..., costco Founded in 1983 by Jim Sinegal, Costco is the worlds leading wholesale warehouse retailer. A membership based club, “Costco provides a wide selection of merchandise, plus the convenience of specialty departments and exclusive member services, all designed to make your shopping experience a pleasurable one.” (Costco.com/about). In 2013 Costco reported net sales of $31.77 Billion in the fourth quarter and $102.87 billion during the 52-week fiscal year (Yahoo Finance). Does the company’s strategy reflect the company’s mission? Costco’s mission: “To continually provide our members with quality goods and services at the lowest possible prices” (Thompson, pg. c-11). Costco’s strategy: Pricing – Costco strives on keeping prices low and only stocks merchandise that is priced to reflect this strategy. They often buy goods at bargain prices as “one-off” and/or bulk deals. This allows the company to price their goods at an exclusive cost. Costco does not believe in marking the goods up to make more money, but instead believes that the lower costs will allow for a faster turnover and a “wont find this deal again” attitude. Product Selection – By keeping a small selection of active items (nearly 3,600) including brand names and store brand goods, Costco is known for selling limited quantity options and typically in bulk. This strategy is called “intelligent loss of sales” and they believe that by stocking large quantity of a good with no other option, they will only lose 1...
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...Case Study Analysis 1: Costco Wholesale Corp: Mission, Business Model and Strategy MGMT 670: Strategic Management Capstone June 26, 2011 Business Case Study: Costco Wholesale Corporation Introduction As a student in MGMT 670: Strategic Management, the capstone course for the Management track at the University of Maryland University College, I was asked to prepare a case study analysis of Costco Wholesale Corporation. Costco is one of the world’s leading wholesale retailers with annual sales of $76.3 Billion for fiscal year (FY) 2010, which is an increase of 9% from the previous year ($69.9 billion). In addition, its earnings per share increased to $2.92, an annual increase of 18% from the previous year. (Costco Financial Report, 2011) This increase is an all time high for the company thereby solidifying its place as a leader in the wholesale industry. Costco and its Business Strategy From inception, Costco’s business strategy has been to offer limited products (4000) at lower prices coupled with great values while keeping overhead costs low. In its main product line Costco has about 3,000 products that are present in the stores at all times and 1000 products that are ever-changing. These 1000 lines allow Costco buyers/merchandisers to hunt for items that will keep customers coming back to see what is new or fresh in the stores. These items help Costco create the “treasure hunt” environment that will keep customers coming back to the store more frequently. The motivation...
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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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...------------------------------------------------- LE Case Costco Wholesale Corp. v. Omega, S.A. (08-1423) By Bolang Chen 1. The facts of the case: Omega is a famous watch manufacturer company in the world. All of Omega watches are produced in Switzerland. Omega sells its products to all of the world through authorized wholesalers and retailers. Each of the Omega watches is engraved with the words "Omega Globe Design” on the back of it. And it means the copyright law in America protects the watch. Costco is a well-known wholesale warehouse store. They purchased Omega watches through an unknown third party company in the New York, and sold these watches in the United States, and the watches price was cheaper than many other American distributor's price. Many years ago, Omega gave Costco the authorization to sell the watches in the foreign market, but they did not give them a mandate for sale in the United States. So, Omega sued Costco to the US District Court for the Central District of California. Omega thought that Costco's behavior has constituted infringement. Although they authorized Costco to sell watches in foreign countries, they did not authorize them to sell in the United States. But Costco said that, according to the 109 (a), called the first sale doctrine. Because Omega allowed Costco to sell them products the first time, they cannot limit Costco to make importation, sales and other acts, which means that Omega has no right to stop Costco from selling their...
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...Companies srl Case 1 Costco Wholesale Corporation: Mission, Business Model, and Strategy he was prone to display irritation when he disagreed sharply with what people were saying to him. In touring a Costco store with the local store manager, Sinegal was very much the person-in-charge. He functioned as producer, director, and knowledgeable critic. He cut to the chase quickly, exhibiting intense attention to detail and pricing, wandering through store aisles firing a barrage of questions at store managers about sales volumes and stock levels of particular items, critiquing merchandising displays or the position of certain products in the stores, commenting on any aspect of store operations that caught his eye, and asking managers to do further research and get back to him with more information whenever he found their answers to his questions less than satisfying. It was readily apparent that Sinegal had tremendous merchandising savvy, that he demanded much of store managers and employees, and that his views about discount retailing set the tone for how the company operated. Knowledgeable observers regarded Jim Sinegal’s merchandising expertise as being on a par with that of the legendary Sam Walton. In 2006, Costco’s sales totaled almost $59 billion at 496 stores in 37 states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. About 26 million households and 5.2 million businesses had membership cards entitling them to shop at Costco, generating nearly...
