Name: Marc Mataix i Sanjuan

SID: 40061313

Organisational Behaviour: Organisational Commitment

Case Study: Costco
3.1 How exactly does Costcos low turnover rate help it in its battle against Wal-Mart? Will any of those
factors also help against Amazon?
Costco business model is based on consumer loyalty. They operate as a membership club so they competitive
advantage relies on consumers renewing their membership. Because of that, having a good consumer service is
even more crucial that for any other company. A low turnover rate increases overall organisational commitment.
First, there is an increase on the effective commitment. You get to know your co-workers better, maybe even do
some friends because the work force is more stable. Hence, you want to perform better to increase the wellbeing
of this stable social group that is formed. Then, there is an increase in the continuance commitment also. You
realise that the alternative would probably be in a less friendly environment where promotion is harder. Finally,
there is also a normative commitment increase because you feel that the comp any has invested a lot on you and
you should continue to improve your performance.
The result of this increase in the organisational commitment due to a low turnover is an extremely good
costumer service that increases loyalty among clients and yields competitive advantage over their main rival
Wall-mart. Even though, Wall-Mart may have absolute cost advantage due to its economy of scale, their service
is below average and most consumers prefer to pay the membership that commits them to do their groceries in
Costco for one year and even renewing their membership along years.
On the other hand, a low turnover rate does not guarantee that withdrawal behaviour would not appear.
As for Amazon, low turnover is less effective when competing with them. Amazon does not rely on physical
interaction and hence, good consumer service is less effective. Having said that, a Costco main product is
grocery. Hence, people go to the shops often. Because of that, Costco can try to sell other goods taking into
account the number of times the people go to their store and thus, compete against amazon. Then, up to some
extend low turnover also helps Costco compete against Amazon,
3.2 What would be a perfect turnover rate for Costco? Describe the consequences of having a too low
turnover.
There is neither right turnover rate nor a reference boundary. It depends on the business model of a particular
company.
Having a too turnover rate is also a problem. Then, you may not react as quickly and appropriate as desired
because there is no outside information. People hired from the outside can give a different insight on what the
problems of a company may be and different ways to solve them.
Another problem of a too low turnover may cause an employee to reduce is performance because it is not
threatened by the possibility of being hired,
Overall, there is no right or wrong answer as for a number.
3.3 If you were in charge of human recourses at Costco , would you retain the philosophy of sending rankand-file employees to school rather than hiring business school graduates? Why or Why not?
As mention before, there should be a balance between outsider and insiders. Because of that, I will keep the
policy of sending insiders to school but also I will begin to introduce outsiders. The market is in constant
movement and in order to compete successfully, there has to be an heterogeneous direction that is able to
analyse the situation from different angles and reach a better conclusion.