...Case Study Analysis 1: Costco Wholesale Corp: Mission, Business Model and Strategy MGMT 670: Strategic Management Capstone June 26, 2011 Business Case Study: Costco Wholesale Corporation Introduction As a student in MGMT 670: Strategic Management, the capstone course for the Management track at the University of Maryland University College, I was asked to prepare a case study analysis of Costco Wholesale Corporation. Costco is one of the world’s leading wholesale retailers with annual sales of $76.3 Billion for fiscal year (FY) 2010, which is an increase of 9% from the previous year ($69.9 billion). In addition, its earnings per share increased to $2.92, an annual increase of 18% from the previous year. (Costco Financial Report, 2011) This increase is an all time high for the company thereby solidifying its place as a leader in the wholesale industry. Costco and its Business Strategy From inception, Costco’s business strategy has been to offer limited products (4000) at lower prices coupled with great values while keeping overhead costs low. In its main product line Costco has about 3,000 products that are present in the stores at all times and 1000 products that are ever-changing. These 1000 lines allow Costco buyers/merchandisers to hunt for items that will keep customers coming back to see what is new or fresh in the stores. These items help Costco create the “treasure hunt” environment that will keep customers coming back to the store more frequently. The motivation...
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...CASE 17 COSTCO CASE STUDY Case study questions 1. What generic business level strategy (Chapt 5) is Costco pursuing. Explain your choice. Companies that target one or a few segments and try to be the low cost player in that segment are perusing a focus-low cost strategy. Such companies tend to produce a more basic offering that is relatively inexpensive to produce and deliver. This helps to drive down their cost structures. Costco sells a limited range of merchandise in large warehouse type stores. A Costco store has about 3,750 SKU’s compared to the average 124K SKU’s at an average Walmart supercenter. Costco offers consumers the ability to make bulk purchases of basic goods like dog food and breakfast cereal at lower prices than found elsewhere. As of 2011, Costco maintains the number 1 spot in industry inventory turnover ratio, and number 3 in the retail sector. Thus, we can conclude that Costco definitely does a good job tailoring its products to the needs of the segment and, in doing so, is able to successfully undercut the cost structure Walmart achieves with their colossal economies of scale. 2. Describe four functional-level strategies that Costco has implemented to support their business level strategy. Label the function (marketing, production, R&D, etc - see Chapt 4) under which the strategy falls. Human Resources Strategy - Costco pays their employees substantially more than what other competitors in industry as well as the sector pay. Along those same...
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...Costco Companies Inc. – Case Analysis * Karthik Sundar (668943916) EXECUTIVE SUMMARY Costco is a membership only club warehouse giant that operates globally. Most of its business is concentrated in the United States with its presence in a majority of the states. It is currently having good business figures of 115 Billion dollars in revenue and a net income of 15.3 Billion dollars. The following is a case study of the hurdles faced by the management at Costco during the period of 1998 when they had come up with a new venture of offering services to its customers. Costco’s sales driver is the fact that it sell a bulk of its products at very low margin to its customers. It is able to do so as it has a large inventory at each warehouse and operational costs aren’t very high. Despite having a large inventory, it has a high number of inventory turns at each of its inventories. Such operational efficiency helps them offer products at great prices to its customers. This value offered attracts a lot of small business and general public. Costco’s customers are a good mix of such business and general customers from the public. It operates on an exclusive membership with a member enrollment fee of 40$ during the period of this case (55$ currently). Major revenue generators are food and sundries amounting to about 60% of the sales at Costco. It has a good business model of operating at good efficiency, competitive pricing, commitment to the quality and great employee focus. A combination...
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... Date of Submission: May 3, 2015 Title of Assignment: Costco Case Study CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledge and disclosed in the paper. I have also cited any sources from which I used data, ideas of words, whether quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student Signature: Georgette McIntosh ******************************************* Instructor’s Grade on Assignment: Instructor’s Comments: EXECUTIVE SUMMARY he purpose of this report was to examine the implications on employees motivations used at Costco Wholesale Corporation. Research for this report included a review of he purpose of this report was to examine the implications on employees motivations A. Problem Statement: State the main problem facing the firm (or industry) in one, succinct sentence. B. Analysis: Summarize the main findings of your analysis. You may use bullet points, bold, italics – any means to convey and highlight the key factors you have determined based on your analysis. C. Alternatives: State briefly (one sentence or a bullet point each) 2 or 3 alternative courses of action that could be implemented D. Recommendation: Choose one course of action and support your choice. E. Implementation: Briefly (2 or 3 sentences) present how the plan would be implemented. This...
