Which one is better Buy Now: Wal-Mart Stores, Inc. vs. Costco Wholesale Corporation? Costco is doing better, but Wal-Mart stock is much inexpensive. Which one is a better buy right now? Here are two different retailers with two different strategies. The alternative norms are that Costco operations are entirely based on the warehouse model and membership fees offer customer more of an economic advantage to customers than Wal-Mart everyday low prices and flexible payment with suppliers. My objective is to analyze the two retail giants’ methodology to satisfy and maintain customer although that I anticipate Wal-Mart’s to be a better buy than Costco because of the gargantuan scale of Wal-Mart has constructed its commerce on saving the customer
Our decision is to invest in Wal-Mart. The choice for Wal-Mart is on the basis that their functional-level strategy is really robust, nevertheless of the fact that they do not treat their employees well. The fact remains that they are financially stronger, have a better business-level strategy, and have a corporate-level strategy than Costco. Costco v. Wal-Mart: What must we learn about them? Let start with Costco. Costco is Wholesale, Retail Corporation which operates an international chain of membership distribution centers that provides quality, brand name merchandise at noticeably more affordable rates than a conventional wholesale or retail sources. Costco 's warehouses display the largest and great product categories such as groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, house wares, apparel, health and beauty aids, tobacco, furniture, office supplies and office
Their ability to distribute the cut rate from their operating proficiencies in supply chain management and cash flow, permits them to offers items at discounted rate and a lower price than their competitors. For Costco the meaning of being the low-cost provider while also differentiating from the competitors is ambiguous at best. Costco’s CEO, Jim Sinegal, is certain that low priced, and the high value merchandises are exactly what is needed maintain and achieve a staying power in the industry. Costco also entices their customers with low prices on designated set apart products available only at their stores. Within these designated products, Costco provides a limited selection of nationwide brand-named merchandises in some wide categories. Their approach comprises of selling a limited number of items, keep their costs down, maintain a high volume, compensate employees well, ensure that customers buy their memberships, and target upscale small-business owners through their business only
Price: All the Costco products have a maximum mark up of 15%, keeping their prices competitive and almost always cheaper than their competitors which usually mark up at 25%. In the video the founder is seen comparing the price of one of their products (a toy truck) to Sam’s Club which was offering it at a lower price, and reconsidering their pricing for it. Their pricing does however force the consumer to buy the product in bulk- making them assume that they are getting the best possible price.
One of the biggest competitors is known as Wal-Mart. With a revenue of $485.651 billion, Wal-Mart is definitely the world’s largest company. According to Walmart’s website, “it operates over 11,000 retail units under 65 banners in 28 countries and employs 2.2 million associates around the world.” Offering numerous items at their lowest prices, Wal-Mart, itself, is the biggest challenger for Costco. At the same time, Sam’s Club is also owned and operated by Wal-Mart and it takes even more profits away from Costco. While the customers can go buy things at Wal-Mart without the membership, Wal-Mart uses the same membership-only strategy for Sam’s Club like Costco. For instance, Sam’s Club offers membership-only services with an annual fee of $45. Sam’s Club offers a wide product category, and it sells almost the same things as Costco. Sam’s Club has 652 warehouses, and its net sales are above $58 billion. Even though Costco is highly concentrated in California, Sam’s Club is evenly spread across the United States. Moreover, Sam’s Club is the only
However, it does not operate any stores outside of the United States, so it does not present a international threat to Costco. Sam's Club, another membership only warehouse club, owned and manage by Wal-Mart. It works mainly in the United States, but has fews in only 3 foreign countries. Anyhow, we can say that Costco dominates the global market for American membership only warehouse clubs. Compared to his competitors , Costco has been a sucess on the international market with a strong value proposition and mission, but mainly a strong strategy in theirs decisions to enter or not in a specific market. For exemple Costco has an inventory turnover ratio of 11.3, which is better than its main competitors, Amazon.com, Inc. (Amazon). Amazon inventory turnover was 7.6 in 2015. With the given turnover ratio, the company take way more days to sell its stock. By having a better inventory turnover ratio and the lowest inventory turnover days possible mean that the company enhance low stocking costs, which increase the overall operating performance. As well we notice that they increase theyre gross operating profit almost every year. However the main profit come from the US territory while the company is struggling in international locations, where comparable-store sales dropped by 8% in Canada during the month and 6% for all of its other international locations combined. This issue is mainly the result
Costco was founded on September 15th, 1983 by Jeffery Brotman and James Sinegal (Chesley). It became renowned for its warehouse club retail model, pioneered by former competitor Price Club. After a major merger in 1993 with Price Club, Costco expanded to 206 locations, doubling the size of the company (“Costco Wholesale Historical Highlights”). The decision was based on the fact Costco and Price Club shared similar business philosophies, operations, and the looming threat of being taken over by Sam’s Club. Operating as PriceCostco, international expansion began with development of stores in Mexico, the opening of two stores in England, and the licensing of a Price Club in South Korea ("Costco Wholesale Corporation").
