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Competitive analysis of costco
Swot analysis for costco
Walmart SWOT analysis
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Recommended: Competitive analysis of costco
Analysis: Costco’s success is related to the company capabilities and resources to help Costco managers single out and focus on all the factors needed to craft a winning strategy that fits the company’s overall internal and external situation. We will proceed with the Costco’s SWOT analysis, as the SWOT analysis is a simple and powerful tool for sizing up a company’s entire relevant strengths and weaknesses, its market opportunities, and the external threats to its future well – being (Thompson, 2018). Internal Analysis: Strengths: A distinctive competency in price: Costco sells products at very lower prices than competitors do and builds big warehouse style superstores that contain an extensive selection of products at a lower price. Costco’s …show more content…
In 2018, Costco expects to open 20-25 new warehouses and relocate warehouses (Costco, 2017 Annual Report Final). Expanding the company’s product line: Costco can expand its product mix, which is currently limited compared to competitors such as BJ’s and Walmart. E Commerce: Costco has a strong presence in E- commerce, which is growing globally. For instance, Costco operates e-commerce in U.S. and Canada. Online businesses provide customers additional products and services, that may not be found in our warehouses. In addition, online marketing can be a great tool in venturing into new markets and attracting more customers. Private label: Costco’s Kirkland Signature private labels provide clubs with the opportunity for higher gross margins. In addition, Costco can increase the number of Kirkland Signature selections and gradually build sales penetration of Kirkland brand items. …show more content…
Current ratio formula = current assets /current liabilities. According to Costco balance sheet 2017, Costco current ratio in 2017 was (17, 317/17,495) = .99%. Costco current ratio is under 1 in 2017. Costco needs to take a closer look at the business and increase its working capital to eliminate any liquidity issues. For most industrial companies, 1.5% is an acceptable current ratio. Quick Ratio: is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. Quick ratio formula = current assets – Inventories / current liabilities. For 20017, Costco Quick ratio was (17,317- 9,834) / 17,495 = 43%. This low quick ratio is an indicator that Costco is over leverage. Debt-to-equity ratio: Evaluates the capital structure of a company. A ratio of more than 1 implies that the company is a leveraged firm; less than 1 implies that it is a conservative one. Debt-to-equity ratio formula is Total liabilities / Total Equity. In 2017, Costco Debt equity ratio was 2.28. This means Costco will not be able to generate enough cash to pay its debt
Price: All the Costco products have a maximum mark up of 15%, keeping their prices competitive and almost always cheaper than their competitors which usually mark up at 25%. In the video the founder is seen comparing the price of one of their products (a toy truck) to Sam’s Club which was offering it at a lower price, and reconsidering their pricing for it. Their pricing does however force the consumer to buy the product in bulk- making them assume that they are getting the best possible price.
Costco’s business strategy is different from their competitor’s in the wholesale retail industry because their purpose is to keep overhead down and pass the savings to their customers. They do this by choosing not to advertise, sell fewer brands and having an innovative approach by having their own manufacturing facilities for a variety of merchandise. Costco does not market their warehouses and their marketing is through word of mouth from current customers who also must have a membership to shop at Costco. When compared to Walmart Costco sells four brands of toothpaste and Walmart sells sixty brands of toothpaste. Costco can buy more for less from the manufacturer of the four brands of toothpaste and pass the savings on to their customers. Costco’s strategy is to sale a limited number of items because this strategy according to (Lutz, 2013) “increases sales volume and helps drive discounts.” Because of Costco’s profitability in the retail market they have managed to continue to be profitable even in an oppressed economy. Costco’s focus is on high-end customers indicated by some of the brands they carry such as Coach Handbags. Costco offers three different levels of membership and is only open to customers who have a membership. Costco’s philosophy is they do not advertise or markup items more than 15% in order to save their customer’s money. These practices lowers the overhead costs and continues passing the savings to the customer. Costco is an international company and has (Costco Wholesale Corporation, n.d.) “462 locations in 43 U.S. States & Puerto Rico; 87 locations in nine Canadian provinces; 25 locations in the United Kingdom; 10 locations in Taiwan; 9...
