A case study analysis of costco wholesale
Document Type:Case Study
Over time, Costco evolved undergoing changes in its lead up and developed into an international firm to the extent of opening 698 warehouses amongst them 488 warehouses in the Puerto Rico and the U. S. A, the rest are located as follows: 2 Spain, 12 South Korea, 11 Taiwan, 8 Australia, 36 Mexico, 27 the U. K, and 24 Japan. In the year 2016, Costco categorised as the world is the seventh leading store and the third biggest in America. ii. Another opportunity is the emerging markets that are growing rapidly especially markets in developing worlds. iii. The Slow pace of growth experienced in the American market is an opportunity for Costco to expand. The rapid growth in the developing countries also presents an opportunity for Costco Company to expand its operations to other new markets elsewhere in the world.
The policy of Animal rights is favourable to Costco. Partly businesses depend on political decisions and factors to operate, for example, if a country, region, or place is torn apart by warring groups it is clear that businesses will not thrive and it will be common seeing them closing down operations. Costco’s case is not different when it comes to how it interacts with political factors in its operations. Political stability is the number one priority for the many stores to run in many countries where they are located. Like other businesses, Costco entirely opens its operations in countries that are stable politically and those that present political ideologies that support firms to thrive well. Shifting consumer behaviour in the social and cultural sphere is to the advantage of the firm.
The consumers of Costco items are likely to shift their consumer behaviour given that the social or social-cultural environment is likely to have a serious effect on them. In the case of this company, the contemporary rise in demand for social responsibility presents a wonderful opportunity for Costco to increase the cooperate social responsibility arrangements, improve its brand strength, refurbish its band image and by this the customer confidence shall have been won. Moreover, Costco may improve how to treat the customers to achieve their satisfaction by revising their policies and implementing strategies and policies for better the existing environmental performance and improve their environmental performances. Regarding the social-cultural factors, there is an opportunity where Costco may aim at satisfying customers full and interest groups as well.
The technological factors that affect Costco present more opportunities than they make threats to the expansion businesses. The influence ecological factors on Costco wholesale business a) Climate change pauses a threat to Costco. b) The embracing of Low-carbon fuel lifestyles by the American society is an opportunity to the electronics business and Costco as well. c) There is also the threat of collapsing bee colonies. The danger of climate change threatens the existence of Costco Wholesale Corporation since the business sells products that are related to or relies much on climate conditions that are at their best. To solve the GMO issues the company must pass regulations that require an accurate labelling of its GMO food products (Thompson, Strickland, & Gamble, 2010). There are as many threats as the opportunities facing Costco Wholesale, and the first step has to be dealing with the threats and finding each threat a lasting solution for the business to be a success.
Industry-shaping Economic features. Top of Form (Thompson et al. , 2010) Writes in case 04 that in 2016 Costco was operating 698 membership warehouses where 488 of them were located in the United States and Puerto Rico. The stores had an intent of wooing the buyers by giving them using their low prices. As the customers kept coming to the store to get the low prices, the in return drove Costco’s sales volume high. For many years, the strategy of pricing used by Costco was aiming to restrain its brand, merchandise markup at 14 per cent compared to the normal 20-50 per cent offered in other stores similar to Costco regarding service and supermarkets as well. For example, mark-ups of the private Costco Kirkland signature items made them be priced as low as 20 per cent below comparable brand names (Thompson et al.
Porters analysis of Costco wholesalers Michael porters invented the five Fs that shape a strategy in his revolutionary article and any business can be analysed for viability using the five Fs. was unseen until recently when Apple surpassed the profits of Microsoft Company. Likewise, the new and emerging competitors might be ignored in their simple states only to grow with time and overtake the organizations formerly known as the mother or parent organizations. Costco Wholesale must take into consideration the small wholesalers who are entering the markets as start-ups or as once fallen giant that is slowly rising back. For it to sustain the competition that these firms approach the market with, Costco Must keep abreast the changes in the current trends in the market technology and economic shifts, as well as spot opportunities in the market for expansion so that the firm remains relevant to the markets(Thompson, Strickland, & Gamble, 2010).
Costco has to manage innovations and inventions that the start-ups bring to the market that makes the differently endowed and uniquely endeared to customers’ problems and solutions. Those who are not satisfied with that can move to other low-costing stores like Wal-Mart. However, small transitions like have little or no effect at all on the store’s profitability. Therefore, the store has full control of customer and supplier bargaining power (Grant, & Walsh, 2016). Substitute goods are those products and services that may be similar or dissimilar by they serve the same function and can be used one in place of the other. The threat from substitute goods is real for businesses as customers can easily acquire goods that can serve the purpose of the goods very well without necessarily buying your goods or depending on the services offered by one firm.
The firms generally compete because of offering low prices on all products they offer. This makes the threat of competitive rivalry less since it is evidence that, few firms have established themselves in the market and they play a superior league regarding competition, the smaller firms, and start-ups are not able to stand the stiff competition. The current existing rivalry competition among the companies lies between moderate and low. Rather than competing for a limited market Costco and the main rival companies need to work, together to ensure they not only expand the market coverage but also widen their scope of operations. If Costco do a product differentiation it will make the product unique and easily identified with the company something which will make it to stand out from the rest of the organisations offering similar goods for sale.
