Costco mini case study Essay

1. What is Costcos business model? Is the play alongs business model appeal? Why or why non? Generating high sales volume and rapid account disturbance by offering fee-paying members low prices on nationally branded and private-label products. Yes, it is appealing because the fees paid by members allowed for fitting supplemental revenues while the turn e actuallywhere rates allowed Costco to receive cash for inventory before it had to pay galore(postnominal) an(prenominal) of its merchandise vendors.2. What atomic number 18 the chief elements of Costcos dodge? How good is the strategy? Pricing, product selection, trea genuine carry merchandising, low cost emphasis, and growth are the chief elements of Costcos strategy. It is a in truth good strategy because they offer the lowest prices no matter what.3. Do you think Jim Sinegal has been an effective CEO? What grades would you obtain him in leading the process of crafting and executing Costcos strategy? What support can y ou offer for these grades?Refer to bit 2.1 in Chapter 2 in developing your answers. Yes, I do think Jim Sinegal has been an effective CEO. I would give him an A in crafting and executing Costcos strategy because he has been excellent in developing a strategic vision of a no-frills and low-cost store, mission, and core values, along with setting objectives of fast inventory turn over and offering the lowest prices at Costco. He has also dvirtuoso a good line of credit of crafting the strategy by finding out what works best while in charge of his front store, Price friendship. He executes and monitors the strategy to achieve the objectives and vision by visiting his own stores and making sure that operations are running in the most smooth and cost efficient way manageable for both businesses and several(prenominal) members.4. What core values or business principles has Jim Sinegal stressed at Costco? Sinegals 5 core values include Obey the law, take care of our members, take ca re of our employees, respect our suppliers, and retort our shareholders.5. What is competition desire in the North American wholesale club industry? Which of the five warring forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related discussions in Chapter 3) to do a complete five-forces synopsis of competition in the North American wholesale club industry. Competition in the North American wholesale club industry is growing 15-20 percent faster than retailing as a whole. The one-third main competitors are Costco, surface-to-air missiles, and BJs Wholesale. Firms in other industriesoffering substitute products is the strongest of the five competitive forces because companies like Wal-Mart or internet retailers are not in the retail wholesale industry but give increased pressure on Costco by selling many of the same types of merchandise at very low prices as advantageously.All wholesale clubs (Costco, Sams Club, and BJs Wholesale) offer low prices to draw out members and provide them with considerable cost savings enough cover or exceed membership fees. It is user-friendly for a consumer to switch their membership from jobber to wholesaler, thus increasing rivalry, which is a strong force in this industry. The window to enter the warehouse club industry is relatively small, unless an outsider decided to acquire BJs Wholesale Club, intending to expand into places where there are no BJs stores. The barriers for a newcomer are high therefor the threat of new entrants is weak. While a big percentage of manufacturers for these retailers or discounters are large, they arent always in a strong bargaining position that could allow them to dictate the terms or conditions by which they would supply their products to their respective warehouse clubs, thus making bargaining situation of the suppliers weak.The bargaining power of the buyer is also weak because of the small influence that an individual buyer has in rel ation to the wholesalers total sales. The threat of substitutes is very high in this industry. There are many places that one could go to purchase the same item. The buyer is also often times more familiar with a substitute retailer.6. How well is Costco performing from a financial perspective? They are doing very well from a financial perspective. Some of the numbers do not look good to the traditional investor, but that is because Costco is not a traditional party. The current ratio shows that Costco can meet all current liabilities, while liquidity is also high (which means the company can quickly convert assets into cash). Profit is also ever increased by not having to store inventory.7. Based on the data in case Exhibits 1, 5, and 6, is Costcos financial surgical operation superior to that at Sams Club and BJs Wholesale? Costco is play in much higher numbers for total revenue than BJs and higher sales than Sams. Costco holds 57 percent of the market share while BJs has 8 a nd Sams has 35 percent.8. How well is Costco performing from a strategic perspective? Does Costco enjoy a competitive proceeds over Sams Club? Over BJs Wholesale? If so, what is the nature of its competitive advantage? Does Costco engage a lovelystrategy? Why or why not? They are performing very well from a strategic perspective. No, Costco does not enjoy a clear competitive advantage over Sams. It does however enjoy a competitive advantage over BJs. the nature of this competitive advantage includes the fact that BJs has in like manner many products, which makes rapid turnover harder to achieve. I think that Costco has a winning strategy because they are selective with the products they choose to sell, they treat their workers well (which in turn creates higher productivity), and they are able to sell a big volume of products, keeping prices down, along with expenses and overhead costs.9. Are Costcos prices too low? Why or why not?Many would argue that their prices are too low, with only 14% markup. I do not believe that they are. If the prices werent so drastically low, the company would not attract so many interested buyers. These prices are what set the company apart from many other competitors, and are therefor necessary for the companys success. 10. What do you think of Costcos payment practices? Does it surprise you that Costco employees apparently are rather well- equilibrate? Better compensated than employees at Sams Club or BJs? I think that Costcos compensation practices are once again, smart.When employees are happy, they are productive. When they are productive, they get more make. When they get more done, it eliminates the need for excess employees to do what could be done by productive employees in the workplace. It would slightly surprise me that they are so well compensated (better compensated than Sams Club of BJs) before reading the entirety of this case because of the no-frills policy that Costco has plain adopted, but it also makes se nse after reading this case study that the employees are so well cared for. It saves and earns Costco excess money in the long run through rising productivity and encouraging dogmatic word-of-mouth. 11. What recommendations would you make to Costco top executives regarding how best to sustain the companys growth and improve its financial performance?I would tell Costcos top executives to try and acquire BJs wholesale, thus acquiring their 8 percent market share. I would also encourage the implementation of self-checkout in stores for ease and convenience of theindividual consumer. Other than that, I think that Costco has a strong business strategy and is implementing strategies currently to sustain the companys growth and improve financial performance.