...existing businesses last; by clearing possible liabilities better outcomes will be evident. Eventually, legacies become built and the company’s prominence exerts dominance and confidence. During environmental scanning of a company, there is a thorough assessment into a complete global analysis. This involves companies, markets, clients, industries, and businesses in the same market. For this study will consider the trends, technological events, successes, and expectations in business. Let us commence by a comparison of Costco’s values versus Sam’s Club values. Costco has developed a brand named Kirkland. The Kirkland brand has the Costco expectation to be equivalent or better than national brands. A continual product improvement is the exact objective for the maximum competing goal. Product quality and price comparison is continuously revisited by the internal Costco research team. Sam’s club is a division from the Wal-Mart Corporation. Although Sam’s and Costco have a close race,...
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...Overview Margarita Torres Costco member and shareholder Evaluating Costco’s financial performance Evaluation methods Common-size statements Sustainable growth model Benchmarking ratios Retail Industry $1.6 trillion in retail and wholesale trade (2001) 15% of GDP (1960) 16% of GDP (2001) Department stores Customer service premium Many SKUs Discount stores Low prices No frills Retail Industry Wholesale clubs Membership only Volume discounts Limited SKUs Online stores Convenience Low overhead Sears, Roebuck, & Company Founded 1893 First retail store opened in 1925 $41 billion in sales (2001) 2,185 stores Wal-Mart / SAM’S Club Founded 1962 First SAM’S Club opened in 1983 $218 billion in sales (2001) 4, 189 stores 528 SAM’S Clubs 39 million members (SAM’S Club) Concentrated in the South BJ’s Wholesale Founded 1984 $5 billion in sales (2001) 130 stores 6.7 million members Concentrated in the Northeast Costco Wholesale Corporation Founded in 1983 Merged with Price Club in 1993 $34 billion in sales (2001) 365 stores 17.1 million members Concentrated in the West Costco Wholesale Corporation Target markets Middle class customers Small businesses Mark up limited to 14% Kirkland Signature store brand Brand name quality at discount prices Efficient operations Common-size Statements Absolute amounts vs. relative ratios / percentages Trends Where are funds allocated? How efficient is the business? Benchmarking Comparisons between businesses Sustainable Growth Model Step 1: Profitability and...
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...Costco Wholesale Corporation | Table of Contents The Problem and Assumptions 2 The Problem 2 Assumptions 2 Qualitative Analysis 2 Quantitative Analysis 3 Industry Trends 3 Costco Strategy Expansion 3 Income Statement Industry/Competitor Comparison 3 Balance Sheet Competitor/Industry Comparison 5 Common-Size Analysis 6 Ratio Analysis 6 Statement of Cash Flow 9 Preferred Action Plan with Alternative Actions 11 The Problem and Assumptions The Problem Margarita Torres purchased shares in Costco Wholesale Corporation in 1997 and now it is 2002. She has decided to analyze her investment to see if Costco will continue to be profitable at a sustainable growth rate. The main question she needs to answer is how the company had been affected by growth. Had its operational efficiency changed? And how had it financed the growth and how its capital structure evolved? Assumptions For the year 2001 a recession occurred. This occurrence is considered when reviewing the financial numbers and statistics during this year. Qualitative Analysis The first step in analyzing Costco Wholesale Corporation is analyzing the relative qualitative data. Based on the data provided within the case the points below summarize how Costco is performing: * Industry: Wholesale clubs grew 12-15% in the 1990s and Costco is currently the largest wholesale club in the industry. * Strategy: Costco targets wealthier clientele of small business owners and middle...
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...Costco case study and strategic analysis Costco Wholesale Corporation (Costco), one among the few largest wholesaler giant differentiates itself applying unique strategies relating to production and operations, and marketing which make it stand out from the rest of the retailers who are also said to be competitive in the retailing and wholesaling business globally. Costco is one of the innovative wholesalers teamed by very dynamic management team and dedicated, motivated and satisfied workforce with the mission “to continually provide its members the best quality products at the lowest possible prices” (Costco Annual Report 2006). Some of the fundamental principle of the Costco is that they obey the law, they take care of their members, they take care of their employees, they respect their suppliers, and finally they reward their shareholders. Some of the reasons how Costco can serve those highest quality goods of national brands for the lowest possible prices is that they eliminate different cost associated with delivery expenditures, account receivable, inventory, sales people, and fancy buildings. And they successfully operate themselves in the competitive environment serving not only an individual customers but also a legal customers (a company), and small business customers. Costco believe that society and the community is one of the key factors of their success. Therefore, they are willing to give back to their community and the society in terms of quality goods in...
