...Competition Among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Club vs. BJ’s Wholesale 11/1/2013 Provide an overview of the company and/or industry and add any pertinent information relevant to the case (5 points) The Warehouse club retail industry was first started back in 1976. It currently consists of 3 main players: Costco Wholesale, Sam's Club and BJ's Wholesale club. These no frill, big box retailers offer discounted merchandise including such items as food, clothing, household goods, cleaning supplies, office supplies books, DVD's and some furniture. Items sold are usually in larger packages than offered in other retail stores. Warehouse clubs attract consumers such as families, businesses, churches and other organizations. It is hard for other retailers such as supermarkets, department store,. office supply stores, along with others to compete with wholesale club pricing. Clubs are able to keep pricing low due to bulk purchasing along with no frill overhead and low labor costs. . 1. Do all three warehouse club rivals – Costco, Sam’s, and BJ’s Wholesale – have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy that the others? Does one rival have a somewhat weaker strategy than the other two? (15 points) All three warehouse club rivals have some similar strategies. All practice the low cost provider strategy Their strategies are to offer...
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...Competition Among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Club vs. BJ’s Wholesale Tami Bouldin-Golt March 1, 2013 Provide an overview of the company and/or industry and add any pertinent information relevant to the case (5 points) From eggs to tires to coffee, the everyday consumer can find whatever he or she needs in a warehouse club; at a much lower price from the common retailer the drawback: annual membership fee. The warehouse industry operates on the idea that by customers buying memberships to shop at their locations, the companies can afford to lower their prices beyond that of major retailers. The idea of having a membership to shop somewhere not only allows the company to lower prices but also creates a loyal customer base that tends to come back year after year. There are three major competitors in this industry, Costco Wholesale Corporation, Sam’s Club (a subsidiary of Wal-Mart), and BJs Wholesale club. Costco and Sam’s Club opened in 1983 to immediate success. By the end of 1984, Costco had nine stores and over 200,000 members and became the first company to reach over $1 billion in sales within the first six years. Sam’s Club had sales in excess of $12.3 billion within 10 years. Both companies rely on a low-cost strategy. B J’s is considerably smaller than Costco and Sam’s club but has still maintained success behind a best cost strategy. While BJs has fewer locations, their stores offer over 7,000...
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...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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...hpu | Case Study: Costco Wholesale vs. Sam's Club vs. BJ's Wholesale | Management 4001 | | Danielle Lewis | 2/3/2012 | | Costco Wholesale vs. Sam's Club vs. BJ's Wholesale The main strategic issue that is faced by Costco (and by Sam's Club to a lesser extent) is the fact that it has trouble competing with BJ's Wholesale on some key factors of customer service. Costco is a warehouse-style retailer, just like the other two companies. Typically, these companies offer lower prices, but consumers who shop there also need to buy their items in bulk (Thompson, 2011). They get fewer perks, such as fixtures and décor, but that saves them money in the long run. It is a very "no frills" shopping experience which suits many people who prefer to buy their items in bulk and not have to shop as often as they otherwise would (Barrett, 2003; Thompson, 2011). Mostly affluent and middle-class people shop at these kinds of stores, as well as many small business owners. People who have less money typically stay away from Costco and other, similar stores because there is a membership fee and buying in bulk can result in larger outlays of money at one time - something many people with lower incomes simply do not have. While Costco is doing well, its strategy of providing that no frills experience for buying bulk goods has been recently called into question. It has been called into question because Sam's Club and BJ's Wholesale are doing more now in order to provide customers...
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...Costco and Wal-Mart's Sam’s Club are competitors in the retail warehouse market. The retail warehouse industry is in an industry in which retailers offer goods to consumers in bulk quantities at cheaper prices. Back in 1992 the estimated size of the industry was $40, recently it has grown over 10.5 times to be around $420 billion (Halzack, Paragraph 8). Looking at this growth rate we believe this is an excellent market to be in and believe it will continue to see impressive growth in the future to come, especially with the current growth its exhibited. Within the warehouse retail space, the majority of market share is held be 3 firms which are Costco, Sam’s club and BJ’s Whole Sale Club being a much smaller player (Soni. " Sizing Up the Competition...
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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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...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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...Costco Wholesale Corporation 1. Describe Costco’s Business Model. Description must identify and describe model components. Costco’s business model was to generate high sales volumes and rapid inventory turnover by offering its members low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories. The components that stick out to me in this model are the low prices, brand names/select private label, and membership. A) Discuss how each component impacts profit generation. The principle business components that allow their business to generate revenues sufficient to cover costs are as follows: * Low Prices support rapid inventory turnover and high sales volumes. The higher sales volumes they generate then the better means they have when negotiating pricing with their vendors, and the potential to reach higher gross profit by the mass quantities they sell. Volume pricing, efficient distribution, and reduced handling of merchandise add to their overall effectiveness. * Brand names and select private-labeled products help to draw customers in because they know the brand names and understand what they are paying for. Discount pricing on top of this, even if it is still cheaper than the local grocer, will still make the shopper feel as if they are getting a deal. When a shopper gets a deal, they are often inclined to spend more and shop there again…both adding to Costco’s ability to generate sufficient...
