Weaknesses Although Costco has got a successful business and been a leader in retailer industry, they also has some weaknesses. Costco’s weaknesses are on the limitations to their business. These limitations may restrict the development of business. Like the exclusivity to members, low price margin, and geographic dependence.
Hunter Avenarius MBA 705 M4: Case Analysis 2 4/3/23 Question 1 Costco’s business model differs from other traditional discount retailers in various ways. The first way goes all the way back to the roots of the business as they were founded on a principle that they would provide the lowest prices possible for their customers by keeping their costs low. They do this by utilizing a low-price and high-volume philosophy (Neubauer, 2022). Meaning, they are not marking up their items as other stores would, rather, they are keeping their margins slim and hoping to outsell other stores drastically.
Michael Abraha Analyzing Community Social Responsibilities Target Corporations is a retailer whose operations involve offering discounted, high quality, and trending merchandise. Such merchandise is retailed at attractive prices in guest-friendly, clean, and spacious stores. The company deals with a variety of food brands such as “Archer Farms”, home collections, food, and pets’ supplies, households, home decor and furnishing, clinics, pharmacy services alongside other services. The biggest community social responsibilities of the industry include protecting the environment, promoting healthy living, promoting community education, and volunteerism.
Costco operates on a membership only basis, therefore customers and businesses must purchase a membership to shop at the retailer. Costco currently has two memberships available, which are their individual membership, also known as Gold Star, and their Business membership, both of which cost $55 annually (10-K, 2015). For $110, a customer can upgrade to an executive membership, where they can enjoy a 2% discount (SWOT, 2015). They currently have around 75 million members, and due to their no-frills approach, low prices, and high quality products they have a high member retention rate of 91% in the U.S. and Canada, and an international rate of 87% (Forbes, 2016). Costco has been steadily growing and their net sales increased from $75,255 million in 2010 to $110,212 million in 2014 (SWOT, 2015).
Organizational Structures and Levels of Authority Organizational structure dictates an organizations way of arranging roles and people. This structure is arranged in a way to get the best work as efficiently as possible. In smaller companies face to face communication is the norm and formal structure may not be necessary. In a larger company with various layers thee must be very clearly defined lines. Leaders are responsible for the ultimate outcome even if they are not performing the everyday tasks.
Costco’s business model is centered around offering a smaller range of products at incredibly low prices which attracts the consumer. In order to supplement this lowered profit margin, they require their shoppers, both businesses and individuals, to purchase annual memberships. The membership fee accounts for a majority of the company’s profit. Furthermore, Costco operates its under a wholesale warehouse style which eliminates the need for excess handling and workers in the store. The stores are stocked to carry certain big ticket, ‘limited time offer’ goods so that customers feel the need to take advantage of the deal because it may not be there when they next return.
Key Trends – Globalisation One of the main opportunities Costco has is more global expansion to specific targeted countries. Although operating in many countries, Costco is heavily dependent on the U.S. and Canadian markets. It still has the opportunity to expand into the Asian and Australian markets where it has a limited presence. Costco has the capability to operate about 100 stores in Taiwan, Korea and Japan combined and about 20 stores in Australia. It currently has 41 stores in Taiwan, Korea and Japan combined and 6 stores in Australia.
Costco Wholesale was founded in 1983, in Seattle, Washington by Jim Sinegal and entrepreneur, Jeff Brotman – now chairman of Costco’s board of directors. Costco is a leading brand among the wholesale retail industry. Not only is the brand amongst the three leading retailers in the United States, but it is also the leading membership-based warehouse chain in the world. Costco operates membership-based warehouses where a wide variety of consumer goods are sold wholesale. These product categories include a broad spectrum of goods such as, snack foods, dry and packaged foods, frozen food items, deli and produce goods, dairy products, cleaning supplies, paper products, electronics, health and beauty aids, office supplies and appliances.
What are the two types of core competencies that drive a firm’s competitive advantage? Which firms demonstrate a clear competitive advantage because of (a) major value-creating skills/core capabilities and/or (b) superior assets or resources? Which firms have demonstrated sustainable sources of competitive advantage? The two core competencies that drive a firm’s competitive advantage are cost leadership and differentiation.
Davis (as cited by Khalidah, Zulkufly, & Lau, 2014) defined Corporate Social Responsibility (CSR) as “… the firm’s consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm. It is the firm’s obligation to evaluate in its decision-making processes the effects of its decisions on the external social system in a manner that will accomplish social benefits along with the traditional economic gains, which the firm seeks. It means that social responsibility begins where the law ends. A firm is not being socially responsible if it merely complies with the minimum requirements of the law, because this is what any good citizen would do.” A firm will not survive without the support of both the stakeholders and shareholders, thus the CSR proposes the indication which stats that a firm can never exist In a vacuum (Khalidah et.
Whitbread is a multinational hospitality company that operates hotels, coffee shops and restaurants with 45,000 employees which bases its headquarter in Dunstable, United Kingdom (B.co.uk, 2015). Whitbread owns the biggest hotel chain, Premier Inn and coffee shop chain, Costa in the UK as well as internationally in other 30 countries(Whitbread.co.uk, 2015). Moreover, they also operate family-friendly restaurants; Beefeater grill, Brewers Fayre and Table Table. Whitbread’s vision is to grow and expand through strong customer heartbeat and innovation to stay ahead in the competitive market.
SOCIAL RESPONSIBILITY As we defined above that social responsibility is to protect and enhance well-being of living things. Every organization is socially responsible to protect the environment and they can do there much which is legally required for the organizations. The very first social responsibility of every business is that to earn enough profit to meet his expenses. If the firm cannot earn profit no social need and social responsibility can be met by the firm the firm fails.
In the recent years more and more companies in the retail and food industry are concerned about the environmental consequences of their action and also the social ethics for the people involved in the production process. This is a shift from the philanthropic actions companies used to take in 1970’s and by following basic international standards to a ‘business case’ perspective of CSR (Customer Social Responsibility). According to the World Business Council for Sustainability Develpoment ( WBCSD) CSR is: ‘’ the commitment of business to contribute to sustainable economic development, working with employees, theirfamilies, the local community and society at large to improve their quality of life’’ (World Bank, 2002)
3.0 Concepts 3.1 Resources and Capabilities In order to achieve and sustain competitive advantage, a business needs both resources and capabilities. Resources are assets that are owned or employed by an organization. The organization utilizes and uses these assets to carry out their business operations. Resources can be grouped either tangible assets or intangible assets.
A firm’s assignment of CSR begins with economic responsibility and narrows up with legal, ethical and other responsibilities, such as sound judgment. What was found as ethical pursuance and sound judgment in Carroll’s model, it is now indispensible because of the fact that ethical responsibilities are required as much as the economic and legal responsibilities in today’s environment and prerequisite for success. CSR can be seen as a rationale on moral and economic grounds, often companies adopt CSR as a defensive strategy though it can be a part of corporate environment and could be used as an aggressive strategy. (Werther and Chandler, 2006) CSR has a range of participants for sustainability and a positive role in the society (Blowfield &
