...structure consists of a Monopoly, Oligopoly, Monopolistic Competition, and Perfect Competition structure. These structures affect how market equilibrium is recognized. Monopoly: A monopoly is a firm that has no opponents in its business. It decreases output to increase revenue and increase profits. An example of monopoly is the U.S. Postal Services. Oligopoly: An oligopoly is an business with only a small number of organizations that can decrease the amount produced and increase revenues in the same manner a monopoly does. An example of Oligopoly is AT&T and T-Mobile. Monopolistic competition is an industry that covers numerous competing firms, which has a similar but somewhat different product. An example of monopolistic competition is wholesale retailers. Perfect Competition: Perfect competition: Perfect competition occurs the minute several small firms compete against each other. An example of a perfect competition is agricultural farms. History of Costco The entire history of Costco began with Sol Price and his son, Robert, opening the first Price Club warehouse on July 12, 1976 on Morena Boulevard in San Diego, California, thus giving birth to a very new concept: a retail warehouse club. The Price family placed Price Club Warehouse #1 inside a series of old airplane hangars previously owned by Howard Hughes; that warehouse, now known as Costco Warehouse #401, are still in operation today. The current Costco is headquartered in Issaquah, Washington, United States...
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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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...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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...Costco Wholesale Corporation Costco Wholesale Corporation - Financial and Strategic Analysis Review Reference Code: GDRT28577FSA Publication Date: 10-Oct-2014 Company Snapshot Company Overview Key Information Costco Wholesale Corporation (Costco) is membership warehouses chain operator. The company's product portfolio includes sundries, hardlines, food, softlines, fresh food and ancillary. It offers two types of memberships, namely, business and gold star to its customers. Costco operates gasoline stations in the US and Canada. Costco offers its products online through websites including costco.com in the US and costco.ca in Canada. The company carries out the manufacture of products through Costco Wholesale Industries and operates about 663 warehouses. Geographically, the company operates in various countries including Taiwan, Korea, Mexico, Australia, the UK, Canada and Japan. Costco Wholesale Corporation, Key Information Web Address www.costco.com Financial year-end September Number of Employees 103,000 NASD COST Source : GlobalData Key Ratios Costco Wholesale Corporation, Key Ratios P/E 27.81 EV/EBITDA 18.25 Return on Equity (%) 18.82 SWOT Analysis Debt/Equity 0.48 Costco Wholesale Corporation, SWOT Analysis Strengths Weaknesses Operating profit margin (%) 2.90 Diverse Product Mix Dividend Yield 0.01 Dependence on the North American Market Value-Added Services Note: Above ratios...
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...Case 4 Competition among the north American warehouse clubs Competition is extremely high in the north American warehouse club industry. Every wholesale club wants sell top-quality merchandise at consistently lower prices than others to draw customers. They have low labor costs and don't spend much on ads and customer service. Competition of like terms is the strongest because all warehouse clubs sell similar products, but they try to compete by lowering the price of them. The threat of substitutes is extremely high because there are many substitutes with zero differentiation. Many products are commodity based. Rivalry among competitors is high with the main driver being low prices. With such large economies of scale and lack of distributors, warehouse clubs are able to offer direct discounts on items. With low prices being the driving force of the industry, each warehouse club must differentiate itself in some way to create an advantage over its competitors. Suppliers have large input in supply but lack the ability to enhance products. All three of these warehouse industries have similar strategies in a way in which all three try to sell top quality products for the lowest price possible and in big bulks. Costco and Sam’s club share common features in their distribution technique. Costco’s strategy is to sell mostly private label products at significantly lower costs than branded items. Sam’s club features lowest membership costs out the top three warehouse clubs in North...
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...required strategy when an organization wants to keep a competitive edge over the competition. There are numerous strategies to pick from in business; a significant strategy is keeping an eye on needed changes and financial trail of record keeping. Furthermore, it is necessary for organizations to keep an outlook on what external sources are doing. It is imperative when acquiring information that defines what other organizations are doing to be conducted in an ethical matter. Committing unethical deception will cause organizational anarchy. The reason long surviving companies like Smart and Final last; is by removing possible dangers so change for the better will be obvious. Ultimately, legacies are built, and the organization’s reputation utilizes power and self-reliance. A thorough global analysis assessment must be completed during an environmental scanning of any organization. This assessment includes businesses, clients, markets, and industries in the same industry. The objective of this paper is to examine the organization and conduct an environmental scan, which will define their competitive advantages and operating strategies. Environmental scanning is the monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation (Wheelen & Hunger, 2010, pg. 16). Let’s begin by a comparing Smart and Final’s values versus Costco values. Smart and Final has developed the First...