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...Costco Case Analysis Assignment # 1 Mark Frenkel MGMT 670 9046 02/21/11 Jim Sinegal initially took a job at Fed -Mart as a means to pay his bills while attending San Diego Community College never imaging that this decision would forever change the direction of his life. It was there that he met Sol Price, who ran the company and who mentored his further inclusion in the business. Sol had a vision that he acted on when he founded his Price Club with the goal of establishing a member warehouse retailing niche business. Having embarked on this path, he took Jim with him and they shared a vision for shaping how they would do business going forward. Initially, Price was content in becoming a leader in member warehouse retailing until he correctly recognized an opportunity to gain more sales volume and greater negotiating leverage with suppliers by granting membership to individuals which arguably created the market for deep-discount warehouse clubs. Sinegal excelled at understanding the driving elements in this type of marketing and became particularly adept at understanding what was working and what wasn’t at stores, which was something that Price was also very good at. Noticing these burgeoning skills, Price made him the manager of the original store. It was here that Sinegal learned the craft at the hands of his mentor, a task he did so with such skill that he decided to leave the proverbial nest and team up with Seattle-based...
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...merchandise that include a mix of across the country branded and illicit private-label products in an exceedingly wide selection of merchandise classes. This is an awfully appealing business model because it provides the power to control fruitfully at a lot of lower profit margin by securing marketer volume getting agreements, economical distribution, no-frill self-service warehouse facilities and supplemental membership fee revenue. Another magnet is because of the high sales volume and fast inventory turnover style of this business model, the accelerated money conversion cycle permissible Costco to gather the funds for inventory before marketer liabilities changing into due. This provided for marketer finance and also the ability to require advantage of early payment discounts that additional reduced operational prices. As a testament to the success of this business model, from 2008 through 2011, Costco was able to increase the amount of warehouses by 15.6%, revenues by 22.6%, and earnings by 14.0%. 2. What are the chief elements of Costco’s current strategy and is it effective? Costco’s...
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...Costco Inc. 2012: A Wholesale Membership Industry Analysis Using the Porter’s Five Forces Model Costco’s Company Background Costco is the third largest retailer in the U.S. as well as the seventh largest retailer in the world. It is leading the discount warehouse and wholesale club segment of the North American retailing industry. As of 2012, Costco had a total of 598 warehouses internationally. Costco’s fiscal 2011 total revenue was $88.9 billion and net income was $1.46 billion. Additionally Costco had $1.9 billion of membership fees revenue acquired from 25 million households and 6.4 million businesses making it the leader in the wholesale, membership industry. The annual sales for one of Costco’s competitors, Sam’s Club, averaged $146 million with a $78 million average per store. Costco’s business model aims to generate high sales volumes and rapid inventory turnover by offering fee-paying members attractively low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise category. Rapid inventory turnover, low operating costs through purchasing high volumes, efficient distribution, and reduced merchandise handling costs are the major factors that make Costco profitable with relatively lower gross margins than other wholesale competitors. Also, the membership fee required from customers is a major revenue source thataccounts for approximately 70 percent of its total revenue annually. Additionally, Costco...
