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Costco's business strategy
Costco's business strategy
Industry analysis of costco
Don’t take our word for it - see why 10 million students trust us with their essay needs.
More handpicked essays just for you.
Costco's business strategy
Costco's business strategy
Industry analysis of costco
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Costco ranks seventeenth place among online retailers. Majority of the stores in North America. Costco to expand the online presence with new products and reaching to customers quickly. Costco biggest threat is survive from the intense competition from Amazon and Walmart who are in top five places among the online retailers. Source (Team, 2013).
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.
Introduction Costco Wholesale Corporation better known as Costco operates an international chain of membership warehouses. Costco prides itself on carrying the top brand names products at a greatly lower price than you would find at retail stores or wholesalers. Each Costco warehouse carries no more than 4,000 products that include but are not limited to: groceries, appliances, toys, sporting goods, books, electronics, apparel, furniture, beauty supplies and jewelry. Before we can begin to analyze Costco we must first understand its history.
Costco Wholesale Corporation strives to grow and expand through their competitive retail and pricing strategies in their market. As a retail firm, Costco depends on cusumer purchasing capacities (Gregory 2015). Costco offers a limited number of items that are afforadable quality services and goods to their consumers and believes it aids to their continued growing and expanding success. Costco is driven by cost leadership for their retailer store because they would rather maintain the lowest prices possible which enable customers to return. Costco largely relies on their pricing and retail strategy to continue sales and organization success.
Costco is a global membership-only warehouse that provides high-quality, branded goods to its club members at discounted prices. In Emma Koehn’s article “From meat to muffins, Costco strikes a chord with fresh food offer” on September 10, 2023, it discusses the growing appeal of Costco to Australian consumers. It highlights that Costco is not only attracting more members due to the increasing cost of living, which is pushing shoppers to seek more affordable alternatives, but also because it offers a diverse range of high quality products beyond food, including household items and electric appliances. This essay will therefore discuss how Costco explores the market and creates unique value for its large consumer groups in detail.
Introduction to Business Costco Wholesale Corporation is a warehouse club retail store. Consumers should join Costco membership to enjoy their cheap price products and services. Costco was founded by Jim Sinegal and Jeffrey H. Brotman in Seattle in September 1983. Membership fees and a tiny portion of retail sales are how Costco makes money. Costco Wholesale Corporation. 2024.
We choose Walmart, Costco Wholesale and Target Corporation in grocery retail industry to calculate their five-year residual income and analysis their operation conditions. Frist of all, we found their net income and total shareholder’s equity from income statement and balance sheet from NASDAQ website, The Wall Street Journal website and PDF of their annual reports. Then, we try to find the cost of capital for each company in the matched year, but we failed. So we decided to calculate the cost of equity by ourselves. Since the three companies we choose are C corporations that pay dividend to their shareholders, we believe that the dividend capitalization model, which bases the cost of equity primarily on the dividends issued by a company, make more sense to us.
As of 2023, Costco has 850 total warehouses with 158 of them being outside of the United States and Canada (Costco, 2023). Costco is able to scale partially because of their hiring and product selection, but also because they slowly build up their store counts in the same countries over the years by capitalizing and adjusting to each countries cultures and catering to it. For instance, Costco entered Japan in the 1990’s and they currently have 31 stores their which is the most outside of North America (Costco, 2023). This is due to their growth strategy (Parnell, 2014).
Almost everyone has heard of the membership warehouse retailer, Costco Wholesale, whether or not you actually choose to shop there. You can find one of their warehouses in over 400 locations around the United States, as well as an additional 200 warehouses in Canada, Mexico, Australia, the United Kingdom, and parts of Asia. Although they are not quite as instantly recognizable as their main competitor, Sam’s Club of Wal-Mart Inc., Costco has attracted somewhat of a cult following due to their unusual business operations. In many financial comparisons, Costco seems to beat out all of their industry competitors. Even in the recent economic downtown, Costco still posted growth in their stock, as well as higher than industry average profits.
1.0 Introduction The company that we choose is Costco Wholesale corporation. Costco is a multinational retail corporation that operates a series of membership-only warehouse clubs (Robert, 2023). Costco aims to offer its members competitive prices on a wide range of high-quality products. With numerous locations across the world, Costco provides a diverse selection of merchandise, along with specialized departments and exclusive services tailored to enhance the shopping experience for its members (Costco Wholesale, 2023). The history of Costco: (Encyclopedia.com, 2018), (Britannica, 2023), (Costco Wholesale, 2023)
Costco’s training program targets the sales executive. Its focus is creating customer loyalty. This assists in realizing increased sales revenue.
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.
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.
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.
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.