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...1.What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related chapter discussions on pp. 57-70) to do a complete Five-Forces analysis of competition in the North American wholesale club industry. In North American wholesale club industry, there are three principal competitors: Costco Wholesale, Sam’s Club and BJ’s Wholesale Club. Costco has approximately 56% share of warehouse club sales in North America; Sam’s Club has about 36% share and the rest 8% goes to BJ’s Club and other small warehouse clubs. A five forces analysis Rival Sellers: This is a strong competitive force in this case. All these three principal competitors: Costco Wholesale, Sam’s Club and BJ’s Wholesale Club, charge membership fees and offer low prices to attract members. The competition among them is vigorous: the products they offer are similar and they all have price advantage. Customers may easily switch membership from one to another. Potential New Entrants: This is a weak competitive force in this case. The three principal competitors: Costco Wholesale, Sam’s Club and BJ’s Wholesale Club have advantage because it is difficult for new companies to enter this industry. To be a new entrant, a company must have large amount of capital to acquire big enough building and land to satisfy large scale buying and selling; also it has to have an established distribution...
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...“Costco is a warehouse that offers members a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories. We concentrate on our mission to continually bring quality goods and services to our members at the lowest possible prices, while being responsible corporate citizens, taking care of our members and our employees, and respect in our vendors.” (Annual Report 2010)” Costco is the way to go when it comes to online and in-store shopping. The retail chain store ranked No. 1 in a recent Consumer Reports survey of 10 stores — besting JCPenney, Kmart, Kohl’s, Macy’s, Meijer, Sam’s Club, Sears, Target and Wal-Mart for its overall shopping experience, according to ConsumerReports.org. This is not an easy feat, considering they opened their doors in 1983, only selling to small businesses. There are numerous reasons why Costco has become a huge phenomenon amongst shoppers; these eight warehouse trends have been the reason for their success. While Costco has seen more profit through these trends, the warehouse industry is growing. Firstly, warehouses are striving to become more environmentally friendly and customers have gained notice of this. Since this is a national trend, it boasts their appearance as a customer friendly store. Secondly, Warehouses have expanded their stores to be more competitive in the marketplace. This is due to the growing number of these types of stores, and their desire to have a competitive edge...
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...2.1 Resources 2 Revenues of 71 Billion 3 550 Warehouses Today – Operates in: 40 States 9 Countries 4 $137 million average sales/warehouse 5 141,000 square feet/warehouse 6 143,000 employees worldwide 7 More than 1.4 million transactions/day Until 2009, Costco made 71billion revenues, and 550 warehouses covers 40 states in 9 countries. i would say that their competitive advantage is that they sell in bulk and often offer a better price per unit, so more people want to buy there. Also, i think that they make alot of their money on membership fees each year. another thing that Costco does is have free samples just about every day of the week. i think that this draws in customers and often times, gets consumers to buy more products (at least i know that this is the case for me) 13. Low pricing Wal-Mart as at the time of this writing is the most capitalized company in the world. Thanks to its low pricing strategy that became its strong source of competitive advantage. Low barrier to entry We live near a Costco and a Sam's, and the Costco is better in many many ways. And you can use a debit card there. And I personally won't support the WalMart empire, so that's another negative on Sam's for me (and we need not go there as that has been discussed to death in this forum as well). I just like the service better at Costco, layout, selection, etc. We seem to have a thread about this every other week...LOL. It really depends on what you buy, how...
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...Competition among the North American Warehouse Clubs: Costco Wholesale versus Sam's Club versus BJ's Wholesale The company competitive strategy are the specific moves that help the company please the customers, make offensive and defensive moves to beat the competition, and how it responds to changing market conditions. The five generic competitive strategies describe the five methods firms use to generate their strategic options. Firms use a low-cost provider strategy, a focused or market niche low cost strategy, a focused or market niche differentiation strategy, a best-cost provider strategy, or a strategic combination of all five. The North American warehouse clubs case show how Costco Wholesale, Sam’s Club, and BJ’s Wholesale are using strategy to try and win customers. The membership warehouse club began in 1976 and after a rocky start, has expanded to a global industry. Costco and Sam’s Club began in 1983 and BJ’s followed in 1984. These three companies have been in a competitive battle ever since. Costco Wholesale’s strategy is based on being the low-cost leader. Successful low-cost leaders are exceptional at finding ways to drive costs out of their business and still provide a product or service that buyers find acceptable (Thompson, Strickland, & Gamble, 2012). Costco uses a focused or market niche low-cost strategy to keep their prices down and earn repeat customers. Costco would only stock items that could be priced at a bargain...