Their boards are similar in member size (Walmart with 12 and Costco with 13). Both companies also advocate for a separate CEO and Chairman. They also have a similar number of meetings per year (Walmart 6 and Costco 5) (Spencer 4). Both companies also utilize executive sessions and Costco, like Walmart, has at least two executive sessions a year for independent directors (Costco 11). Finally Costco also has a code of ethics that applies to all employees, directors and executives. They
According to Cardenal, Costco has significantly outperformed other retailers such as Wal-Mart and Target (2014, p. 1). Since 2006, Costco revenues have increased 127.8 percent as of June 2014. During the same time, Wal-Mart revenues have increased 70.24 percent while Target revenues increased 60.94 percent (Cardinal, 2014). Based on reported sales for May 2014, Costco’s comparable sales, excluding the impact of gasoline prices and exchange rate
In the warehouse segment, Wal-Mart’s Sam’s Club competes harshly with Costco. Costco has fewer warehouses but greater sales and revenues. Costco customers also shop at Costco more frequently than Sam’s Club customers and, on average, spend more each visit as well. Costco’s dominance may be the result of better innovation. Costco offers luxury items and was the first to sell fresh meat and produce, and gasoline. This is important because innovation is a key factor in assessing competitors in an industry.
Company Selection Paper Team B's assignment this week was to select two different publicly traded companies in the same industry. The two companies will serve as the basis for subsequent team assignments. The two companies chosen for the study are Wal-Mart and Target. This paper provides an overview of each of the selected companies. Date of Company Establishment Wal-Mart was established in 1962 by Sam Walton.
As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is their expenses, which include merchandising costs and pre-opening expenses, have been increasing steadily and they need to balance this out to keep a positive net income. Analysis: Key Issue #1: Costco has many competitors, with the primary two being Sam’s Club, a wholesale business managed by Walmart, and BJ’s wholesale club. Sam’s Club offers the same services as Costco.
Ungar, Rick. Walmart Pays Workers Poorly And Sinks While Costco Pays Workers Well and Sails-Proof That You Get What You Pay For. Forbes, 17 April, 2013.
Wal-Mart Stores Inc. is in the discount, variety stores industry. It was founded in 1945, Bentonville in Arkansas which is also the headquarters of Wal-Mart. Wal-Mart operates locally as well as worldwide. It operated 1209 discount stores, 1980 super centers, and 567 Sam’s Club by January 31, 2006. It has also extended its operations to many international countries. It runs its retail stores in two forms: Sam’s Club and Wal-Mart Stores. The Sam’s Club sells assorted product lines such as hardwares, electronics, jewelry, and to mention a few. The Wal-Mart stores also offer similar products in addition to the following: health and beauty products, apparel for women, men and children, household appliances etc (www.yahoo.finance.com). The Vision Statement, Mission Statement, Values and Code of Conduct, Corporate Governance: Directors, Executive Management, Committees and Stakeholder will be the key elements that will discussed in this report as it relates to Wal-Mart. In addition to that, the major trends in the general/macro environment and industry will be analyzed.
The first Wal-Mart store opened in July of 1962 in Rogers, Arkansas by Sam Walton who believed that the future of retailing was in discounting and to avoid competing with established giants like Sears and Woolworth, Wal-Mart’s stated out of the large cities in the beginning and this strategy help avoid competition, while in rural areas Wal-Mart began growing their customer base by offering ways to save money and shorter travel distance, Sam Walton felt the best way to make customers happy was to provide the low prices every day (Farhoomand, 2006). The company needed to continually find ways to control the operating costs so the savings would then be passed on to Wal-Mart customers in the form of lower prices than the competitors. Walton was opposed to having any kind of employee unions for its company and saw them as a disruption and an inconvenience (Farhoomand, 2006). The continued search for lower prices made him aware of business related travel cost, Wal-Mart executives stayed in low cost hotels when they traveled and the cost related to the services provided by suppliers, Wal-Mart helped suppliers improve operations and efficiency to produce lower cost. Walton wanted the suppliers to correct any nonessential or insufficiencies existing in their business structures as a way of gaining lower prices and higher value products for its Wal-Mart stores. To further push savings Wal-Mart forced cost down by eliminating the middleman and buying directly from the manufacturers. This cost saving also applied to executive salaries Walton felt providing employees with stock options, training opportunities, and allow employees to grow and develop would be a better way to engage and involve them in his vision (Farhoomand, 2006).
Wal-Mart is known to beone of the best supply chain companies in the world. Throughout the years Wal-Mart has adapted strategies that keep up to their name. Unlike many retailers, Wal-Mart purchases goods directly from manufacturers, skipping a few steps of the supply chain cycle. Buyers use advanced negotiation skills to make sure they are receiving the best price on purchases. Wal-Mart also has their own trucks picking up from warehouses, reducing the price significantly on transportation. Long term relationships with vendors are extremely emphasized to understand prices and cost structure. These practices build Wal-Mart to its name and keeps low prices for retail customers all over the world. Supply Chain studies have shown that in 1998, Wal-Mart would fill up stock in 2 days compared to their competitors which would complete it in 5. Part of the reason Wal-Mart would replenish so
Costco is one of the companies that have started from humble beginnings to become one of the most recognized institutions in the wholesale industry. Based on the Costco case, there are valuable lessons I have learned and the look of things is that Costco is here to stay. One of the insights I have gained from the Costco case is that organizations should understand their value chains and focus on their strengths to drive competitiveness. Another lesson that I have learned is that information technology can be used by organizations to improve their levels of competitiveness. Also, the Costco case study has enabled me to realize that the management of organizations should constantly evaluate the impacts of the strategies they employ because it is through such evaluations that the best practices can be adopted to improve the performances. Costco has applied these aspects in its different areas of operations, and they have advanced the organization since its inception days to present. From the strategic management practices, the organization has grown from strength to
Wal-mart has a reputation for caring for its customers, of course their employees, and for the prospective public. So Wal-Mart can be an industrial leader for the world of shoppers with an eye for lower affordable prices, company decision makers would continue it's systematic strategies that it's founder and president established years ago. Sam Walton believed in three guiding principles in his strategy planning they were to provide the customer with good value and service, to have a good relationship with its associates, and to be involved with the community.