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...Costco Case Questions 09/26/2013 Question 1: Competition in the North American wholesale club industry is high, with Costco being its leader at 56% of the market share. Main ways to compete are lower prices, more efficient operations, and reduced labor and overhead costs as well. Some of the clubs do the bare minimum in advertising while others, like BJ’s, spend more money on it (special Christmas radio advertisement and such). Out of the five competitive forces, the strongest is the rivalry between the competitors, because all of the players in this market attempt to offer high-quality products at lower prices. According to Figure 3.3, one of the reasons for rivalry amongst competitors to be strong is a relatively low cost to buyers to switch brands, and also if buyer demand is growing slowly, both of which are true in this case. All competitors in this industry are focusing on low margins on the products and high volumes of sales. Suppliers do have some power and influence on the wholesale club members, especially in the case with Costco, which buys some of its goods on the gray market and is known to sell some big-ticket items, but with globalization happening and more and more of suppliers being available around the world, they do not present a reason for concern as high as the rivalry between market players. Customers are always looking for lower prices and higher quality of merchandise, which Costco has been excellent at providing. BJ’s strategy is to give a better...
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...business success is its high sales volume and rapid inventory turnover, which helped the company to receive cash for inventory before it had to make a payment to its vendors (p. C-35). The company generated $71 billion at 544 warehouses in 40 states, Puerto Rico, Canada, the UK, Taiwan, Japan, Korea and Mexico. Its annual sales per store averaged $130 million whereas it’s closest competition; Sam’s club averaged $75 million per store. (p. C32-C33) 2. What are the chief elements of Costco’s strategy? How good is the strategy? The chief elements of Costco’s strategy are low prices, a limited product line and limited selection, and a “treasure hunt” shopping environment (p. C-35). The company’s strategy is appealing because they entice with low prices to attract more customers. Similarly the company is also based on the limited product or product selection as more products mean more confusion for the customer. This technique helps to create a good relationship with its suppliers. The strategy contains all of the criteria to make Costco one of the successful companies today. 3. Do you think Jim Sinegal is an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? What support can you offer for these grades?...
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... Date of Submission: May 3, 2015 Title of Assignment: Costco Case Study CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledge and disclosed in the paper. I have also cited any sources from which I used data, ideas of words, whether quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student Signature: Georgette McIntosh ******************************************* Instructor’s Grade on Assignment: Instructor’s Comments: EXECUTIVE SUMMARY he purpose of this report was to examine the implications on employees motivations used at Costco Wholesale Corporation. Research for this report included a review of he purpose of this report was to examine the implications on employees motivations A. Problem Statement: State the main problem facing the firm (or industry) in one, succinct sentence. B. Analysis: Summarize the main findings of your analysis. You may use bullet points, bold, italics – any means to convey and highlight the key factors you have determined based on your analysis. C. Alternatives: State briefly (one sentence or a bullet point each) 2 or 3 alternative courses of action that could be implemented D. Recommendation: Choose one course of action and support your choice. E. Implementation: Briefly (2 or 3 sentences) present how the plan would be implemented. This...
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...improve competition,JIm Sinegel,the chief of Costco require Costco’s suppliers not to offer other retailers lower price than Costco gets,if suppliers do that,Costco will stop cooperation with this supplier.And in this case,Starbucks refuse to drop in coffee bean price,Mr.Sinegal warned that remove Starbucks coffee from his store unless it cut coffee bean price,these behaviors violation of business ethics,violation Principle of fair competition. 2.Identify the primary stakeholder,What are their stakes? Suppliers:Costco just sell a limited number of items,and each item include limite brand,consumers do not have much choice in Costco,but because Costco’s price really lower than other retailers,so consumers still like to pay here.Even though suppliers’s profit was depressed Costco,but less profit higher sales make up the loss. Shareholder: obviously it is the biggest stakeholder,Costco’s stock price has risen more than 10 precent in the last 12 month which bring more benifits to shareholders. employees:staff wages are always linked with the company‘s profit,in Costco,employees satisfied their get,and fell happy here. Consumers:Costco’s consumers include family and small businesses,low price let they love Costco very much.I became Costco consumer for one year,it was really good,you can get almost everything at here with low price but same high quality. 3.Identify 2-4 alternative approaches to the ethical issue(s) presented by the case and the impact each would have on the primary...
