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Costco Business Analysis
Marketing strategy of costco
Costco Business Analysis
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Market Analysis Costco Wholesale Corporation is a large corporation with a total of 721 stores worldwide club operators over the past 15 years. With Growth earnings at an average annual rate of 11% for the next five years, and 12.12% forecasting earnings increase for this year. Close to 6000 quality products from furniture to Food to electronic goods are offered to customers with a membership. 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
to boost customer satisfaction. Costco started offering online shopping which made an end revenue of $100 million in just three years. Costco strives to be eco-friendly by using recycled materials for their packaging to look more attractive in the customer’s eyes. Costco keeps an eye on supply availability, any scarcity due to labor strikes or political factors can cause customer annoyance, which will affect the sales. Costco buys directly from its supplies, making sure to keeping a close relationship with them as well to the exclusion of any delay in receiving the products, giving their customers the freedom of purchasing whatever they need as quickly as possible.
Kohl’s also boasts a loyal customer base and strong brand equity. These strengths are critical to offset their weaknesses. Flaws include an imbalance on sales for men’s products and a lacking online presence. (Kohl's Corporation, n.d.) Another way that Kohl’s is actively counterbalancing their negatives is by capitalizing on opportunities. Kohl’s has found that their beauty sections are an immense source of opportunity. As a result, the company is expanding those departments in an effort to capture those sales that would otherwise go elsewhere. (Wahba, 2014) Finally, Kohl’s keeps the knowledge of their threats at the forefront of their decision-making. They understand that their coupon system can be abused and cause profit losses. They also recognize that price wars in their industry can also be very damaging. As a result, they are working towards more secure methods of offering savings and strategically making efforts to remain the leader for price setting. (Wahba,
Many steps are taken while marketing a product or company, such defining a target market and researching the best approach to gain customers (Solomon, Marshall, & Stuart, 2012). Due to market fragmentation, many markets can be divided into small subgroups allowing for a better marketing approach. As seen in the marketing approach of the product Cheerios, understanding smaller target groups can create specialized campaigns to reach consumers, which increases brand loyalty and sales. In 2014, Mark Addicks, General Mills Chief Marketing Officer, stated with the new technology age his company has began a new approach focusing on new target markets such as expectant moms, which require folic acid that can be found in Cheerios (Schultz, 2014). Cheerios
Costco Wholesale Corporation was an uncommon type of retailers called wholesale clubs. These clubs differentiated themselves from other retailer by requiring annual membership purchase. Especially in case of Costco, their target market is wealthier clientele of small business owners and middle class shoppers. They are now known as a low cost or discount retailer where they sell products in bulk with limited brands and their own brand. The company is competing with stores like Wal-Mart, SAM’s, BJ’s, and Sears.
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").
Costco is a membership warehouse club that dedicates itself to providing the members of Costco with a wide selection of products at the best possible prices. Costco promises their members products of great quality and value and if the member is not satisfied, they will refund the money back to the member. Costco pays their employees much better than Sam’s club, a competitor of Costco, with Costco paying $15.97 versus Sam’s Club paying $11.52 (Cascio, 2006). Costco also provides a heath care insurance plan that covers 82% of their employees where Sam’s Club is at 47% (Cascio, 2006). Costco employees are covered by a retirement plan with the company contributing an average of $1,330 per employee versus 64% of employees at Sam’s Club and the
Product: Costco doesn’t have a lot of product options, with usually only a few different types of the same product. But they offer a huge variety of products as they aim to be a one stop shop for everything the consumer needs. They also offer a variety of services such as photo printing services, car rental, and even life insurance.
Nguyen, A. (2013, April 12). Costco: From Concept to $1 Billion in Three Years. Costco Wholesales Corp. . Retrieved April 6, 2014, from http://lindaperry.us/aec3033/AdNguyen2.pdf
Costco is into Services Sector. It is part of Industry which deals with Discount &Variety Stores. Costco operates membership warehouses where it offers various types of merchandise like household consumables, Electronics, Automobile, garden etc. to its members. Costco is well diversified and also operates Pharmacies, Gas stations, Travel business etc. Thus it fulfills almost every need of its members. It boasts of 600+ warehouses across 8 countries with earnings in excess of $2 Billion on Sales of $100 Billion. It has 184,000 employees worldwide and more than 1000 suppliers who have to follow a rigid & comprehensive supply chain & quality policy.
Recommendations to achieve a sustained competitive advantage: Online, mobile, and store purchase will certainly increase customer traffic with the online and store combinations gives Target Corporation with a best possible low-cost price. A best-cost provider strategy allows Target to position itself and compete with low-cost providers such as Walmart. In addition, it employs a competitive strategy with a designer label along with superior supply chain, increased operational capabilities, and skilled employees. . The strategy of sending coupons are huge for a customer, so increase discount based on their purchase history and use the store brand credit card to attract more customers.
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.
This research seeks to reveal the importance of marketing strategies in today’s complex and competitive business world. For this reason, this study will discuss various theories, issues and approaches of the marketing linking them with W.L. Gore & Associates and thereby propose the best options, ideas, strategies and techniques for the improvement of the company. To reach the points, this study will especially collect secondary and qualitative data and information.
Control systems – Costco has an Enterprise Facility Information management system, each Costco is connected to corporate, the EFIM provides real-time information, management of control systems (like energy), and an inventory management system that allows suppliers to monitor their own stock levels at any Costco. The EFIM reduces costs related to energy consumption, maintenance, and contracted services
As of 2016 there were 2,250 Chipotle restaurants worldwide. (Number of Chipotle Mexican Grill locations worldwide 2007-2016, 2017) Another interesting fact about Chipotle, is that in 1998 McDonald’s started investing in shares of Chipotle and by 2001 they had become the majority shareholder. In total McDonald’s invested over $360 million into Chipotle. (Myers, 2014) Although they have since split ways, the investment McDonald’s made into Chipotle helped to boost the growing power of the new to market concept burrito
At the end of 2012, Costco was a successful business; however there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. 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 preopening expenses have been increasing steadily and they need to balance this out to keep a positive net income.
The third strategy is focused on increasing value for their customers. This strategy has become a key element in helping retailers increase sales. Just in the last few years, Whole Foods has implemented a competitive price match program. Since it has proven successful in increasing sales, Whole Foods has plans to implement other cost savings measures for its customers. They are expecting to decrease their gross margins to those experienced in their stronger years.