Costco Executive Summary
Executive Summary This research will further explore the unique decisions top management has made throughout the years at Costco Wholesale to become a leader and has been able to maintain their goals and the importance of how good customer service and consistency of high quality products improve sales and boosts sales.
Problem Statement Analyze the facts that brought Costco to their leader position in the market and how it has become successful throughout the years.
Background
The company started in 1976 in San Diego, California as a store called Price Club, loosing almost 750,000 in their first years of operations. By 1979 and two locations, the store became profitable and in 1983 Jeff Bortman and Jim Sinegal founded the first …show more content…
Costco in Seattle. By the end of 1984 there were nine stores in 5 states with approximately 200,000 members. The stores were originally designed to help small-to-medium-sized businesses reduce costs in purchasing for resale and their own consumption; but nowadays, one of their highest profits come from Costco’s Memberships it reaches also to families and single people that want to get more value for their money buying in this type of discount retailer store.
Analysis
Costco is known for carrying top quality national and regional brands at prices consistently below traditional wholesale or retail outlets, selling numerous categories of products such as: groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, house wares, apparel, health and beauty aids, tobacco, furniture, office supplies and office equipment. Their private label called Kirkland Signature products, created to satisfy customers with high quality needs including juice, cookies, coffee, tires, house wares, luggage, appliances, clothing and detergent, in some cases Kirkland’s products are higher quality than regular national products. Additionally, Costco Wholesale Industries, a division of the Company, operates manufacturing businesses, including special food packaging, optical laboratories, meat processing and jewelry distribution. These businesses have a common goal of providing members with high quality products at substantially lower prices ("Taking stock in," 2008).
In the past few years, Costco introduced new services to provide more benefits to its members: Optical laboratories, pharmacy services and gas stations with lower prices than conventional ones.
Costco has grown international in 6 countries and expanded into 37 states in the USA, studying the locations of the stores in detail taking into consideration regions where there is a large number of small business owners and professionals with higher income that reach for high end goods. In the past few years, Costco introduced new services to provide more benefits to its members: Optical laboratories, pharmacy services and gas stations with lower prices than conventional ones. Costco has grown international in 6 countries and expanded into 37 states in the USA, studying the locations of the stores in detail taking into consideration regions where there is a large number of small business owners and professionals with higher income that reach for high end goods.
A SWOT Analysis shows the Strengths, Weaknesses, Opportunities and possible Threats inside a company. This Analysis gives an organization a comprehensive visual of these four categories simultaneously. Through diagramming the strengths, weaknesses, opportunities, and threats, a visual breakdown of the organization is developed. From there, relationships between items in different categories can be assessed and recommendations made. (Marshall, G. & Johnston M, …show more content…
2011) Below is the SWOT analysis breakdown and could be used to better analyze the current standing of a company.
Strengths
Locations
High end quality products
Employee Compensation and practices
Own private brand “Kirkland”.
Customer Loyalty
Weaknesses
Limited product offerings compared with the competition
Marketing
Minimum markup in pricing.
Minimum operating costs.
Opportunities
Online sales www.costco.com
Marketing and Advertising campaigns.
Acquiring local and small retail chains
S/O Based Strategies
Use their strengths and their loyal customer base to improve online and social media access reach and boost sales.
W/O Based Strategies
Increase their online sales that would keep their warehouse operating costs minimum and markups would not be compromised.
Threats
Supply Chain and Distribution problems
Competition (Wal-Mart, Sam’s Club, Amazon , etc.)
High wages to employees
S/T Based Strategies
Use well paid and trained employees to maintain and attract even more customers with their exceptional customer service.
W/T Based Strategies
Assure distribution problems are minimum and frequently visit competition to be up to date for new products to introduce in the stores. Recommendations
Using the SWOT analysis 4 recommendations where made based on their Strengths, Weaknesses, Opportunities and Threats:
Use their strengths and their loyal customer base to improve online and social media access reach and boost sales.
Implementing Internet and social media campaigns has been working successfully nowadays, and one advantage Costco has is the fact that they have a loyal well-based customer base that can be reached easily through emails. Using also customer based metrics opportunities to target new potential customers could be beneficial to expand their number of memberships.
Increase their online sales that would keep their warehouse operating costs minimum and markups would not be compromised. Costco has two factors that could jeopardize their performance: the first is that they try to keep operating costs as low as possible so that prices are not affected and they can keep markups minimum to reach the lowest prices in the market. These two factors combined can be targeted through internet sales and shipping directly to their customers
home.
Use well-paid and trained employees to maintain and attract even more customers with their exceptional customer service. Costco is well known for their customer service and the benefit they bring to their employees including higher wages than most of the competition. Keeping employees happy is a great technique to keep customers happy and welcome at the warehouses.
Assure distribution problems are minimum and frequently visit competition to be up to date for new products to introduce in the stores. Design strategic plans to overcome all types of distribution problems in case there are delays.
Conclusions
The key to Costco’s success has been to offer their customers’ quality goods and services at low prices and this has built a strong customer base, which is mainly through word of mouth. Despites Costco outstanding business performance, some would say that Costco has too narrow of a product line, however, they compensate this with phenomenal prices below market value. Costco has a slower market growth as compared to Wal-Mart, but because they have had a consistent and constant growth since opening, investors choose to stay with Costco for their consistency and proven growth over time.
References
Taking stock in Costco wholesale corp. . (2008, October 21). Retrieved from http://www.gurufocus.com/news/37287/taking-stock-in-costco-wholesale-corp-cost
Marshall, G. & Johnston M. Essentials of Marketing Management. 2011. MC Graw Hill
Thompson, A. Costco Wholesale in 2012: Mission, Business Model, and Strategy. Retrived from www.bsg-online.com
Comments: ____________________________________________________________________________________________________________________________________________________________
Problem Statement Analyze the facts that brought Costco to their leader position in the market and how it has become successful throughout the years.