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...Costco Companies Inc. – Case Analysis * Karthik Sundar (668943916) EXECUTIVE SUMMARY Costco is a membership only club warehouse giant that operates globally. Most of its business is concentrated in the United States with its presence in a majority of the states. It is currently having good business figures of 115 Billion dollars in revenue and a net income of 15.3 Billion dollars. The following is a case study of the hurdles faced by the management at Costco during the period of 1998 when they had come up with a new venture of offering services to its customers. Costco’s sales driver is the fact that it sell a bulk of its products at very low margin to its customers. It is able to do so as it has a large inventory at each warehouse and operational costs aren’t very high. Despite having a large inventory, it has a high number of inventory turns at each of its inventories. Such operational efficiency helps them offer products at great prices to its customers. This value offered attracts a lot of small business and general public. Costco’s customers are a good mix of such business and general customers from the public. It operates on an exclusive membership with a member enrollment fee of 40$ during the period of this case (55$ currently). Major revenue generators are food and sundries amounting to about 60% of the sales at Costco. It has a good business model of operating at good efficiency, competitive pricing, commitment to the quality and great employee focus. A combination...
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...Management 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...
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...COSTCO ASSIGNMENT QUESTIONS 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not? Costco operates on a low-cost business model, which is extremely successful for them. They strive to keep their customers coming back by providing them with the lowest possible prices every time. They also focus on providing their customers with products they will actually want and will buy. This is a very appealing business model because since they run on a membership fee and because of their extremely fast turnover rates, they know that they will be financially stable for a while. We can also see that their business model is effective based on their financial statements, so we know that whatever they are doing is working for them as a company. 2. What are the chief elements of Costco’s strategy? How good is the strategy? The chief elements elements of Costco’s strategy include: low-cost, providing their customers with active items, limited selections of brands, “treasure hunt experience” and company expansion. I believe that because of their super low prices, they make a large amount of their money from the membership fees, without that they might not be nearly as profitable. However, because of the treasure hunt experience, geographical expansion, and product selection they do have a good strategy and allows them to be successful. 3. Do you think Jim Sinegal has been an effective CEO? What grades would you give him in leading...
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...Case Study 2 | CostCo WholeSale | Financial and Competitive Forces Analysis | Taylor Lazenby 2-23-2015 | Costco Wholesale Since 1983, Costco Wholesale has risen to the top as the most proficient, efficient, and effective wholesale distributors in the world. By using a strategy based around ultra-low prices, a limited selection of nationally branded private labeled products, a treasure hunt shopping environment and operating with low operating costs, as well as geographic expansion, Costco has been able to distinguish itself from its competitors as the leading wholesale provider in the world. While Costco is the leading wholesale provider in the world, it still has obstacles and barriers to navigate through as it continues to sustain its operations. To summarize some of these challenges and to determine which of the challenges is the strongest and why, the 5 competitive forces model will be used. The 5 competitive forces model holds that competitive pressures on companies within an industry come from 5 different sources. These include: 1. Competition from rival sellers 2. Competition from potential new entrants 3. Competition from producers of substitute products 4. Supplier bargaining power 5. Customer bargaining power Most often, the strongest of the 5 competitive forces is often the competitive pressures created by the rivalry among competing sellers. This remains true in this case with Costco Wholesale as well. The wholesale segment of...
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...Companies srl Case 1 Costco Wholesale Corporation: Mission, Business Model, and Strategy he was prone to display irritation when he disagreed sharply with what people were saying to him. In touring a Costco store with the local store manager, Sinegal was very much the person-in-charge. He functioned as producer, director, and knowledgeable critic. He cut to the chase quickly, exhibiting intense attention to detail and pricing, wandering through store aisles firing a barrage of questions at store managers about sales volumes and stock levels of particular items, critiquing merchandising displays or the position of certain products in the stores, commenting on any aspect of store operations that caught his eye, and asking managers to do further research and get back to him with more information whenever he found their answers to his questions less than satisfying. It was readily apparent that Sinegal had tremendous merchandising savvy, that he demanded much of store managers and employees, and that his views about discount retailing set the tone for how the company operated. Knowledgeable observers regarded Jim Sinegal’s merchandising expertise as being on a par with that of the legendary Sam Walton. In 2006, Costco’s sales totaled almost $59 billion at 496 stores in 37 states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. About 26 million households and 5.2 million businesses had membership cards entitling them to shop at Costco, generating nearly...
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...Tina Korhonen 4/11/2012 Week 2 case 4 Competition among the 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...
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