Costco Wholesale Corporation: Mission, Business Model, and Strategy

In: Business and Management

Submitted By iboder
Words 663
Pages 3
Costco Wholesale Corporation: Mission, Business Model, and Strategy

Problem Identification
a) There is an advertising problem b) For purchasing the products, membership cards are required c) In the warehouses, product locating is not successful d) North America has a major market for the sales e) Customer trends should consider

Analysis of Problems
a) Advertising
1) The advertising is not successful
2) Social media are not used enough
3) Company image has been going down after Mr. Sinegal leaves b) Membership Cards
1) Middle lower class does not accept to use membership cards
2) At this economy, yearly payment is too much for some people
3) For entering a new market, card system is a handicap

c) Warehouse System 1) Shelf system is not effective for selling the products 2) Big aisle gives negative energy to the customers d) North American Market 1) For belonging to this market is a big weakness for the company 2) Competitors have some advantages like gasoline companies. e) Customer Trends 1) For selling the high quality cannot be standard for this kind of market Alternative Solutions
a) Alternative 1: Spending More Money for Advertising
i. It will definitely affect the sales in a good way ii. On the other hand, the company is not going lose customer to Sam’s Club and BJ’s Wholesale iii. It will help to create a new image for the company
i. At the recession time, this kind of investments has some risks ii. Trying to change the image can be negative idea for the customer side

b. Alternative 2: Membership card system can be checked again
i. Most of the people do not…...

Similar Documents

Evaluating a Firm Costco Wholesale

...CPIM Certified Advanced Facilitator Assuming the role of a Mutual Fund Manager, Costco Wholesale, a Fortune 500 company, has been chosen for analysis to decide whether to invest funds with the organization. This paper will high-light the results of a SWOT analysis, the internal and external stakeholders, their wants and needs, and finally, how their wants and needs are being met by the company. Costco Wholesale Company is an acknowledged market leader and was listed 28th in the top 100, most successful businesses in the world, in 2010, and 25th in 2011. “In 1975, a Mr. Solomon Price, sold his company Fed-Mart to begin a new retail venture, aimed at small businesses called the Price Club. Mr. Price invited Jim Sinegal, owner of Costco, to help him open the first Price Club Warehouse in 1976. Sinegal learned from Price the business of a high-volume warehouse with only a limited number of products, and left Price in 1983 to start Costco, with partner Jeff Brotman. Costco merged with Price some years later, and Sinegal bought Price out and remained as CEO of Costco. Today, as of August 31st, 2012, Costco has 608 warehouses, 66.5 million cardholders, 160,292 full and part-time employees world-wide, and a revenue of $88.9 billion annually” (Corona, 2012, p. 558). One cost advantage for Costco is that they sells in bulk; allowing customers to purchase goods at a cheaper price, no big fancy shelving......

Words: 1245 - Pages: 5

Costco Wholesale Club

...Costco Wholesale Corporation 1. Describe Costco’s Business Model. Description must identify and describe model components. Costco’s business model was to generate high sales volumes and rapid inventory turnover by offering its members low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories. The components that stick out to me in this model are the low prices, brand names/select private label, and membership. A) Discuss how each component impacts profit generation. The principle business components that allow their business to generate revenues sufficient to cover costs are as follows: * Low Prices support rapid inventory turnover and high sales volumes. The higher sales volumes they generate then the better means they have when negotiating pricing with their vendors, and the potential to reach higher gross profit by the mass quantities they sell. Volume pricing, efficient distribution, and reduced handling of merchandise add to their overall effectiveness. * Brand names and select private-labeled products help to draw customers in because they know the brand names and understand what they are paying for. Discount pricing on top of this, even if it is still cheaper than the local grocer, will still make the shopper feel as if they are getting a deal. When a shopper gets a deal, they are often inclined to spend more and shop there again…both adding to Costco’s ability to generate......

