Costco Is Getting Stronger Summary

In his article, “1 Big Reason Costco Is Getting Stronger”, Andres Cardenal discussed the success Costco has experienced (2014, p. 1). In addition, he compared Costco’s strengths to its competitors, Wal-Mart and Target. Cardenal presented why he believes Costco may continue to grow even stronger.

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

Costco is an excellent example of the economic term “cost leader” which is defined as a company that can make a product more cheaply than other companies making the same type of product (Cambridge Dictionary). As Costco grows, its ability to offer competitively low prices increases, allowing Costco to continue to increase market share and attract more members. Because of its size, Costco achieves greater purchasing power with suppliers, enabling the company to negotiate better prices and more favorable payment options for its merchandise. Also, economies of scale and supply-chain efficiencies create more cost savings as the company’s sales volume grows. By selling more products, Costco can spread its fixed costs among more units, further reducing the impact of fixed costs per unit. This process is a good example of the economic theory of economies of scale, which means that as a company grows and production units increase, a company will have a better chance to decrease its costs. According to economic theory, economic growth may be achieved when economies of scale are realized (Heakal,