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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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...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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...North American Warehouse Clubs: Costco Wholesale Club vs. BJ’s Wholesale Overview Costco and BJ’s are both wholesale stores. They offer a variety of products sold in case lots, furniture, food, household products, clothing, books, DVD’s, and many other bulk products. They limit their products to brand names and store product names. They offer bulk items at a lower cost than a typical grocery store. They are kept in warehouse stores which cost the companies less with cheaper shelving and store lighting fixtures. Low operating costs allows these wholesalers to charge much lower prices. These warehouses are very attractive for business owners, caterers and non profit organizations. They can get their products of greater quantity at a much lower cost. There are more than 1250n warehouses in Mexico, Canada and the U.S. 56% percent of them alone are in the United States. These warehouses have competed with Kohl’s, Target, Office Depot, Best Buy and Wal-Mart to name a few. The first warehouse was introduced by Sol Price in San Diego California in 1976. They lost money in their first year of operation but by 1979 had 2 stores. Before then they experimented with a retailer called Fed-Mart. Jim Sinegal who is the cofounder and CEO of Costco worked for Fed-Mart as a teenager. When Sinegal was 26 Sol Price made him the manager of the original store in San Diego. The first Costco store opened in 1983 the same year Sam’ Club opened. By 1984 there were 9 Costco stores with 200,000...
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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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...In fact, Costco is also the first wholesale membership warehouse stores around the world. Members need to pay an annual membership fee so that those members could purchase the goods below the market price from 5% to 30% in Costco. The membership fee is the highest one among the wholesale industry which claims $55 for annual. BJ’s and Sam’s Club are the other two major warehouse supermarkets in US whose membership price are $50 and $40 annually. However, Costco’s renewal rate of membership fee is still up to 90%. Actually, the total amount of annual membership fee helps Costco avoid a lot of waste cost in operations and management. Costco uses the membership fee rate and renew rate accurately measure the purchasing power. Also, Costco purchases the same good in a large quantity so that they could reward in a deep discount from manufactures. The lower cost also allows the Costco’s customers get a lower price comparing with other similar rivals. The members like to save a certain amount of deposit in Costco so that Costco could gather every individual’s same amount of cash in mutual purchasing funds to find and get the biggest discount from the good manufactures. Costco also manipulates the membership to retain the customers’ loyalty. Those people who deposit the no refundable membership fee would not come to Costco’s in a small times one year. The membership fee is $55 annually which is not a small amount. People who apply for the membership usually tend to shop in Costco in a frequent...
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...Appendix C: Organizational Analysis Costco Wholesale Corporation Introduction… The purpose of this Organizational Analysis is to discuss Costco’s current mission and values, provide a snapshot of their existing overall business model and the environment they are working in, and then discuss the key success factors required to succeed in their industry. Beyond that will be an examination of what resources (tangible, intangible, and human) and capabilities (functional and value chain) are needed to deliver on these key success factors, as well as analyze how Costco ‘stacks up’ to the competition in those areas. Finally there will be a discussion of what areas should be either improved or exploited moving forward to give Costco a more distinct competitive advantage (and therefore increased profits) in this industry. Mission, Values, and Strategy… Costco’s mission, quite simply, is to provide high quality merchandise at the lowest possible prices for its members, in an ethically responsible manner. Below is a copy of their mission statement directly off of the Costco website… The Mission Statement of Costco Wholesale: "Costco's mission is to continually provide our members with quality goods and services at the lowest possible prices. In order to achieve our mission we will conduct our business with the following Code of Ethics in mind: • Obey the law • Take care of our members • Take care of our employees • Respect our vendors If we do these four things...
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...Industry Analysis In 2013, the traditional supermarket industry is unattractive because of: a) Existence of powerful substitutes in the form of large discount retailers (Wal-Mart, Target), warehouse clubs (Costco, Sam’s Club, BJ’s, and pharmacy chains (CVS, Walgreen’s) that have increased emphasis on grocery sales. * Because increased traffic leads to increased sales of higher margin items in retail stores, there is growing attractiveness for retail stores to enter grocery industry * Retail leaders such as Wal-Mart and Target run highly efficient operations. Coupled with a large volume sale philosophy, both are able to take market share from traditional supermarkets through significant price cuts. As such traditional supermarket share has dropped in last year from 67% to 51% with the growth of retailers participating in grocery sales * Lack of differentiation across products and brands gives consumers a high degree of bargaining power because they incur little to no switching costs between rival competitors and brands (see below) and because of the growth of substitutes. Customers who want to do all their shopping both retail and grocery supplies either in small volume purchases or in bulk have many options to choose from (Wal-Mart vs Schnuck’s vs CVS vs Costco) b) Strong competitors across all segments of supermarkets, which can be broken down into traditional, premium, and discount stores, * The supermarket industry is traditionally a low profit...
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