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...Costco Case Study 1. List the five (5) most significant strengths and weaknesses of Costco and the primary or Support activities in which these strengths and weaknesses are found. In 1976, the company Costco Wholesale opened. Costco is a membership warehouse club. Costco focuses on bringing members good, low prices and quality merchandise. The way Costco run’s there business creates many strengths for the company, but also weaknesses. After looking at the Costco’s business model and the way that they do their business it is easy to see that they have many strengths throughout the company. These strengths include: Low pricing, Treatment of Employees, Diversity, and Membership. In terms of low pricing, Costco provides consumers with quality goods and services at the lowest price, giving customers the best value for their money. The reason Costco is able to do this is because they have private-labeled items that come in 20% lower than comparable brand named items. Costco focuses on keeping operating costs minimal, which results in the way they survive even with selling to customers at their low prices. The next strength is Treatment of Employees. Costco pays a higher minimum wage to their employees. The employees also are benefited from Costco paying around 90% of employee benefits, including: Medical, Dental, and Disability. The reason Costco does this is because they believe if they treat their employees well, that employees will work harder and be loyal to the company...
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...management workforce has a reputation for being the most productive and loyal in all of retail. A winning retail strategy, flexible ... Which of the three management-skill categories do you think Costco CEO James Sinegal draws upon most during his year-round visits to local Costco warehouses? Explain. 2. What aspects of Costco's ... Management - Google Books Result https://books.google.com/books?isbn=0324537700 Richard Daft - 2007 - Business & Economics workforce has a reputation for being the most productive and loyal in all of retail. A winning retail strategy, flexible ... Which of the three management-skill categories do you think Costco CEO James Sinegal draws upon most during his year-round visits to local Costco warehouses? Explain. 2. What aspects of Costco's ... Costco Wholesale Corporation - Essays - Mastan www.termpaperwarehouse.com › Business and Management * Sep 7, 2013 - Read this essay on Costco Wholesale Corporation . Come browse our large digital ... Which of the three management-skill categories do you think Costco CEO James Sinegal draws upon most during his year-round visits to local Costco warehouses? Explain. Team building; Managing warehouses like ... What Costco CEO James Sinegal Can Teach You About ... www.openforum.com/.../what-costco-ceo-james-sinegal-ca... * * OPEN Forum With a 12 percent turnover rate over three decades, every business...
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...Case Study 2 | CostCo WholeSale | Financial and Competitive Forces Analysis | Taylor Lazenby 2-23-2015 | Costco Wholesale Since 1983, Costco Wholesale has risen to the top as the most proficient, efficient, and effective wholesale distributors in the world. By using a strategy based around ultra-low prices, a limited selection of nationally branded private labeled products, a treasure hunt shopping environment and operating with low operating costs, as well as geographic expansion, Costco has been able to distinguish itself from its competitors as the leading wholesale provider in the world. While Costco is the leading wholesale provider in the world, it still has obstacles and barriers to navigate through as it continues to sustain its operations. To summarize some of these challenges and to determine which of the challenges is the strongest and why, the 5 competitive forces model will be used. The 5 competitive forces model holds that competitive pressures on companies within an industry come from 5 different sources. These include: 1. Competition from rival sellers 2. Competition from potential new entrants 3. Competition from producers of substitute products 4. Supplier bargaining power 5. Customer bargaining power Most often, the strongest of the 5 competitive forces is often the competitive pressures created by the rivalry among competing sellers. This remains true in this case with Costco Wholesale as well. The wholesale segment of...
