Costco Questions

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Submitted By bamawillis22
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, 1. Costco’s business model was to generate high sales, which would produce a rapid inventory turnover. This is an appealing model because it makes potential customers curious of what kind of prices are on the inside and they eventually join the club to see what it is all about. 2. The chief elements of Costco’s strategy are Pricing, limited product line, limited selection, and treasure-hunt merchandising. Obviously, this is a great strategy because sales and income continue to increase. Low prices are always a good strategy for anyone to have. 3. I do believe Jim Sinegal has been an effective CEO. Costco started because Sinegal had a “vision” of providing his customers with low prices. If I were to grade Sinegal on his accomplishments, he would receive an A+. He has done a great job in following “The Strategy-Making, Strategy Executing Process”. 4. Jim Sinegal stresses to give the customer the best value you possibly can at the best prices while knowing where you are in the industry and not trying to do too much to too many. Know your customers and stay focused on your core business. Their low prices and limited selection of quality merchandise plus the wide range of categories creates a very rapid inventory turnover. Inventory turnover equals the Cost of the goods sold divided by their inventory. They also have profits at a very low gross profit margin. Gross profit margin equals Sales Revenue minus Cost of goods sold divided by Sales revenue. 5. Costco competes with supermarkets but mainly competes with Sam’s Club and BJ’s Warehouse in North America. There are over 1200 wholesale club stores in North America with Costco having a little more than a third of those stores. I believe competition from producers of substitute products is the strongest competitive force for Costco with good substitutes everywhere around the same price with…...

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