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...COMPANY BACKGROUND Costco was founded by Jim Sinegal and Seattle entrepreneur Jeff Brotman. Operation of the first store of Costco began in 1983. There were nine Costco stores in five states by end of 1984. Costco became a public company for raising additional fund for business expansion in December 1985.Costco successful to reach one billion dollar in sales in less than six years which make the company the first ever United States (U.S) that reach that huge amount of sales. Costco merge with Price Club in year 1993 and came out with name of PriceCostco. Later, the name was changed to Costco Wholesale Corporation in August 1999.This warehouse club chain have 57 million members. It sales volumes only based on its members as it only open to their members and guests. Costco is the fourth largest retailer in the US and is the seventh largest in the world. Currently, Costco holding market share or in other words industry standing of US and Canada is about 55% . Whereas its close competitor Sam's Club market share is about 36% and 9% by BJ’s Wholesale Club. Costco offer tremendously lower price products with good quality and branded name. The price which are offer by Costco much lower compare to other conventional wholesale or retail that sell similar items and products. Profit generated by the company from its membership fees is about one billion with E- commerce sales contributing about five hundred and thirty four million. It was estimated that the renewal rate of the card...
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...took a risky move in the mid-70s that redefine the wholesaling industry. "They pioneered what is now termed “warehouse retailing.” In this business model, business owners operate warehouse stores located in the cities, where buildings and real estate property have lower prices" (www.thehistoryofcorporate.com). Consumer products are bought directly from the manufacturers and delivered straight to these warehouse stores, where they are sold by the bulk at cheaper prices than that in department stores. Price Club, is the company formed by Sol and Robert Price, they opened its first warehouse in San Diego in 1976. Although its first year of operations wasn’t profitable, the second year saw Price Club very lucrative profits. Soon after, Price Club was able to rapidly recover all the money they put in and open another warehouse store in Phoenix, Arizona in 1978. Eventually, Price Club became a leading name in the warehouse retailing industry. Jim Sinegal, an executive vice president for Price club, left from Price Club and went to create Costco Wholesale Corporation in 1983. Costco’s marketing and distribution copied from Price’s designs. This is where the kirkland signature brand came into play. By 1988, Costco became Price’s biggest competitor, with expansions reaching Canada and profits amounting to $2 billion. In 1993, when competition threatened both Price Club and Costco Wholesale, the two companies decided to be come partnerts. after Price’s earnings dropped to 40%. The new...
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...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 Club. The...
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...costco.com.au/About/AboutCostco.shtml 1. History In 1976 Price Club was founded in San Diego, California. A year before their business reached over $1 billion dollars in sales, Costco opened its first warehouse in Seattle, Washington. In 1986 Price Club had 22 locations and 3.2 million members while Costco had 17 locations and 1.3 million members. In 1993 these two companies formed under a merger, but it wasn’t until 1997 that they changed their name from PriceCostco to Costco Companies Inc. Costco’s mission is to offer quality, brand name products at a substantially lower rate than their competitors. Although Costco targets small-to-medium-sized businesses in large cities throughout the world to help reduce costs in purchasing for resale and for everyday business use, they also sell to customers for their personal needs. Businesses and large families are Costco’s greatest customers. "Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing and accounts receivable. We run a tight operation with extremely low overhead which enables us to pass on dramatic savings to our members." Soon after their merger, Costco introduced their Kirkland Signature brand name- products that boast to be of equal or better quality than leading brands. Some of the products under the Kirkland label include juice,...
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...Revenues | Weaknesses – Geographic dependence Older Customer BaseLimited Goods and Services | Opportunities -Attracting Young customers International Expansion Growing Demands of private labels | Threats –Competition Internet Retailer gaintsIncrease Labour and healthcare cost | Strength (Internal Forces) : * Pricing Authority - Costco’s philosophy is to provide its members with quality goods at the most competitive prices. It does not focus its efforts on maximizing prices in the short term, but instead focuses to maintain a perception among its members of “pricing authority”, or consistently providing the most competitive prices. These bring customers back to the warehouse, since they have the belief that they are in fact getting the best price on a wide array of products. The company also uses its gasoline business to draw members to warehouses. While this business is relatively lower margined than others, it again drives higher volumes of other higher-margined products. * Brand Loyalty : Costco’s relentless pursuit of offering high-quality products and offering great value has allowed it to attract a very loyal customer base. This has allowed the company to grow market share and increase its customer base over the years. * Higher Revenues - Costco has rapid inventory turnover combined with high sales volume, contributing to higher revenues. The high sales volume ensures high revenues in spite of low selling prices. Weaknesses (Internal Forces) – ...
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