Background
The company started in 1976 in San Diego, California as a store called Price Club, loosing almost 750,000 in their first years of operations. By 1979 and two locations, the store became profitable and in 1983 Jeff Bortman and Jim Sinegal founded the first …show more content…
Costco in Seattle. By the end of 1984 there were nine stores in 5 states with approximately 200,000 members. The stores were originally designed to help small-to-medium-sized businesses reduce costs in purchasing for resale and their own consumption; but nowadays, one of their highest profits come from Costco’s Memberships it reaches also to families and single people that want to get more value for their money buying in this type of discount retailer store.
Analysis
Costco is known for carrying top quality national and regional brands at prices consistently below traditional wholesale or retail outlets, selling numerous categories of products such as: groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, house wares, apparel, health and beauty aids, tobacco, furniture, office supplies and office equipment. Their private label called Kirkland Signature products, created to satisfy customers with high quality needs including juice, cookies, coffee, tires, house wares, luggage, appliances, clothing and detergent, in some cases Kirkland’s products are higher quality than regular national products. Additionally, Costco Wholesale Industries, a division of the Company, operates manufacturing businesses, including special food packaging, optical laboratories, meat processing and jewelry distribution. These businesses have a common goal of providing members with high quality products at substantially lower prices ("Taking stock in," 2008).
In the past few years, Costco introduced new services to provide more benefits to its members: Optical laboratories, pharmacy services and gas stations with lower prices than conventional ones.
Costco has grown international in 6 countries and expanded into 37 states in the USA, studying the locations of the stores in detail taking into consideration regions where there is a large number of small business owners and professionals with higher income that reach for high end goods. In the past few years, Costco introduced new services to provide more benefits to its members: Optical laboratories, pharmacy services and gas stations with lower prices than conventional ones. Costco has grown international in 6 countries and expanded into 37 states in the USA, studying the locations of the stores in detail taking into consideration regions where there is a large number of small business owners and professionals with higher income that reach for high end goods.
A SWOT Analysis shows the Strengths, Weaknesses, Opportunities and possible Threats inside a company. This Analysis gives an organization a comprehensive visual of these four categories simultaneously. Through diagramming the strengths, weaknesses, opportunities, and threats, a visual breakdown of the organization is developed. From there, relationships between items in different categories can be assessed and recommendations made. (Marshall, G. & Johnston M, …show more content…
2011) Below is the SWOT analysis breakdown and could be used to better analyze the current standing of a company.
Strengths
Locations
High end quality products
Employee Compensation and practices
Own private brand “Kirkland”.
Customer Loyalty
Weaknesses
Limited product offerings compared with the competition
Marketing
Minimum markup in pricing.
Minimum operating costs.
Opportunities
Online sales www.costco.com
Marketing and Advertising campaigns.
Acquiring local and small retail chains
S/O Based Strategies
Use their strengths and their loyal customer base to improve online and social media access reach and boost sales.
W/O Based Strategies
Increase their online sales that would keep their warehouse operating costs minimum and markups would not be compromised.
Threats
Supply Chain and Distribution problems
Competition (Wal-Mart, Sam’s Club, Amazon , etc.)
High wages to employees
S/T Based Strategies
Use well paid and trained employees to maintain and attract even more customers with their exceptional customer service.
W/T Based Strategies
Assure distribution problems are minimum and frequently visit competition to be up to date for new products to introduce in the stores. Recommendations
Using the SWOT analysis 4 recommendations where made based on their Strengths, Weaknesses, Opportunities and Threats:
Use their strengths and their loyal customer base to improve online and social media access reach and boost sales.
Implementing Internet and social media campaigns has been working successfully nowadays, and one advantage Costco has is the fact that they have a loyal well-based customer base that can be reached easily through emails. Using also customer based metrics opportunities to target new potential customers could be beneficial to expand their number of memberships.
Increase their online sales that would keep their warehouse operating costs minimum and markups would not be compromised. Costco has two factors that could jeopardize their performance: the first is that they try to keep operating costs as low as possible so that prices are not affected and they can keep markups minimum to reach the lowest prices in the market. These two factors combined can be targeted through internet sales and shipping directly to their customers
home.
Use well-paid and trained employees to maintain and attract even more customers with their exceptional customer service. Costco is well known for their customer service and the benefit they bring to their employees including higher wages than most of the competition. Keeping employees happy is a great technique to keep customers happy and welcome at the warehouses.
Assure distribution problems are minimum and frequently visit competition to be up to date for new products to introduce in the stores. Design strategic plans to overcome all types of distribution problems in case there are delays.
Conclusions
The key to Costco’s success has been to offer their customers’ quality goods and services at low prices and this has built a strong customer base, which is mainly through word of mouth. Despites Costco outstanding business performance, some would say that Costco has too narrow of a product line, however, they compensate this with phenomenal prices below market value. Costco has a slower market growth as compared to Wal-Mart, but because they have had a consistent and constant growth since opening, investors choose to stay with Costco for their consistency and proven growth over time.
References
Taking stock in Costco wholesale corp. . (2008, October 21). Retrieved from http://www.gurufocus.com/news/37287/taking-stock-in-costco-wholesale-corp-cost
Marshall, G. & Johnston M. Essentials of Marketing Management. 2011. MC Graw Hill
Thompson, A. Costco Wholesale in 2012: Mission, Business Model, and Strategy. Retrived from www.bsg-online.com
Comments: ____________________________________________________________________________________________________________________________________________________________