However, it does not operate any stores outside of the United States, so it does not present a international threat to Costco. Sam's Club, another membership only warehouse club, owned and manage by Wal-Mart. It works mainly in the United States, but has fews in only 3 foreign countries. Anyhow, we can say that Costco dominates the global market for American membership only warehouse clubs. Compared to his competitors , Costco has been a sucess on the international market with a strong value proposition and mission, but mainly a strong strategy in theirs decisions to enter or not in a specific market. For exemple Costco has an inventory turnover ratio of 11.3, which is better than its main competitors, Amazon.com, Inc. (Amazon). Amazon inventory turnover was 7.6 in 2015. With the given turnover ratio, the company take way more days to sell its stock. By having a better inventory turnover ratio and the lowest inventory turnover days possible mean that the company enhance low stocking costs, which increase the overall operating performance. As well we notice that they increase theyre gross operating profit almost every year. However the main profit come from the US territory while the company is struggling in international locations, where comparable-store sales dropped by 8% in Canada during the month and 6% for all of its other international locations combined. This issue is mainly the result
There is a reason that it is the second largest and continues to grow. There are many things we can take from what Costco has done. Craig Jelinek said “treat the consumers with respect and treat employees with respect, good things are going to happen to you.” He treats his consumers with respect and they keep coming back to buy more good at the lower prices that Costco has. All of the benefits that he is giving his employees between their wages and healthcare, this in return puts money back in the economy and makes for a healthy country. Another thing to learn from this is creating a happy work environment. By treating its employees well Costco believes that it is creating a happy work environment in which they believe will result in a more profitable company. Also what you can learn from Costco is they are marking things up by fourteen percent or less. This is attracting customer to their goods, and as stated in the article by David Schick “they are selling more olive oil, more cranberry juice, and more throw rugs than just about anybody.” This is allowing Costco to get larger discounts from their suppliers and allowing Costco to set the industry’s lowest price. Some simple things as that are good to take away from what Costco has done. Treating people right makes them want to come back, lower prices helps you sell more and get larger discounts when you buy things, and helps you
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 and with more than 600 warehouse locations in North America, they have a huge presence. This leads to an image of stability, creating more member opportunities, leading to membership growth and loyalty. High membership loyalty With more than 90 percent membership loyalty, Costco has a captive audience and with membership comes sales.
Costco Wholesale is type of retail store known as a Membership Warehouse Club. This means that they sell items in bulk to customers that have paid for membership. Costco has three types of membership which are Executive, Business, and Gold Star. Executive memberships cost $110.00 per year, and each member receives a 2% reward on most Costco purchases. These members also receive additional benefits and discounts when shopping at Costco. The Business Membership costs $55.00 per year and is made for business owners and managers. A business membership can have up to 6 card holders on their account for $55.00 each. The Goldstar membership is $55.00 per year and is for individuals and households. Each of these types of memberships can be used for
The current ratio measures the ability of a business to pay back their liabilities. Kroger’s current ratio for both years was under one, which shows that Kroger has more current liabilities than current assets. This could predict that Kroger is not in good financial health at this time. However, some of their competitors have current ratios under one too. The grocery store industry trends to have lower liquidity ratios, because they keep lower levels of current assets. Their ongoing sales help pay upcoming liabilities. Still, business owners and investors would be looking for a current ratio over one at least.
Costcos threats might include competitors such as Sam’s Club and Walmart. People might pick Walmart over Costco because Walmart does not require a membership in enter and it carries more name brand products. Sam’s Club is nearly the same thing as Costco. The only advantage someone may see to buying from Sam’s Club is that they might be more convenient or they might have more name brand
CVS Health Corporation is very popular in the world of retail pharmacy. This corporation’s strengths, weaknesses, opportunities, and threats can be reviewed by a simple SWOT analysis. In order to get a basic picture of how well the company is performing, it is important to look at all aspects of a SWOT analysis. By including both strengths and weaknesses in a company’s analysis, there is less room for bias for or against the company. According to an analysis created by Marketline, CVS’s strength comes from its large network of stores, ExtraCare loyalty program, and strong financial performance (“CVS Health Corporation SWOT ANALYSIS,” 2015). There are also several opportunities available to the company, such as possible acquisitions, new walk-in medical clinics, and the increased demand for services by the aging US population. CVS is a strong company; however, according to Marketline, “allegations against CVS’s refill practices triggered monitoring and investigations, and threats against CVS include
Costco manages membership warehouses and sells branded and private labeled products in a variety of categories. The company offers packaged foods of large quantity, apparel, electronics, garden/patio, health/beauty aids, furniture etc. Costco is also engaged in the business of pharmacies, food courts, photo processing centers; which are all implemented in the warehouses. In addition, Costco provides membership services to its customers with the choice of goldstar or business.
The treat of new entrants for Costco is low because there are many advantages that Costco has compare to its competitors. Phalguni Soni indicates that “A new competitor would also find it much harder to have the same recognition for consistency in pricing and products that Costco has, as the company has been around for decades. It would also require scale in order to pose a significant threat to Costco” (Soni). It is clear that Costco’s brand recognition is strong in not only the U.S. but also other countries where it operates. The company have operated for a long time with a large number of warehouses in all of the states of the country, so it will be the first obstacle that any new entrants have to encounter.
Strong Brand Name: Costco has crated a very loyal customers base by providing customers with high quality products, low prices and merchandise selection. This has allowed Costco’s to grow its market share and increase its customer base from its beginning.
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.
Customers are able to trust Costco. The company makes sure that people will know the better quality goods that it sells than other companies. The first thing that customers
Costco Wholesale is a multi-billion dollar overall retailer with dispersion focus club operations in eight countries. They are the apparent pioneer in wholesale field, dedicated to quality in every zone of their business and respected for their unprecedented business ethics. Despite their immeasurable size and extension in overall improvement, they have continued giving an agreeable domain which their laborers thrive and succeed.