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...Management Strategies Case Study #2 Competition among the North American Warehouse Clubs As of 2010 the nearly $215 billion discount warehouse and wholesale club segment within the North American retailing industry consisted of three major competitors (Thompson, C55-73). These competitors included Costco Wholesale, Sam’s Club which is also a Wal-Mart subsidiary, and BJ’s Wholesale Club. All three of these warehouse clubs also competed with a wide range of other types of retailers such as retailer discounters like Wal-Mart and Dollar General, general merchandise chains like Target and Kohl’s, specialty chains like Office Depot and Staples in office supplies and Best Buy in electronics and DVDs, supermarkets, gas stations, and even internet retailers (Thompson, C55-73). The competitive forces which influence these wholesale businesses are the suppliers, substitute products, buyer, new entrants, and rival firms. The strongest force out of these five competitive forces is rival firms. Costco, Sam’s Club, and BJ Wholesales are all competing for equivalent buyers within the North American wholesale club industry and market. BJ while on the smaller scale, does still have competition from both Costco and Sam’s Club, however they have not been as affected by their competition on the East Coast. Unlike BJ Wholesale Costco and Sam’s Club are both international. Even though Costco has a considerable market share they still have pretty stiff competition when it comes to Sam’s...
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...Question 1 What is Costco’s business model? Is the company’s business model appealing? Why or why not? Costco’s business model focuses on selling limited selection of products at low prices, often at very high volume and rapid inventory turnover. These goods are bulk-packaged and marketed primarily to large families and businesses. Costco does not carry multiple brands or varieties where the item is essentially the same. It provides members with a selection of only about 4000 items, this results in a high volume of sales from a single vendor, allowing further reductions in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own bags or use the merchandise shipping boxes from the company's outside vendors. Costco’s business model is appealing because rapid inventory turnover, high sales volume per warehouse, low prices, reduced handling of merchandise, are all elements that create value to a Costco’s members, and make the company successful. Question 2 What are the chief elements of Costco’s strategy? How good is the strategy? The chief elements of Costco’s strategy are: Low prices: Costco’s pricing strategy is to cap the margins on brand-name merchandise at 14 percent (compared to 20-50 percent margins at other discounters and many supermarkets. The margins on Costco’s private-label Kirkland Signature items are a maximum of 15 percent. Costco’s strategy...
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...Costco Case Study The chief elements of Costco’s strategy are low pricing, limited product selection, and a treasure hunt shopping environment. • Pricing: a key element of their pricing strategy is to cap its markup on brand-name merchandise at 14% and markups on their private label items can be no higher than 15%. This strategy keeps customers coming in to shop by enticing them with low prices. • Product Selection: this portion of the strategy only provides members with a selection of about 4000 items. Their product range covers a broad spectrum but the selection in each product category is limited based on fast-selling models, sizes, and colors. • Treasure-Hunt Merchandising: while the product line consists of 4000... Costco goes out of its way to surprise and excite its visitors with limited availability designer items. This solves two major challenges faced by warehouse stores – with products sold in such huge quantities, why visit regularly and why buy now. While Costco strives to beat the competition’s pricing, it also delivers exceptional value in its high-end offerings and customer service, giving consumers more for their money. This strategy works well for Costco, given its customers are the most affluent of all the warehouse clubs, with average incomes around $75,000. However, these customers are also value conscious, as evidenced by the members who opt for executive memberships, although it costs more per year, to take advantage of a 2% discount on most...
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...Introduction Costco Wholesale Corporation "Costco" operates in the discount warehouse and wholesale club industry segment. Costco has had a long history of successful management and recently has come under new leadership. The warehouse and wholesale club industry has three main competitors in the North American region however it is facing increasing pressures from low-cost retailers, nationally and Internationally. Although still profitable, the company experienced some erosion of their growth rates during the most recent fiscal year (2015). Costco's new management team will need to focus on the company's core competencies of low-cost leadership and providing superior customer value to maintain its market position within this market segment. Mission & Growth Strategy Costco's mission is "to provide the highest quality goods and services at the lowest possible prices while providing excellent customer service...." (Thompson, 2012). They strive to provide their members with un-matched value, a treasure hunt shopping experience and high quality service. Their philosophy entails taking care of their staff, the staff provides quality care to the members, and member retention will provide financial gains to the shareholders. Their growth strategy is achieved through opening new warehouses throughout the world and increasing club memberships. Club membership fees are a critical component of Costco's financial success. Membership fees accounted for approximately 70%...
