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Costco business model strategy and model for other industries
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Asset utilization ratio analysis of a company used for the group project
Costco has been a strong company for many years. Asset utilization/ efficiency ratio is important for evaluating this company because this ratio is frequently used to compare a company’s efficiency over time. In accounting, asset is an economic resource, which means that anything that is capable of being owned or controlled to produce value has positive value to the company, is considered an asset. The more efficient Costco is with asset management, it shows how well they use their assets to generate revenue. A gain in revenue does not mean they are making profit, but part of the company’s goal is to maximize profit. The main assets we use to evaluate asset utilization are account receivable, inventory, and fixed asset, cost of goods sold, sales and total asset.
Target has been looking for ways to expand. Target’s value proposition is “Expect More. Pay Less.”. This has always been their proposition and it seems to work. Target seems to meet most of their consumer’s expectation and provide the best for them. Target is a competitive retail market to Wal-Mart and Costco mainly because they carry better brands than Wal-Mart. This strategy markets the brand from Wal-Mart. The market is competitive and one wrong move will haunt them. For example, Target’s 5% reward program off purchases at Target locations and on their online website builds million and there are new customers who have not shop yet at Target. Target expanded and builds more City stores and opened 125-135 stores in Canada and they are working slowly to expand to operate 200 or more stores over time. The one recent issue with credit card security has affected many of their sales. There was a...
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...ory ratio, which means that their strong sales and this indicate better liquidity. Costco’s day sales in inventory is much lower which means they take less time to convert their inventory into sales and Target’s days sales in inventory is higher which means they take longer to generate their inventory into sales. Costco also does better in collecting accounts receivable because their days sales in receivable is much lower and target’s days sales in receivable is nearly 10 times higher. Cash means a lot to a company and being able to collect cash faster than their competitor gives them more option. Costco’s asset turnover is higher which means how many times Costco sells or turnover its asset and this is a sign of high efficiency. Costco is known for being efficient internally and externally. Costco takes the upper hand is utilizing their assets to generate sales.
According to Kantar Retail, most of Target’s shoppers are younger on average than its rivals, and more educated. That means it has to consistently offer something different and appealing; it emphasizes more on the latest-trend apparel, eye-catching home décor and exclusive designer merchandise than its competitors. This results in a willingness to pay a bit more for items by customers who are willing to pay a bit more. Moreover, this successful
Target, a high-end discount department store, hoped to continue expanding and adding to the company’s 1,752 stores, by purchasing 200 Zellers stores, located in Canada. One of Target’s, longtime goals was to expand into Canada , and after a decade, the company took a jump across the border (Shaw, 2011). Because many thousand Canadians hold a Red Card, Target’s reward card, Target assumed this would be a successful expansion, increasing the amount of US brands that encompass Canada’s market. Target spent a year converting the Zeller stores, altering and renovating them to transform them into Target Canada, a subsidiary of Target (Shaw, 2011). They opened 124 stores in locations all over Canada, hiring back only one percent of the former Zellers employees, desiring to make a fresh start for the department store chain (Target Refused Zellers Workers).
In order for Target to have been successful, first and foremost, the retailer should have known that they would not be able to beat their competitor, Walmart, in a price war. That alone, is a losing battle. So, a higher quality of products, fewer locations, and a better understanding of Canadian tastes could have propelled the retailer into establishing, for the long term, a profitable global presence with our Canadian neighbors.
Costco Wholesale Corporation is an international chain of membership warehouses operating on the concept that offering members lower prices will produce high sales volume and rapid inventory turnover (“Annual Report” 4). While Costco warehouses are designed to help reduce costs for small-to-mid-sized companies, memberships are also available for individuals (“Company Profile”). The two memberships offered by Costco include Business and Gold Sta...
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
1. The Discount Department Store. Target prefers to be called as the latter instead of just department store. Expect more, pay less. With this tagline, the customers expect to purchase more items and pay the least amount possible. Not like other retail industries like its competitor Kmart and Wal-Mart, Target maintains retail value in terms of product offerings. They are known in their designer’s items in clothes, exclusive beauty products, categorized and functional goods, and seasonal offerings. It also sells the greatest number of gift cards among its rival business.
Target Corporation is the biggest discount retailing business in the US which comes just after Wal-Mart Stores Inc. The headquarters are located in Minneapolis in Minnesota in the USA. George Dayton founded it. It initially started as a family business with a regional retailer shop and later grew into a national full retailer store. The company’s main aim is to offer retail services at friendly rates and, its main attracting feature is discount rates offed on different products in the business. The company has indicated tremendous growth in the retail business. It has a target to outgrow its market and achieve competitive advantage over its competitors. This essay seeks to discuss the competitive analysis and
High quality product a low cost: “Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, and accounts receivable” (Thompson, 2016).
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.
As compared to its rivals, Target has presented its brand as a middle-class brand which assists in attracting customers that find other stores like Walmart unpleasant
Target Corporation being a retail industry, the structure by product grouped to a functional level practices works the best. This is necessary for the other functional levels to collaborate as a single team to produce a positive customer shopping experience. Target Corporation further divided the functional level into a geographic area to exercise management tasks effectively with the given authority. Each structure of the management at the geographic level has a strategy discussion, a line of communication, growth, and progress reporting according to the corporate reporting plan. Jana Potts who manages Target Corporation store has closer to 300, 000 employees working for her and the effective can be improved if the role is broken within domestic into channels, stores into broader segments and a separate global position. The rapidly growing online channel and global expansion are necessary to support Target Corporation's strategy of internal growth and sustain it for long term sustainability. These structural changes will allow Target Corporation to connect with its employee at a functional level and bring changes faster, track and monitor the
In December 2013, Target was attacked by a cyber-attack due to a data breach. Target is a widely known retailer that has millions of consumers flocking every day to the retailer to partake in the stores wonders. The Target Data Breach is now known as the largest data breach/attack surpassing the TJX data breach in 2007. “The second-biggest attack struck TJX Companies, the parent company of TJMaxx and Marshall’s, which said in 2007 that about 45 million credit cards and debit cards had been compromised.” (Timberg, Yang, & Tsukayama, 2013) The data breach occurred to Target was a strong swift kick to the guts to not only the retailer/corporation, but to employees and consumers. The December 2013 data breach, exposed Target in a way that many would not expect to see and happen to any major retailer/corporation.
Opportunities: Target has an opportunity to leverage its strength to overcome some of its weakness.
Target has used the marketing mix very well, and it shows in the yearly rise in sales. The continuation of marketing will be vital especially with the always changing trends in our times.
However, the quick ratio says the opposite. When inventories are subtracted from current assets, and then current assets are divided by current liabilities Costco is king. Kroger comes in second, while Walmart trails closely behind Kroger. The five-year averages for Walmart, Costco, and Kroger regarding the quick ratio is 0.24, 0.53, and 0.27 times. Therefore, when the inventories (much of which is perishable food items) are excluded, Costco seems to be more liquidable than Kroger and Walmart.