Costco Business Model Essay

4) Concepts 4.1) Business Model Business model is the way in which a company creates value for its customers, while at the same time generates revenue and makes a profit from company operations. According to a recent research note by Morgan Stanley analysts, “Costco operate one of the best business models in our space” (Taylor). Costco business model has the ability to use economies of scale to buy large amounts of goods from suppliers at low prices and set minimal profit markups and then to pass these savings onto its customers by providing high quality products at lower costs. Costco operates a membership only warehouse club business model. In this model, consumers can access the products and services available at Costco by paying an annual membership fee. According to Motely, Costco membership renewal rate for last year was “91% in the U.S. and Canada and 88% globally” (Bowman). This clearly shows Costco has a strong loyal customer base, and customers value the product and services offered by Costco more than the membership fee. Morgan Stanley research states, the “underlying health and loyalty of Costco 's consumer and the profitability of the model remain intact” (Taylor). Therefore, it is clearly visible the Costco’s business model creates outstanding value for customers and yield attractive profit. 4.2) Objectives Business…show more content…
Any changes of the labor laws and tax reform can create opportunities as well as threat to the company. Costco pays high wage rate, which is well above the minimum wage requirement of labor law, to its employees, the employees’ performance is far better than the minimum paid employees. Here, the company not only meeting the legal requirement but also exceeding the requirement increases the overall business

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