The chief elements of Costco’s strategy are low pricing, limited product selection, and a treasure hunt shopping environment. • Pricing: a key element of their pricing strategy is to cap its markup on brand-name merchandise at 14% and markups on their private label items can be no higher than 15%. This strategy keeps customers coming in to shop by enticing them with low prices. • Product Selection: this portion of the strategy only provides members with a selection of about 4000 items. Their product range covers a broad spectrum but the selection in each product category is limited based on fast-selling models, sizes, and colors. • Treasure-Hunt Merchandising: while the product line consists of 4000... Costco goes out of its…show more content… Costco’s receivable period was 3 days in 2001 and 4 days in 2010. This indicates Costco collects funds in a relatively short period of time, which will reduce the chances that the receivable will need to be charged off. The competitors are relatively consistent with Sears at 5 days, Wal-Mart at 3 days and BJ’s at 5 days.
Trends
Below are some ratio trends and graphs. Based on the trends you can see each of the categories have been relatively constant. The ROE decreased in 2009 to 10.83% compared to 13.95% in 2008. However as of August 2010 ROE has increased to 12.03%. The ROA decreased as well in 2009 to 4.94% compared to 6.20% in 2008. Again like ROE, the ROA has increased to 5.47% as of August 2010. The Financial Leverage, Profit Margin and Asset Turnover have been relatively consistent over the past 10 years.
In 2009 Costco struggled just as all business did due to the deep recession. While their sales and profits were less than in fiscal 2008, Costco remained solidly profitable in fiscal 2009. During the past fiscal year they opened twenty new warehouses; increased their membership cardholder base by 2.3 million members, with membership renewals remaining strong at over 87%; and their employees continued to have job security along with one of the best wage and benefits packages in the retail industry. Fiscal 2009 was the first time in their history when sales did not achieve record highs. Sales were $69.9
as well. This store is Costco, also known as Costco Wholesale Corporation, and it has grown to be one of the most impressive companies in the entire world. Costco is an American membership wholesale club whose first location opened in 1976 under the Price Club name and became a very large company that makes around $120 billion a year. Costco is an American membership wholesale club based in Issaquah, Washington. According to “About Us.” (“About Us.” About | Costco) , Costco was the world’s first…
Costco case study Miho Morishita Costco is one of successful businesses in the U.S. It is the third largest retailer in the U.S. and the seventh largest retailer in the world, which makes 87 billion annual sales. The company’s business model and strategy are key factors for the success. Its philosophy is telling what the company is; obey the law, take care of our members, take care of our employees, respect our suppliers, and reword our shareholders. Costco’s business model and strategy Costco’s…
and Lean Manufacturing, companies had to alter its operational efficiency and the way it conducted its business in order to grow and stay competitive. Costco Wholesale Corporation entered the wholesale club industry in the early 1980s (Tayan, 2003). The idea behind a wholesale club was to maximize profits by minimizing operational costs…
|Costco | |ESC-Accounting and Finance | | | |This case analysis will analyze the efficiency and health of the organization. This | |case analysis was created using the textbook and the Stanford Graduate School of | |Business. Costco Wholesale Corporation Financial Statement…
COSTCO CASE ANALYSIS. 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not? Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve…
Past few weeks of studies has enlightened us with many concepts and ideas that businesses practice in order to maximize profits, increase return on investment and differentiate them to survive and sustain the trends of the consumer market. One of the key factors discussed is economies of scale which has a huge impact in the current business environment as it also plays a vital role to create barrier for other small businesses to enter as a possible contender or competitor in the same industry. Through…
Case Study #1 Costco Central Michigan University 1. Describe Costco Business Model. According to CMU (2010), the Costco business model was “to generate high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories” (p.388). * Rapid inventory turnover – When combined with efficiencies gained through bulk purchasing, sound logistics, and minimal product…
best-cost strategy. The company business model is appealing because it attracts customers and not just any customers but you attract loyal customers who will continue shopping at Costco because of their business model. When it comes to discount shopping, consumers want to feel like they are getting the best price and with Costco, they really are. 2.) The chief elements include fewer prices, a very restricted product line and selection of products, and an atmosphere that welcomes the thrill of shopping…
to have a rough year and not make as much as they had thought they were. 2. What are marketing intermediaries? Give an example. Marketing Intermediaries are companies that help promote, sell, and to distribute their goods to buyers. An example is Costco who act like a middleman between the customer and the supplier. 3. Using Objectives #2 from page 74 in the text, explain how changes in the demographic and economic environment affect marketing decisions. The demography is a way to understand what…