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...Daniel Cho, Miko Xinyuan Shan Professor Macaulay MGMT 425 2/16/16 Costco Executive Summary This paper conducted an external analysis of Costco which is in the retail industry, more specifically, variety stores. The five forces of this industry include Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of Substitutes, and Intensity of Rivalry. After having conducted research, the intensity of each of the forces are as follows: Threat of New Entrants – moderate; Bargaining Power of Buyers – weak; Bargaining Power of Suppliers – weak; Threat of Substitutes – strong; and Intensity of Rivalry – weak. Furthermore, the greatest concern involves threats from online purchases, due to the convenience and ease of the transaction. Although, suppliers that have large economies of scale are working with Costco in securing preferential prices. Threat of New Entrants The first of Porter’s Five Forces is the threat of new entrants, which refers to the likelihood of new competitors entering the industry. The strength of this force depends on the levels of barriers to entry. When barriers to entry are high, the threat of new entrants are low, and vice versa. We determined the threat of new entrants to be moderate for the Variety Stores industry. The first two barriers to entry are large economies of scale and high capital requirements. When consumers shop at wholesale clubs, products are usually sold in bulk and are bought in larger quantities...
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...WHAT IS THE ETHICAL DILEMA FACING WAL-MART & COSTCO? Tamika Goodman Mr. Sherlock-Prince Ethical dilemma is defined as a complex situation that often involves an apparent mental conflict between moral imperatives, in which to obey one would result in transgressing another. Ethical dilemmas are aften cited in an attempt to refute an ethical syste, or moral code, as well as the worldview that encompasses or grows from it. Wal-Mart pushes it’s slogan “Always Low Prices”. Wal-Mart is the largest retail operation in history. . This company is the world's third largest public corporation, according to the Fortune Global 500 list in 2012. It is also the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family who own a 48% stake in Walmart. It is also one of the world's most valuable companies. Costco Wholesale Corporation is the seventh largest retailer in the world. As of July 2012[update], it was the fifth largest retailer in the United States, and the largest membership warehouse club chain in the United States. Both Companies are very succesful in selling every day essential needs to customers, and both companies are competitors against each other. The ethical dilemma facing both compaines is that each company have there own ethical principles, core beliefs and values on how the company is...
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...Costco Business Model And Elements Of Costcos Strategy, Management1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?2. What are the chief elements of Costco’s strategy? How good is the strategy?Posted by Alena | Posted Date: 8/7/2011 12:03:45 PM | 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?Business Model is used to exemplify the methods and ways which we used to generate planned revenue. The Costco’s business model is to generate high sales volume and rapid inventory turnover by offering low prices on limited selection of national branded and select private-label products in wide range of merchandise categories. Costco’s offers these products to their members who are of two types’ business members and gold star members.This business model is tempting because it gives a test to Costco’s management to continue to devise strategies and methods through which they can keep hold of existing members and catch the attention of new members. Otherwise they will suffer failure because there will be a risk that discontented members will not renew their membership. This business model takes company towards total quality management.2. What are the chief elements of Costco’s strategy? How good is the strategy?Strategy is the organization’s pre selected means or approach to gaining its goals or objectives, while keeping in view current and future external conditions. Costco’s strategy’s elements...
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...ASSIGNMENT QUESTIONS: Costco Wholesale Corp.: 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not? Costco business model is meant to maximize efficiency by depending on a high sales tied with quick inventory earnings. Costco’s concept is base on offering members the lowest price on a limited selection of national brands, the warehouse format maintain a low cost rate as they buy and sell items in bulk. Costco memberships keep customers loyal, because it accumulate most of its profit from membership fees, they’re able to sale their goods at a very low markup price. Overall Costco’s business model is very appealing, while being positioned to grow its business for the foreseeable future, it has many benefits. Example, efficiency inventory combine with quicker inventory turnover will reduce Costco cots of selling goods. High sales volumes combine with quick inventory allows Costco to sell and receive cash for goods before it has to pay for any of its merchandise, which allows Costco to finance a large percentage of its inventory through the payment terms provided by its vendor rather than having to maintain a sizable working capital to pay for its merchandise. It’s high end target product result in bringing in high-end consumer into its stores which is another reason it’s appealing. 2. What are the chief elements of Costco’s strategy? How good is the strategy...
