...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 reason being...
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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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...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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...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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...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 than usual. This type of consumer purchase is also linked to the high capital requirements barrier to entry. In order to enter the Variety Stores industry, the potential new entrant will initially have to invest a large amount of its financial resources, which can prevent them from starting...
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...Environmental Scan Paper Kenneth Anderson MGT / 498 November 10, 2014 Rodney Greene Abstract In business, it is important to gauge internal business with external business. This process will provide an advantage for shaping the future of business. For that reason, the procedure of creating strategies will help by conducting environmental scans. Environmental Scan Designing and building on core values is a 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...
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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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...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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...turnover by giving fee-paying members beautifully low costs on a restricted choice 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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...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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...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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...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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...to respond effectively to all competitive pressures and adapt to changes in the industry. With higher interest rates, higher consumer debt loads, energy costs, inflation, cost to find and retain employees, and reduced consumer confidence in the market Costco faces a tough economic environment which can affect demand for their products and services. In addition, commodity prices like gasoline and food can shift dramatically. Costco has no assurance of vendor supply for merchandise and thus they are vulnerable to changes in the terms of sale, pricing and access to new products is not guaranteed. Out of stock positions can lead to loss of sales and consumer trust. Costco faces strong competition from a variety of retailers and warehouse club operators including internet-based retailers. Walmart/ Sam’s Club is still rated number one by suppliers and they have better access to merchandise. The price of gas is reducing the number of shopping trips that consumers are taking and reducing their overall level of spending. This Case Study recommends ways for Costco to...
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...Mission/Code of Ethics 3. Brian Sanichar Strategy 4. Gopal Mohan Marketing Strategy 5. Anwar Rahman Financials 6. Airon Melo Financials/Competition 7. Sohani Somai Current Status of Costco 8. Kyle Hecter Recommendations Dameon James Background Costco Wholesale Club wasn’t always the wholesale club company that generated $71 billion dollars in 2008 as well as having 544 warehouses in 40 states; Like any other company, Costco was a blueprint waiting to dominate the wholesale industry. The Person that came up with the membership warehouse concept was Sol Price. The very 1st price club per say was conducted in San Diego California on Morena boulevard at an airplane hangar in 1976. Sole Price started to experiment with discount retailing called Fed-Mart and that is where future CEO Jim Sinegal got his start as he was employed at the fed-mart loading mattresses earning only an abysmal $1.25 an hour while attending San Diego Community College at the same time. Soon after that, Price decided to sell away fed-mart to focus more on his new empire, which was the San Diego Price Store in which Jim Sinegal tailgated with him to help him build that empire. This proved to be a successful move as within the next few years, the Sol Price club stores rose to the top of the list as the number one leader in member warehouse retailing and the most intriguing thing about this is that it has gained success by mainly operating in the west coast. As Price was figuring ways to...
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...SWOT Strengths – Pricing AuthorityBrand Loyalty Higher 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...
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