...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 and was founded as Price Club on...
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...Costco Wholesale Corporation is the largest membership warehouse club chain in the world. The company is headquartered in Issaquah, Washington, United States. Costco's first location, opened in 1976 under the "Price Club" name and it was housed in a Quonset shed in San Diego. The company’s one of the kind model serving mostly regions with a large number of small business owners and higher income professionals with a demand for high end goods proved to be the winning formula. Accomplishment encouraged James Sinegal and Jeffrey Brotman to open the first Costco warehouse location in Seattle which is still the company’s flagship location. The new project proved very successful; Costco became the first company ever to grow from zero to $3 billion in sales in less than six years. In 1993, Costco and Price Club merged, forming "PriceCostco." The combined company had 206 locations generating $16 billion in annual sales and created the company's current structure. Costco's web site was first introduced in 1995, and it started conducting e-commerce in 1998 at Costco.com. In 1997, PriceCostco changed its name back to Costco, under which the company currently operates. Costco has also changed the site of its corporate headquarters from Kirkland, Washington, to Issaquah. As of December 18, 2009, Costco has 566 locations: 413 in forty U.S states and Puertorico, 77 in Canada, 32 in Mexico (joint venture with Comercial Mexicana), 21 in United Kingdom, 9 in Japan, 7 in South Korea, 6 in Taiwan...
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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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...http://www.costco.com.au/About/History.shtml http://www.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...
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...SWOT ANALYSIS Group 4: Wholesale Clubs Due Date: April 13th Participants: Chelsea Jensen (Sam’s Club) Caitlin Kavanaugh (BJ’s) Julie Lehrman (Costco, formatted and submitted the document) A SWOT analysis is an analyzation on a situation which is broken up into 4 parts: Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses of a situation are internal factors that can include the development of a company or program, pricing, distribution, brand awareness, promotion market sharing, and management experience. Opportunities and threats of a situation are external factors that can include market trends, competitive activity, regulatory issues, economic pressure, and social issues. By evaluating a situation and categorizing those evaluations into the SWOT chart, you can more clearly see the past, present, and future of a situation/company. Identifying trends, analyzing the organizations competitors, accessing the organization itself, and researching the present and prospective customers are some points to look out for. As a result of a SWOT analysis, you can more clearly see how a company can: build on strengths, correct a weakness, exploit an opportunity, and avoid a threat. On the following page there is a chart that organizes a SWOT analysis on 3 different wholesale clubs: Costco, BJ’s, and Sam’s Club. Sources of information can be found on the page 3. S W ...
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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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...Do all three warehouse club rivals-Costco, Sam’s and BJ’s wholesale – have highly similar strategies? No; What differences intheir strategies are apparent? Costco is providing items in bulk and at low prices; consumers gravitate toward discounting hoping to get the most out of their money. Sam’s is decreasing product costs by buying from low cost labor countries like China and Mexico. BJ’s is focusing on retail shoppers offering more grocery items and smaller quantities of packaged goods. Does one rival have a better strategy than the others? I think Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution. Cross docking allows the club has the ability to minimize inventory, improve product quality and increase responsiveness to any changes in the market conditions. Does one rival have a somewhat weaker strategy than the other two? Yes; BJ’s because they’re not as popular and they’re concentrated in the Eastern United States, which allows the company tostreamline distribution and marketing. They’re also not benefiting from the economies of scales, because the margins are very thinand making low costs/high volumes are essential to profitability. 3. Which of the three warehouse club rivals has the strongest financial performer in recent years? See attached. Sam’s has a favorable Operating Profit Margin and CAGR operating income; Costco has a favorable Asset Turnover and CAGR Total Assets and BJ’s has favorable CAGR...
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...Jennifer Wepking-Doeden BADM 482 Case 1 – Costco 7/14/14 Costco Case Analysis INTRODUCTION Costco’s mission statement reads: “The company will continue to pursue its mission of bringing the highest quality goods and services to market at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethics that includes taking care of our employees and members, respecting our suppliers, rewarding our shareholders, and seeking to be responsible corporate citizens and environmental stewards in our operations around the world.” (CITE) After evaluating Costco’s this mission, I believe their business model and strategy is extremely appealing to all parties involved. To a customer having the highest quality goods that come with low price tags, while providing excellent customer service is what they look for in this competitive market. If a customer purchased a poor quality good or experienced horrible customer service while at Costco, they most likely won’t return. Another appealing aspect Costco gives to customer is that the CEO will answer phone calls about the complaints. This will make the customer feel like something will be done about their complaint. Employees should admire the involvement the CEO Jim Sinegal presents and how the company’s business model appeals to them. The strict code of ethics they company projects is a major appealing aspect. Projecting correct ethics will help the company again worthy employees...
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...The competition in the American Warehouse Club Industry is based on factors such as price, merchandise quality and selection, location, and member service. They also had competition from retail 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, gasoline stations, and Internet retailers. The strongest competitive industry force is competition between like firms. This is because all three of the wholesale clubs are so similar. They all had low prices, warehouses ranging from 70,000 to 130,000 sq ft (some up to 160,000), and very low operating costs, sell products in bulk packaging and offer membership. They are all so alike that it pretty came down to which ever store a customer went to first they would stick with. All three wholesale clubs have similar strategies. They sold high-quality brand-name merchandise at prices that were significantly lower than those at supermarkets, discount retail chains, department stores, drugstores, and specialty retail stores like Best Buy. But BJ’s expanded their strategy a little more. It focused on its Inner Circle members through merchandising strategies that emphasized a customer-friendly shopping experience. Club locations were clustered in order to benefit from greater name recognition and maximize the efficiencies of management support, distribution, and marketing...
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...American Warehouse Clubs Date: 7-08-2012 | 1. Competition like in the North American wholesale club industry: - In North America discount warehouse and whole club segment has $125 billion market shares captured by Costco, Sam’s and BJ’s. There is high competition in the whole club sector, because every firm wants to enter a more profitable market by offering low prices with top quality products to grab customer attention. To attain this they have low operating cost and low labor cost to operate their facilities. They dictate the suppliers for price, deliveries and payment terms. As it indicates the suppliers have to wait for 30 to 60 days for their payments after the delivery is done. Other than general customers these clubs are attracted small business owners, churches and non-profit organizations. To increase the profit margins they introduced annual membership fee collected from customers to purchase products in whole sale clubs. Among the three whole sale clubs Costco and Sam’s club are in various states and have also established themselves internationally. But BJ‘s has limited their store to eastern seaboard of the US only and its market share is not affected by other two clubs at their positions. BJ’s accepts coupons which add value to its customers. This is an advantage to BJ’s and a disadvantage to the other two firms. BJ’s does have same competition levels of the other two clubs to participate in rivalry. When compared to Costco and Sam’s club the major market share...
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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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...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 reason being is because both Costco and Sam’s Club are domestic...
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...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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...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 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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