Costco Organizational Structure

  • Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
  • Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
  • Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.

Introduction

Costco is an American multinational company that operates a chain of membership-only bulk retail stores. The company was founded by James Sinegal and Jeffrey Brotman to take advantage of the emerging warehouse club industry, with the first Costco store opening in Seattle, Washington in 1983.

As of March 2022, Costco operates 829 stores around the world with a presence in countries such as Australia, Canada, Mexico, Japan, South Korea, the United Kingdom, and Taiwan. So far, the company has a limited presence in Europe.

So how is the company structured? 

Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.

Functional groups

Functional groups, as the name suggests, group the important functions that are essential to maintaining business operations. Each group is led by an Executive or Senior Vice President who reports to current CEO W. Craig Jelinek. 

Group examples include:

  • Diversity.
  • Information Systems.
  • Ancillary Businesses, Manufacturing and Business Centers.
  • Information Systems.
  • Ecommerce. 
  • Real Estate.
  • Merchandising. 
  • Administration. 
  • Finance.
  • Accounting. 
  • Human Resources.
  • Legal & Secretary.

Geographic divisions

Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence.

Geographic divisions in the United States are more numerous since this is the nation where Costco derives most of its revenue. Divisions include:

  • Northeastern.
  • Southeastern.
  • Midwestern.
  • South-Central. 
  • Northwestern, and
  • Southwestern. 

 For international markets, these are Costco’s divisions:

  • Eastern Canada.
  • Western Canada.
  • United Kingdom.
  • Australian.
  • Japan.
  • Taiwan.
  • Mexico, and
  • Korea.

It is important to reiterate that geographic divisions are a secondary characteristic of Costco’s organizational structure, with each functional group able to be applied to any division. For example, the Merchandising group can influence any division with a new promotional strategy.

Decentralization

Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. Indeed, the company has looked for ways to reduce bureaucracy and encourage employees at the store level to generate innovative ideas to increase motivation and buy-in.

In addition to increasing staff morale, decentralization means each Costco store can better respond and adapt to local market conditions. Instead of having to run important decisions up the chain, lower-level managers can make decisions quickly and in confidence that they will not be reprimanded for using initiative. 

Read Next: Costco Business Model, Costco SWOT Analysis, Who Owns Costco?

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