The other argument to consider is whether the forces are performing to make competition to become intense or less intense. The combined effect on the industry has to be taken into consideration and whether the industry will increase or lower its profitability due to driving change factor. The industries key success factors Key success factors are the overall competencies, achievements in the markets and competitive capabilities that have huge effects on the success factor of the future of the organization. Some of the key success factors of Costco are the overall low cost of products which is the mission of the Costco wholesale and which is very useful in edging out competitors in the same field. As enlisted by their second CEO and co-founder Jim Senegal (case 04) customer satisfaction and relation are part of the company’s strong key success factors Either, Costco has a talented and highly skilled workforce that is aggressive and led by an experienced and highly innovative CEO known as Craig Jelinek.
The website also enables customers to place orders easily and Costco receives them with a lot of easy and makes the delivery. In connection to this, thereby improves the marketing side of the store and gives the store a competitive edge over other stores, which have not yet embraced the full use of technology in their operations. A correct analysis of key success factors of Costco is likely to help the company raise the correct or accurate strategy that is economically sound and viable as well. When a company finds itself in a better position on one or more key, success factor it remains better placed and at a vantage point compared to its rivals in the market. The management of Costco should avoid the lure to identify and label a key success factor as important to the company when it, in fact, has little or no significance to the company at all.
There is also Target retailer based in the U. S who are a rival company to Costco and Wal-Mart. Back in 2016 target made sales wortth69. 5 billion U. s dollars. In 2016, the store had 81 million cardholders in the same year who were entitled to shop at the store, and as a result, the store made close to 2. 5 billion dollars from membership cards only (Thompson et al. Per store, the yearly sales of all the Costco stores averaged at $166 million worth of sales or an average of 3. 2 million dollars’ worth of sales per week for the year 2016. The results above are 86 per cent higher than the closest competitor of Costco who is which had $ 89 million per annum, which translates to 3. Financial analysis In 1976, the price club, which currently goes by the name Costco wholesale, lost $750000 U.
S dollars in its first year of operation. However, in 1979 the sore had 900, employees, two stores and over 200, 000 members. Several years later, the company in 2016 there is $2. 5 billion worth of cash from cardholders only (Grant, & Walsh, 2016). It also shows how the company’s payable turnovers have declined from the year 2007 to the year 2011 The table below is an example of Costco wholesale operative data from the financial year ending 2007 until the year 2011. From the table, it can be noticed that the net sales are decreasing from 2007 to 2011. Costco financial activity ratios analysis Below are some of the financial ratios that show how the Costco wholesale has been performing day today from the year 2007 to the year 2011 ( Costco case study pg, 4) So far, the company’s strategy of lower prices is working fine as the firm is making profits and achieving its set milestones with its current strategies.
The target of retaining customers has become a reality, and the firm is expanding to other countries to look for more market in addition to being profitable. All these are proofs of a working strategy (Grant, & Walsh, 2016). Thirdly, the company faces stiff competition from mortar and brick and other online retailers, which limit revenues and profits. Besides, the weaknesses create vulnerability for the company towards losing its clients or market through negative attitudes from the public (Grant, & Walsh, 2016). Opportunities The company’s opportunity works towards improving business practices and expanding the firm internationally. The possibilities arising from global economic situations. The growth in the emerging global retail market creates an opportunity to enlarge their business and increase revenues. Additionally, the firm is vulnerable to facing threats from rising prices on commodities and resources, which can limit its key strength of providing low priced products (Grant, & Walsh, 2016).
Any business has to identify its marketing strategies given their customer satisfaction. Besides meeting, the geographic, psychographic, and behavioural marketing segmentation, demographic factors also make a significant effect that many companies consider while marketing their products to a targeted group. Costco Company offers cosmetic products to its consumers in that it has to view gender, age, education and income level of its customers so that it can evaluate on how it will market its products to the targeted group. The company’s cost structure may not be very competitive, but it is earning some profits. The issue of G. M. Os warrants special attention from Managers after the issue of cross-border customer satisfaction. THE REPORT TO the CEO 10. Introduction Costco is one of the successful business entity that proves that proper management and effective maximization of available resources triggers to success in the organization.
There is also the need of improving the customer relationship as well as ensuring a conducive working environment for all the employees, an organization that puts the needs and demands of the clients into their work culture not only meets customer expectation but they also get to achieve customer satisfaction. In the modern business environment, this is essential towards creating a competitive advantage over other companies (Grant, & Walsh, 2016). Costco thus requires increasing the client-employee interaction, which aims towards ensuring that the firm understands client needs and demands of quality products and services. One of the ways through which the company can initiate this service program into their culture is by conducting employee training on hospitality and public relations. It will ensure that clients receive quality services and experience when they shop at the Costco stores (Grant, & Walsh, 2016).
Other than planning to automate all issues in the store, Costco should let the sores to be destinations where people can come and have some food, and in return, the store makes some money while others come to enjoy and have fun. That way the customers will have more satisfaction with the store and will need. In addition, the store needs to address the issue of customer satisfaction with totality to ensure the customers are satisfied. Further, clients need access to physical stores due to some reasons. Should the store automate their processes then they need to run the stores parallel with online selling. A. , Strickland, A. J. , & Gamble, J. Crafting and executing strategy: Text and readings. , & Walsh, P. R. Strategic management: BUS 800.
From $10 to earn access
Only on Studyloop