Summary Of Costco's Pricing Strategy
The first Costco opened in 1983. It was founded by James Sinegal and Jeffery Bortman. Around that same time Sol Price and his brother Robert started a company called Price Club that served small businesses in San Diego, California. In 1993, the two merged and since then have become the second largest wholesale retailer in the world. The current CEO is Craig Jelinek.
Their current market situation and competitive strategy highlights aspects that Costco has implemented in the organization to increase sales and
Costco Wholesale conducts functions in 8 countries, as well as, being a multi-billion dollar worldwide company. The company also strives to offer a family environment for their employees so they may advance their careers and flourish (Costco Wholesale Corporation, 1998-2016). With it being a large corporation, Costco definitely would endure several financial, along with managerial accounting principles in their operational endeavors. One form of financial accounting information that could be pertinent to Costco exists with Wall Street’s calculations. Costco reported a 25% increase in profit in addition to a 14% commerce boost (Holmes & Zellner, 2004).
The outlook can be characterized by such factors: Retailers are generally affected by the state of the economy and by consumer's spending and income: WalMart is more exposed to foreign markets, whereas Costco is mainly a U.S. company. The U.S. stock market is overvalued, we may expect lateral movements until the economy will go back to its non-QE state; thus, even if not directly affecting sales, market's swing may affect management decisions and reporting. Additionally, labor regulations and trade agreements may affect revenues by increasing costs and reducing gross margins: WalMart issues with workers seems to be addressed; nonetheless, wages in the whole economy do not seems to increase leaving the problem as generic. Nonetheless, Costco is less affected.
In Costco’s macro-environment, a variety of factors could affect the company’s economic viability. External factors such as inflation, foreign currency exchange rates, levels of unemployment, reduced consumer confidence, and changes in tax policies could unfavorably affect the demand for Costco’s products and services. Prices of some goods and services including food products, are often variant and subject to fluctuations deriving from changes in domestic and foreign supply and demand, competition, taxes, labor costs, or delays in delivery which could significantly affect Costco’s sales. Therefore, the product’s costs and selling could also increase affecting financial results. Other important economic factors include the increasing international
In addition, Costco does a great job in their internal growth process with hiring (Loeb, 2015). Costco’s purchasers do well as they know their store locations and the local demographic’s desires. For instance, in Australia, the Costco there like Vegemite, so they have that there and not in U.S. locations (Loeb, 2015). Costco is smart with their distribution chains as they usually use 65% of local bought and specific products (Loeb, 2015). Globally, Costco has built trust within their brand as customers go to them for quality service, freshness, and a great selection of products.
Introduction The restaurant industry in the United States had annual sales of $ 631.8 billion and employs 12.9 million people in 2012. Even in times of recession there is little evidence that this industry has seen a decline especially in its fast food and quick service segment. But with a depressed economy with no immediate upward trend in the near future, majority of the customers indicated that they would either curtail their spending on eating or best maintain its current level which is certainly going to affect the future of many restaurants in the industry. Chipotle is part of the fast casual segment of the U.S industry with over 1,600 restaurants.
Introduction Most organizations view internal processes as ways of creating profits. In contrast, good companies create structures that use both societal and human values in its decision-making processes. These organizations believe that they have common purpose and strive to produce good and services that improve the lives of users and balance public interest with financial returns (Moss Kanter 2011). They also work to enhance the lives of the people that work for them. Good companies view their employees as their most value asset.
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.
What would you describe as Costco’s basis strategy as a retailer? Costco strategy is simple they choose to focus on taking care of employees, customers and expenses. Costco offers fair wages, low prices and as a result they obtain an advantage in quality, profits, and customer satisfaction. Costco realizes that satisfied employees helps build a stronger company. How do its human resource practices support that strategy?
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.
2. Costco want to build a long-term sustainable strategy based on targeting these customers. So Costco shall adopt sustainably low cost strategy that can gain a variety of different types of customers and increase market share. Companies that are able to offer lower than existing market price. It can usually lure more business
Specifically, Ralph’s (similar stores are Vons and Albertson’s) and Whole Foods (similar stores are Gelson’s and Trader Joes) are two firms that utilize cost leadership and differentiation. On one hand, we have Ralph’s using cost differentiation by providing a broad range of merchandise at a decent price. On the other hand, we have Whole Foods that has implemented a differentiation strategy by marketing their merchandise as healthier (organic). The trade of for both companies is that they are attracting less consumers by just marketing to a specific crowed. For instance, if Whole Foods had lowered their price and still sold premium merchandise, soon Ralph’s would be in trouble.
Costco is high aggressiveness retail firms due it sells
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.
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