Strengths Quality name-brand products at low prices. This is the cornerstone of the Costco business model and one of the biggest drivers of their success. Costco has built an identity based on this strength. Fast inventory turnover and High sales volume This is a key strength that directly relates back to the first strength. Fast turnover means they are collecting on their purchases often before payment is due, cutting borrowing costs and further reducing prices. Their high volume adds to this, allowing for bulk purchasing and strong purchasing power, resulting in lower costs. Strong market presence and high brand recognition Costco benefits from the fact that their name is associated with quality and low prices. They are highly recognized In a tight economy, the less affluent may have a hard time justifying the membership cost. Lower profit margins Lower profit discourages investment and gives an appearance of poor performance despite how well the business is performing. Low margins also leave little room for market fluctuations and situations like holding inventory longer alone, may lead to profitability issues. Small product mix Sometimes it’s all about choice and it the brands or product mix gets old in the eyes of the customer they will go elsewhere. The same products all the time can force consumers to look elsewhere for what Costco doesn’t supply and eventually erode membership. Older, more affluent demographic (Infoscout, 2016) The aging population will eventually shrink and unless Costco starts appealing to the younger, less affluent consumer the membership will start to contract. Opportunities Increasing Geographic presence Costco’s international presence is small but is also growing faster than in North America (Soni, 2016). This is a huge opportunity to become more of a global player and expand their market, leading to less vulnerability due to the North American Increasing a presence in this area would go a long way towards attracting the younger demographic and bridge that gap. Costco is doing a great job in the physical segment and if they can extend into the virtual market, they can grab a portion of the growing virtual business currently dominated by players like Amazon. Threats Online competition With the advancement in age of the current Costco demographic, the online presence of Costco is going to play an important role and it may eventually make or break the company. Either Costco has to proactively ramp up that area or they will become obsolete. The younger demographic is less likely to do anything in person, they want the business to come to them. With more retailers offering free shipping, the Costco bread and butter of the in-person shopping experience could dry up quickly. Warehouse retail competition Anything successful is often replicated and that where the threat lies. Either tweaks in policies such as Walmart paying their employees more in line with Costco workers and bridging the service gap, or new players coming in and stealing market share, Costco has to stay ahead of that threat. They need to keep streamlining their business and keeping it relevant or they will soon become yesterday’s
Promotion: Costco doesn’t have any conventional marketing/ promotion strategies like their competitors as they are not big on advertising. They email and mail their members flyers and product descriptions which help them maintain their customer retention. However, they don’t actively advertise to new customers, primarily relying on their current customers to advertise by word of mouth like Kimberley Peterson, the
My organization, Trader Joe’s, is not an international business. Their stores are all located in the United States; therefore, I chose Whole Foods, who is a main competitor of Trader Joe’s for this assignment.
They will continue to add more stores and expect to open its 3,000th store during the first half of 2005. Their ability to generate significant net operating cash enables them to continue to invest in product innovation, new technology, and the ability to strengthen its leadership in the industry.
Costco Wholesale Corporation was an uncommon type of retailers called wholesale clubs. These clubs differentiated themselves from other retailer by requiring annual membership purchase. Especially in case of Costco, their target market is wealthier clientele of small business owners and middle class shoppers. They are now known as a low cost or discount retailer where they sell products in bulk with limited brands and their own brand. The company is competing with stores like Wal-Mart, SAM’s, BJ’s, and Sears.
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").
“Culture is not the most important thing. It’s the only thing.” (Gabler, The Magic in the Warehouse, 2016). It has been said that “Costco acts more like a cheerful cult than a hard-driving business.” (Gabler, The Magic in the Warehouse, 2016). Costco hasn’t wavered from their founder’s strategy of promoting within; over 98% of their management started their careers with Costco. This strategy clearly works; the environment is one of family not just coworkers. They are loyal to the brand and motivated to work hard and climb the corporate ladder. Costco sees this as ensuring the future of their values which in turn ensures their
Looking at increasing net margin by 3% in 2018 for Chipotle, Chipotle will need to push through the negative media attention they have received and once again become a much more competitively advantageous company. Chipotle should take a look into their day-to-day businesses and costs associated with that business. One notable fact about Chipotle is that they do not offer franchising opportunities. Franchising is a great way to revitalize business, especially in Chipotle’s current condition. However, since Chipotle is still not looking into franchising, they can look at reducing operating costs for
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.
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
The value that each consumer adds to the economy is $46,000. This is a good GDP per capita when looking to expand into a new country. Currently 33.4% if the countries overall GDP is in Industry. Overall, this is a fair indicator on entering the country. Costco is in the Industry sector, and it is not the highest composition by sector. This does not mean that the company will not succeed. The company has a stable GDP growth rate, which indicates that Sweden’s economy is expanding at a healthy rate. Sweden’s inflation rate is nearly nothing. This would mean that the customers and Costco would get the value of their dollar, which is a positive sign. When evaluating the success of entering the Sweden market, the unemployment rate is somewhat shocking. Sweden’s lowest unemployment rate ever was 1.3%, it is currently at 7.9%. I don’t think that this would hurt a company that was entering the country. Costco would have a good sized labor force to choose from for their employees. Of that labor force, 43% have secondary education. This is a fair pool of people to select management from. Entering the Sweden market as far as business friendliness would be a good. Out of 189 countries, Sweden recently increased their rank to number 11 in regards to the ease of doing business. This is an indicator that Costco would not have a difficult time with the government and business
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.
... strategy of cutting cost is planned in the next one or two years by 2016. The target for online shopping that the company estimates to increase by 8 million people is to be achieved by 2020.
Key Issues: At the end of 2012, Costco was a successful business; however, there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise.
Historically, Dollar General operated in a highly price sensitive market segment, with 55% of its consumer base earning an average annual gross income of less than $40,000.[2] To attract these customers, Dollar General employed an Everyday Low Price strategy similar to Wal-Mart’s. Thus, keeping costs low and driving high traffic volumes were critical to the company’s financial success. Dollar General achieved this strategy in several ways, including keeping rents and labor costs low, locating in low-income, high traffic areas that offered consumers few substitutes, and offering a wide variety of popular CPG and white label goods.
Size of current customer base and market share is small (potential growth and new advertising agreements)