Words: 1876 - Pages: 8

Costco Wholesale Corporation and the Kroger Corporation Stock Analyses

...Costco Wholesale Corporation and The Kroger Corporation Stock Analyses Chart:[1] [pic] In the news: The market industry trend for the companies are moving downward for the past couple of weeks putting so much pressure on the two companies up direction stock performance on specific days. Facebook IPO could have a story behind the downward performance of the industry. The Kroger Co. (KR) announced this past week that they have been honored a prestigious Black Pearl Award for advancing food safety and quality.[2] The Black Pearl Award is named once every year and The Kroger co. had the honor of having it in 2012. This award is given by the International Association for Food Protection (IAFP). This means that Kroger co have put so much efforts to advance food safety and quality through consumer programs, employee relations, educational activities, adherence to standards, and support of the goals and objectives of the IAFP.[3] This announcement was declared on the 15th of May. When you look at the graph you can see the direct effect on the stock that day. On the 15th of May 2012 the stock performance holed up against the opposite direction of both market indexes Nasdaq and New York Stock Exchange. This up direction performance is a reaction of the positive news that was released to the investors. Nonetheless, the up rising performance for both KR and COST did not hold for more than a day and got dragged down by the market index. On the other hand Costco did not have any......

Words: 400 - Pages: 2

Strategic Management Plan for Costco Wholesale Corp.

...Strategic Plan for Costco Wholesale Corporation Executive Summary The retail industry is an extremely competitive environment that poses many challenges for Costco Wholesale Corporation and its competitors. Since many of the stores offer the same products, it may sometimes be very hard for customers to differentiate between retail stores. Even though the economy is recovering from a recession, the retail business is still a mature industry and is improving very steadily. Costco and its competitors are affected by the same political, economic, social, and technological factors, such as taxes, presidential elections, SEC regulations, the economic state of the country, exchange rates, various social characteristics, such as customer age, income and family size, and the growth of e-commerce. All of these external factors have a great influence on how Costco conducts their operations. Costco is a premier leader in the retail industry thanks to their strategic pricing strategy, low cost operating system, and financial stability. Costco is still vulnerable to numerous threats, such as competition, exchange rates fluctuations, increasing labor and healthcare costs, and high exposure to low growth markets. If Costco is to maintain the market share in the retail industry, they should consider the options of offering more customer service in their warehouses, increase online retail sales, and acquire other retail stores for expansion and growth. Finally, if Costco wants to......

Words: 6610 - Pages: 27

Costco Wholesale Corporation below and answer the questions asked. Case 1: 7.5% Costco Wholesale Corporation 1. Which of the three management-skill categories do you think Costco CEO James Sinegal draws upon most during his year-round visits to local Costco warehouses? Explain. Team building; Managing warehouses like Costco require an organization that is flat, fast, and flexible. Sinegal focuses in on customer and employee needs and wants which gives an understanding of behaviors and attitudes. This abandons the hierarchy of command-and-control mindset while replacing it with coaching, motivation, and empowerment. When Jim travels to Costco warehouses around the world (he tries to visit each location at least once a year), he knows the names of an unusual number of employees, from store managers to forklift drivers. “He is amazingly in tune with the employees who work for him.” It speaks to Jim’s management style: He has always been an in-the-trenches CEO, acknowledging that employees are a key part of meeting the company’s goals. One principle that he continuously stresses to his managers is “If you’re not spending 90 percent of your time teaching, you’re not doing your job.” The foundation that Jim has brought to the company as far as his compassion and to really do what is best and to give back, not just to the employees but to the community, is something that is instilled in everybody here,” she says. “Working for Costco, you see how important that is and what a difference......

Words: 1314 - Pages: 6

Costco Five Forces Model Analysis

...MEMORANDUM TO: Strategic Business Planning Committee FROM: Raquel Hansen DATE: March 16, 2014 SUBJECT: Five Forces Model Analysis As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to find a position in our industry where our company can best defend itself against these forces or can influence them in our favor (Porter, 137). There are five important forces that determine competitive power (Pearce & Robinson, p. 99): * Supplier Power * Buyer Power * Competitive Rivalry * Threat of New Entrants * Threat of Substitution The attached Exhibit A, Costco’s Five Forces Analysis, provides a visual representation of our competitive strengths and weaknesses. I will provide an explanation of each of the five forces moving forward. Supplier Power – Weak Bargaining Power Costco has is known for its ability to leverage its buyer power making their supplier’s power weak. At the same time we recognize......