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...STANFORD GRADUATE SCHOOL OF BUSINESS CASE: A-186A DATE: 06/19/03 CosTco WHOLESALE CORPORATION FINANCIAL STATEMENT ANALYSIS (A) INTRODUCTION Margarita Torres first purchased shares in Costco Wholesale Corporation in 1997 as part of her personal investment portfolio. Between 1997 and 2002, she added slightly to her holdings from time to time when the company sold stock for what she felt was a reasonable valuation, and up to that time she did not sell any of her shares. Having watched Costco grow from 265 warehouses to 365 worldwide, and from sales revenue of $21.8 billion to $34.1 billion, she wondered what factors led to such successful growth. She also wanted to determine whether those factors would hold consistent going forward. At this point, Costco was one of a special breed of retailers called wholesale clubs. Unlike other retailers, wholesale clubs required that customers purchase annual memberships in order to shop at their stores. Costco operated a chain of warehouses that sold food and general merchandise at large discounts to member customers. The company was able to maintain low margins by selling items in bulk, keeping operating expenses to a minimum, and turning inventory over rapidly. Costco’s closest competitors were SAM’S Club (a division of Wal-Mart) and BJ’s Wholesale, which both operated as wholesale clubs. Other competitors included general discounters (such as Wal-Mart), general retailers (such as Sears), grocery...
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...HBS Case Study 2: Costco Wholesale Corporation Financial Statement Analysis (A) Lee Hathaway MMS 185: Managerial Finance Professor Veraldi September 27, 2007 It is important for stockholders to continuously re-evaluate their investments. Although some investors do this more frequently and thoroughly than others, the majority of shareholders do so at least once each year. Therefore, Torres’ desire to update her analysis in order to determine whether Costco was still operating efficiently makes perfect sense. After thorough examination, my analysis proves that Costco remains one of the industry’s leading competitors and there seems to be no reason for Torres to sell her shares as long as she wishes to retain holdings of a retail wholesale club in her portfolio. The common-size financial statements evaluating the period 1997-2001 (exhibit 9) reveal valuable information regarding Costco. Torres noticed that there were two revenue lines: net sale of goods and membership fees. She decided to use net sales of goods as the point of comparison and express other line items, including membership fees, as a percentage of net sales in order to allow for a clearer reflection of gross and operating margins. This format enabled her to analyze the profit and asset structures of Costco over time. To begin, Margarita Torres’ common-size financial statements for Costco demonstrate a rise in membership fees and other sources of revenue from 1.82% in 1997 to 1.93% in 2001...
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...globalization, and a benchmarking analysis of Wal-mart in comparison with comparable organizations in their industry segments using United States companies. Competitors in the supercenter market are Target and Meijer, whereas Costco is a key competitor in the member warehouse-style market. Only Costco (Costco Annual Report, 2011) is currently competing in the international marketplace. Financial Health Wal-Mart Stores Incorporated (WMT), Target Corporation (TGT), and Costco Wholesale Corporation (COST) are public held companies with stock traded on the New York Stock Exchange (NYSE) and required to file an Annual Report on forms 10-K annually with the Security and Exchange Commission (SEC) (Stock Quotes, 2012). Meijer’s is a family-owned private company and not subject to SEC filings of their performance and is excluded from analysis because their financial data is not available (At 75, Meijer family still controls retailers destiny, 2009). Income Statement The latest income statements submitted by Wal-Mart, Target, and Costco to the Security and Exchange commission all reported millions in profit (Stock Quotes, 2012). Wal-Mart’s consolidated net income for its fiscal year ending January 31, 2012 is $15,699 million (Walmart Annual Report, 2012), which equates to a $4.54 net per share income, and resulted in $1.46 paid in dividends for each common share (Walmart Annual Report, 2012) ). By comparison, Costco latest annual report for fiscal year ending August 28,...
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...federal, state or local laws. The organization will try to meet minimum law requirements during the negotiations in order to maintain competitive advantage. In general, these negotiations will be generalized for the international union across the nation. This means, depending on he state where each facility exists in, it might violate some state and local laws. References Berman, B. (2011). Competing in Tough Times. Business Lessons from L.L. Bean, Trader Joe’s, Costco, and Other World-Class Retailers.Upper Saddle River, NJ:Pearson Education Inc. Cascio, W. F. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy Of Management Perspectives, 20(3), 26-37. doi:10.5465/AMP.2006.21903478...
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