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Costco's business strategy
Costco case study in business strategy
Costco's business strategy
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In order for Costco to maintain its market position as the largest membership-only warehouse club in the United States, they must identify external factors such as opportunities and threats that affect their market as well as develop strategies that address these factors identifiable in the PESTEL analysis. The PESTEL analysis of Costco Wholesale Corporation indicates that the company has many opportunities for growth in most of the dimensions of its macro-environment. However, the company must also create plans to protect itself from the threats in the
industry.
As a whole, building a Costco in the Longview/Kelso area would be exponential in improving this area's economic state. Being the most productive and profitable warehouse club chain in America, Costco building in Longview/Kelso would bring more business to this area and have a good effect on the economic state of our cities (Longo). Almost anywhere there is a Costco Warehouse, there is life and sustainability. Portland, Vancouver, and Camas thrive and they all have something in common; they have a Costco. Citizens love having a Costco nearby and Longview/Kelso would gain much from having one. One thing Longview/Kelso would gain from having a Costco, would be that Costco brings business into towns. Next to an average Costco, a customer could
Associated Wholesale Grocers (AWG) came into being more than eight decades ago when several independent retailers decided that the power of a cooperative far outweighed the influence of any one individual retail grocer. AWG provides distributor services to independent grocers in over 30 states with nine distribution centers throughout the South and Southeast regions of the country. In addition to their wholesale foods department, AWG offers a myriad of services from new store design, construction, marketing, product placement and “world class” logistical consultation (cite 11). AWG faces many of the same logistical challenges that other similar wholesalers face to include rising fuel costs, inclement weather, stringent timelines and an ever evolving need for stringent quality. One method to exploit a business’s positive and negative attributes is through the use of a Strength-Weakness-Opportunity-Threat analysis, or SWOT analysis (Cite 11). If used correctly, the analysis results can give insight into potential market areas of expansion and expose vulnerabilities to senior leadership so that they can be mitigated. AWG looks at its Supply Chain Management (SCM) as an integral part of its core business offering multiple services such as logistics to new co-op members. The team members of AWG are positioning themselves for sustainable success, now and in the future.
It is through following these statements that will bring a firm success in the future. However, external factors outside of a company’s control can negatively affect the expected targets and steer the company from their mission & vision. Most companies do not have direct influence on this kind of environment (Harrison & St. John, 2014). The following three sections will evaluate the external forces & trends for Dick’s Sporting Goods. The following also will elaborate on external factors from direct competitors that faces Dick’s Sporting Goods. I will conclude on what other threats Dick’s Sporting Goods can expect to see, and how they can place a buffer in between these factors to stay on track towards their mission &
According to Smithson, Walmart can expand its markets to new and emerging markets especially in the third world countries, which can significantly increase its revenues. Secondly, the company can reform is employment practices and improve the quality standard and in doing so, attract more customers and improve its brand image. On the other hand, the company faces threats such as the rising healthy lifestyle trend I that the company in most cases does not provide customers with healthy goods. At the same time, the company can capitalize on this aspect and increase its revenues. Aggressive competition from other discount retailers such as Target creates a great threat to the company (Smithson, 2015).
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
Costco’s business strategy is providing high end goods in bulk with low price, the benefit of Costco’s flexible prices is that they can control it to save on budget costs such as packaging, while protecting the promised quality. Costco’s primary target market are large families, upscale customers, and small businesses it offers refunds for all the products
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").
Every company and/or organization starts and operates to achieve a single major goal, which is normally included in the company’s mission statement. Setting a goal, however, does not translate into success on its own; it is only the fist step. Understanding market segmentation is the second most important aspect of doing business. “Sellers and advertisers want to be able to determine what the potential market is for their product or service, as well as the best ways to reach potential consumers” (Terrell, 2013). Once a goal is set, an organization first must decide if it wants to operate locally, regionally, nationally, and/or internationally, as the size of the geographic coverage has a large influence on demographic coverage. It is crucial for a business to understand what it is meant by demographic coverage; it is to understand people’s age, gender, culture, social norms and beliefs, and income in a given geographical size (Grewal & Levy, 2010). Let’s take a high class and luxury bar as an example to explain the importance of these key factors. If the bar is located in an area where the average age is 60, it will be safe to assume that the business will have difficulties finding many customers. Similarly, the business will not be able to survive if it is located in an area that has a lot of Mormon or Muslim residents as drinking alcoholic beverages is prohibited by these religious practices. On the other hand, if the said bar is located in an area such as San Francisco where the average age is around 38 years old, the median income is ~$70,000, and the culture is a melting pot of many races with many beliefs and behaviors, it will most likely thrive to its full potential (city-data.com, 201...
We decided to use the PESTEL model for our analysis of Prince Puckler’s external environment and found that nearly all of the aspects of the model, outside of technological and political, had a strong impact on the company. Economic factors play a sizable role in the industry, for example, when the economy is in a downturn ice cream is seen as a luxury good and people purchase less of it, while in normal economic times more ice cream will be purchased. Several factors affect this change in consumption including unemployment rates and disposable income. Social factors, including education levels, wealth and lifestyle trends in the local population also have an impact on Prince Puckler’s external operating environment. All of these social factors vary wildly in Eugene, as the education level fluctuates from high school to college degrees and wealth can vary wildly. These factors, however, do not have a large impact on Prince Puckler’s because your average person will be able to afford ice cream regardless of their education level.
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.
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 Our decision is to invest in Wal-Mart. The choice for Wal-Mart is on the basis that their functional-level strategy is really robust, nevertheless of the fact that they do not treat their employees well. The fact remains that they are financially stronger, have a better business-level strategy, and have a corporate-level strategy than Costco. Costco v. Wal-Mart: What must we learn about them?
Target is the second leading discount store in the United States, which makes looking at market structure easy to identify. In this case Target would be considered a perfect competition market structure due to several factors. This type of marketing structure also helps to explain the financial performance that Target has and how it is able to maintain its position among the U.S.’s discount stores. By understanding more about market structure, we are able to understand how companies, such as Target, are able to be so successful.
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.
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.
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