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...CASE STUDY 1: COSTCO WHOLESALE IN 2008: Mission, Business Model and Strategy A retailing company with a mission to continually provide members with quality goods and services at the lowest price possible, Costco Companies, Inc.’s business model was to generate high sales volume and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories. It is very much appealing as small businesses are the definite target customers. Low price definitely attracts more customers, and is strategically advantageous to this kind of industry. Costco’s low price strategy is the highlight of the company’s strategy and is very powerful and keeping the business hot to the customers. Its merchandising strategy in limiting selection to only about 4000 items is also good keeping in mind that the mission is to provide low price items, thereby lowered operational cost in stocking of these items. Treasure hunting balances the “routine-ness” of Costco and adds a state of excitement to buyers so they would regularly check out what’s new. Its low profile marketing and advertisement is being kept at minimum cost which is strategically aligned with the mission. Website sales also increases sale as it is convenient to the customers. Jim Sinegal is the key contributor in most of the success being celebrated by Costco. For instance, it is dubbed as the fourth largest retailer in the United...
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...Project Feasibility GEANINA POPESCU CASE STUDY PREMIERE MOISSON BAKERY ELEMENTS OF THE SOLUTION Introduction Dear Madams, Sirs The attached report contains PM Consulting Inc’s study concerning the opportunities of implementation and distribution of the Premiere Moisson Bakery products. As required the options of a product market expansion were considered and they were analyzed for their present and future economic feasibility. Based on the information that you provided to us, we concluded that there is a market for your products and that the project will be financially feasible. We will recommend as a go to seek and negotiate partnership in the cities of Ottawa and Quebec however we recommend that the United States should be approached in an ulterior phase at a future date. SITUATION We, PM Consulting Inc were able to identify three specific phases of Ms Lilian Colpron business evolution. These are: 1. Liliane Colpron started her own business at the age of 30 years while having three children and being divorced. She started by negotiating a partnership with a French baker and she opened a little bread shop. She learned how to make and bake bread as well as how to package and deliver bread. Liliane Colpron owned this little bakery for twelve years and then she sold it when she was making sales of $1,000,000 per year. 2. Once the frozen raw bread dough was starting to be the new “it” on the market, Liliane Colpron decided to exploit this new...
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...The Costco 1. In general Costco provides products at 20% or 40% less than the competitors. Simple facilities in the stores make customers to believe that they buy products economically. They have options to make comparison between different international brands and producers. Although customers buy things in large scales, they know that they pay less for each unit. On the other hand, there are some brands that are totally expensive but high quality, purchasers know they can find such brands in Costco and buy them cheaper. Besides they can use parking freely because it is important for this company to provide parking and shopping carts instead of luxurious food serving amenities. 2. Costco have two different key point for making money. First of all, it operates efficiently. It cuts out all of costs like its employees stayed at minimum and reduces overtime working. Or, because it buys products in large quantities, it would have bargaining power and the facilities that have for transferring things from suppliers, are used efficiently. Secondly, it has good relation with its customers. It really listen and monitor the customers’ complains and offerings and also searching for their needs and wants. 3. It seems that Costco always do things in trial and error. This method has been worked until now, but it is better to have marketing plan for all of them and have experimental surveys to protect from future losses. As a matter of fact, they have targeted customers with high...
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...Instructor ENVIRONMENTAL FACTORS Environmental Factors on Marketing Decisions of Costco Wholesale Corporation Environmental factors are made up of all the factors and activities that have a significant effect on managing a business. These factors have a strong influence on operating any business, particularly in marketing options (Pagell & Halperin, 2000). Environmental factors cause risks to the achievements of any business and to deal with these factors, a firm must improve its main skills and create good methods (Staff, 2009). There are different components that would have a great impact on these latest services provided by the firm. After acknowledging these components, the firm must create a strategy. In his book, David jobber explains that with the support of this observation, the business becomes more successful in applying the different methods (Jobber, 2001). One of the major organizations in the trade business is Costco Wholesale Corporation; this company was established by James Sinegal and Jeffrey Brotman (Costco Wholesale Corporation, 2009). On the start of the sales volume, the business is regarded to be among the world's major membership warehouses (Costco: About Company, 2009). This corporation has the rank of one of the 5 biggest businesses in the U.S. in retail industry. Issaquah (Washington) is where the H.Q. of the corporation is located in the U.S. (Costco Wholesale Corporation Reports January Sales Results and Comments on Earnings Outlook...
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