Marketing Model Of Costco Business Model Essay

Marketing Model Of Costco Business Model Essay

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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 Fool.com, 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 objectives are measurable performance targets that are set by management for the company to achieve. These performance targets are the results the management hopes to achieve and maintain as they continue and grow the business. The two different measurable performance targets are financial objectives and strategic objectives. Financial objectives are the financial performance targets set by t...


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...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 performance.
4.4) Porter’s Five Forces Analysis
4.4.1) Rivalry Among Competing Sellers
The degree of rivalry among competing sellers is high. There are only three key players wholesale clubs industry, such as Costco, Sam’s club and BJ’s. Costco is on the top by generating more revenue than the other two competitors. However, all these companies offer similar cost saving by offering products at low prices, and compete each other to earn more revenue. Moreover, buyers switching costs are low. Buyers can easily obtain membership from any club and witch their membership from one club to another club.
Bargaining Power of Buyers







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