will be driven by customized, scalable, and manageable processes
capable of handling our company’s growth. With properly chosen systems we won’t overwhelm
staff with unmanageable amounts of data but rather useful streamlined information and reports that
drive effective decision making. Our system will allow us to tailor responses to our customers
needs as well as adapt to changing market conditions. Analysis of system wide statistics will be
critical to driving future growth. (Haag & Cummings, 2009, p. 128-156).
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REFERENCES
Haag, S., & Cummings, M. (2009). Information systems essentials (3rd ed.). New York
McGraw-Hill/Irwin.
Michael E. Porter. "The Five Competitive Forces that Shape Strategy" Harvard Business Review
January 2008, p.86-104.
Emerging Technology News, Technology Trends, retrieved at http://www.emerging-technologiesnews.info/index.php/technology-trends/server-host-market/ 0n 11/23/12
Economy Watch, E Business Strategy – e commerce business strategies June 30, 2010 retrieved
at http://www.economywatch.com/business/e-business-strategy.html on 11/23/12
Journal of International Technology and Information Management, Gupta Mahesh, The enabling
role of e-business technologies in strategic operations management April 1, 2010, retrieved at
http://www.highbeam.com/doc/1G1-252944713.html?key=0142160D517E1A116B1A0E0618076D4B36254D35463B78700E730E0B60641A617F1371193F
Costco – Investor Relations http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irolirhome&cm_re=1_en-_-Bottom_Nav-_-Bottom_investor&lang=en-US
TheManager.org, Beyond Porter- A Critique of Porter, Dagmar Recklies retrieved at
http://www.themanager.org/Strategy/BeyondPorter.htm on 11/23/12
VMware Solution Exchange, retrieved at
https://solutionexchange.vmware.com/store/category_groups/desktop-virtualization on 11/23/12