Words: 1191 - Pages: 5

Costco Wholesale

...Costco Wholesale Corporation Costco is open to the public and also features privately owned brands like Kirkland signature. Costco Wholesale Corporation is a membership-only warehouse club and is the second largest retailer in the United States, the seventh largest retailer in the world and the largest membership warehouse club chain in the United States. Costco employs 126,929 full and part-time workers in the United States, and 185,207 full and part-time employees worldwide. Costco offers lower prices and better values buying in bulk from wholesalers. At the Costco I work at, we run a tight operation with extremely low overhead which enables us to pass on savings to our members. Coupons are a huge part of our sales, as pamphlet books are mailed to our member’s households every other week. Costco's warehouse is one of the largest and most select product category selections to be found under a single roof. Categories include groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, housewares, apparel, health and beauty aids, tobacco, furniture, office supplies and office equipment. Costco is known for carrying top quality national and regional brands, with 100% satisfaction guaranteed, at prices consistently below other wholesale or retail outlets. Costco’s main competitor is Sam’s Club and any other wholesale retailers, grocery stores, or supermarkets. There are currently 71.2......

Words: 347 - Pages: 2

Financial Analysis Costco Wholesale Corporation

...Financial Research Paper for Costco Company Overview for Costco Costco Wholesale Corporation operates affiliation warehouses that provide an assortment of exclusive and secluded label products in a variety of stock categories in no-frills, self-service warehouse facilities. The organizations product categories include candy, snack foods, tobacco, alcoholic and non-alcoholic beverages, and cleaning and institutional supplies; appliances, electronics, health and beauty aids, hardware, office supplies, garden and patio, sporting goods, furniture, and automotive supplies; dry and institutionally packaged foods; apparel, domestics, jewelry, housewares, media, home furnishings, cameras, and small appliances; meat, bakery, deli, and produce; and gas stations, pharmacy, food court, optical, one-hour photo, hearing aid, and travel. It offers Business and Gold Star (individual) memberships. As of October 8, 2009, the corporation operated a chain of 560 warehouses encompassing 407 in 40 states and Puerto Rico, 77 in Canada, 21 in the United Kingdom, 7 in Korea, 6 in Taiwan, and 9 in Japan, as well as 32 warehouses in Mexico and 1 in Australia. Costco Wholesale Corporation also propositions its products through in the U.S. and through in Canada. It has a strategic alliance with Valdez Heli-Camps. The company, formerly known as Costco Companies, Inc., was founded in 1976 and is based in Issaquah, Washington. The company’s premier membership is the......

Words: 1836 - Pages: 8

Costco Wholesale 2012

...COSTCO WHOLESALE IN 2012: MISSION, BUSINESS MODEL, AND STRATEGY Jim Senegal was a very effective CEO. He was able to take capitalize on the membership warehouse concept that he learned from Sol Price when he worked for Price club in the late 1970. In 1983, he developed a strategic mission and values “to continually provide our members with quality goods and services at the lowest prices possible”. This resulted in the first Costco being opened in 1983. The crafted strategy objectives centered around “ultra-low prices, limited product selection, a “treasure hunt” shopping experience, low operating costs, and geographic expansion. The rapid inventory turnover, vendor financing, low operating costs, and self service facilities enabled Costco to operate at a significantly lower gross margin and to pass on those savings to members through lower prices and higher quality goods. By charging members a prepaid fee, which supplemented overall profitability, it provided shareholders with an acceptable return. Those strategies could make Costco Wholesale as the third largest retailer in the United States and the seventh largest retailer in the world, also being the clear leader of the discount warehouse and wholesale club segment of the North American retailing industry. Began its operation in 1983 until January 2012, Costco had a total of 598 warehouses in 40 states and Puerto Rico, 9 Canadian provinces, United Kingdom, Korea, Taiwan, Japan, Australia, and Mexico. In 2011 Costco......

Words: 1613 - Pages: 7


...1. What is Costco’s current business model and why is it appealing? Costco’s business model is predicated on a best-cost theme. They take the low-priced supplier approach and mix that with creating price of the many stakeholders by targeting on wonderful client service, a severe code of beliefs, treating staff like family, concerning suppliers, satisfying shareholders, and a robust intelligence of environmental place. They need to enforce distinctive cost-saving methods in their production, operations, and selling that has allowed them to draw in the foremost affluent customers in discount selling. The central focus of their business model turned around high sales volumes and fast inventory 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......

Words: 3870 - Pages: 16

Financial Analysis of Costco Wholesale Corp

...Financial Analysis of Costco Wholesale Corp. Costco Wholesale Corporation (Costco) is a publicly traded company based on the concept that offers, members, low prices on a limited selection of nationally branded and select private-label products in a wide range of merchant categories. It operates warehouses in the U.S., Canada, the United Kingdom, Japan and Australia and through majority-owned subsidiaries in Taiwan and Korea. The company warehouses present exclusive products which include appliances, auto tires, clothing and accessories, computers and electronics goods, grocery, furniture, health and beauty, home and décor, office products, fitness and sports, travel and luggage. Costco provide ancillary services that include gas stations, pharmacy food courts, optical dispensing centers, hearing aid centers, photo processing centers. Costco was ranked 19th and 18th by Fortune 500 in 2013 and 2014 respectively. Major competitors are Sam’s Club (Wal-Mart Stores Inc.) and BJ’s Wholesale club, Inc. Costco was founded by James D. Sinegal and Jeffrey H. Brotman in 1983 and is headquartered in Issaquah, WA. (COST, n.d.). In this essay, the 2014 annual report of Costco will be reviewed using the financial analysis tools of liquidity, profitability and solvency. A further analysis will consider three (3) non-financial factors that impact on investment decisions. Financial Tools Analyzing Liquidity Liquidity is defined as the degree to which an asset or security can be bought or...

Words: 2612 - Pages: 11


...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%...

Words: 796 - Pages: 4

Management and Leadership: Costco Wholesale

...Management and Leadership: Costco Wholesale MGT 330 March 21, 2011 Management and Leadership: Costco Wholesale Costco Wholesale is a company in the membership wholesale business. Costco Wholesale, or just Costco as the members refer to them, has 565 locations in 40 of the 50 states and Australia, Canada, Japan, Mexico, Puerto Rico, South Korea, Taiwan, and the United Kingdom (Hoovers, 2011). Costco has 56 million card members who purchase memberships to shop there and obtain name brand products at the lowest prices. Costco sells everything from aspirin to caskets to wedding dresses. Costco Wholesale also has a very popular online store. Costco Wholesale is ranked number 25 in Fortune Magazines Fortune 500 (Fortune, 2011) Difference between Managing and Leading Costco is a company who strives to train their management staff into not only productive managers but also superior leaders. Costco warehouse employees train mainly with hands-on training by other employees and managers in the same department. For example, the Front End is a department where the members check out their items. On the Front End are packers, cashiers, supervisors, one assistant manager, and a manager of the Front End. When a new employee begins training as a cashier, another employee will train the new employee. The trainer will lead this new employee to make good decisions versus bad and lead him or her to do the best at his or her job. The Front End also has......

Words: 1077 - Pages: 5

Costco 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......

Words: 11396 - Pages: 46

Business Analysis Part Iii: Costco Wholesale Corporation

...Business Analysis Part III: Costco Wholesale Corporation MGT/521 June 14, 2012 Business Analysis Part III: Costco Wholesale Corporation Jim Sinegal, Costco Wholesale cofounder and CEO summed up Costco Wholesale Corporations strategic planning and operations in a nutshell according to the Retail Industry website, “Wall Street is in the business of making money between now and next Tuesday. We’re in the business of building an organization, an institution that we hope will be here 50 years from the now. Strategic planning is an important part of running any business and the more so for businesses that operating in multiple states and countries.” On May 27, 2012, Costco Wholesale Corporation reported sales that covered a period of thirty-nine weeks. The Corporation reported “net sales of $7.67 billion for the month of May, the four weeks ended in May 27, 2012, an increase of 7% from $7.14 billion during the similar period last year” (Bloomberg BusinessWeek, 2012). The company reported net sales ending in a thirty-nine week period of $71.28 billion, “an increase of 10% from $64.75 billion during the similar period last year” (Bloomberg BusinessWeek, 2012). Many may wonder why Costco Wholesale Corporation is the leading wholesale business in the industry. To provide a good understanding of why Costco Wholesale Corporation is the leading warehouse distributor in the industry, this paper will help provide understanding by discussing strategic initiatives of the corporation......

Words: 2001 - Pages: 9