Report on the Case Study of Costco: A Different Approach

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Report on the Case Study of Costco: A Different Approach

Executive summary

This report examines the working, structure of the large wholesale company Costco. To get familiar with the topic, the report first states the background and history of the company which tells how the company has managed to expand its routes in the country.

After that, the report states and discusses that how the the multi giant company is different from other companies in the same industry. It basically attracts huge number of customers by selling on wholesale at discounted prices. One of the major attractions of the company is that it spends least on its advertisements and still manages to expand its customer base through the quality they provide to their customers.

At the end, the report concludes that the company is very smooth in its operations and instead of having so much of competition in the market, it has managed to grow, develop and provided services and products to their customers while earning good profits.

1.0 Introduction

1.1 Background

Traces of history says that, back in 1983 the first Costco was opened in Seattle. The founder of the company was known to be James D. Sinegal who introduced a new concept in the running race of the industry. In the mean time the company went across the number of changes I its names and its evolution and finally in 1999 the company got its name. Costco started to expand its roots worldwide from United States, Europe, Mexico, Far East and Australia. the Company gained a lot of name.

1.2 Aim

Costco basically deal with all the items which are of basic necessity if day to day lives. Costco makes itself different from other stores by having a certain restriction on the purchases as common store people cannot walking and buy A Costco store typically carries supermarket items and as an ever-changing selection of other merchandise, including some luxury goods. CEO Craig Jelinek, successor believes that the secret of Costco success lies in many ways the company overturns conventional wisdom. People they need to have a proper membership card to makes purchases. Costco stores are mainly expanded up to 14000 sq. meters with only 4000 Costco works as a warehouse retailer where common people buy products in bulk items in total to sale, this is not a half of the normal supermarket selling its. Costco mainly concepts of providing customers the best items at a cheaper an affordable amount. It is like the normal supermarket stores with self-service formula. People here buy products in large quantities. The proofs that they have spread their roots to various countries in meantime show their demand and willingness of producers and wholesalers to like their large scale retailing. Once the CEO said to a reporter of ABC channel United States that they don’t even spend a cent in advertising their company but still has a team of about 140000 employees working in their stores at different locations. Costco is also known for providing the best wage rates to their employees. Costco is always praised for being the most flexible company among giving authority to their employees and letting them make quick dessins which helps the employees to work effectively. The authority and responsibility and flexibility that is given in hands of the employees also helped Costco to gain its name in the society.

2.0 Discussion

2.1

Costco was introduced In Australia in 2009, but gained popularity and maintained its goodwill quite sooner than other organisation did. Costco is different from other supermarkets in any ways. Firstly, customers are restricted to directly walk-in in the store to buys products in order to get the benefits of the store customers need to have a valid membership card. Annual membership for a consumer cost $60 per year for “gold star”. The executive members pay up to $120. The company is thinking to increase the membership to about $5 per year. There are basically 3 types of membership cards personal (gold star), business, and executive. But the limitation of card is that only 2mmbers are allowed per card. Unlikely the other memberships cards unfortunately Costco does not deal with any sort of discounts for senior citizen. As compared to other organisations and companies Costco is proven to a lot cheaper and affordable than other supermarket stores. It makes itself different from Kmart, target and big w buy selling the products in bulk one cannot buy the goods in small quantities whereas it is a retail store which actually works as a wholesale store. For an instance if a consumer wants to buy one packet of juice but he is restricted to buy that so he will have to buy the certain. Consumers cannot buy products for weekly purchases rather they buy products in bulk for and make monthly shopping. Which saves a lot of their time and money.

2.2

Costco has been blessed to have an outstanding CEO. One who is devoted to the accomplishment of the organization and who adjusts himself and his Corporate staff on all levels with the employees. His activity and system of minimizing expenses by having a straightforward office is noteworthy. He likewise executes a solid and ground-breaking proclamation when he won’t reduce costs with regards to the pay rates of the employees; for example. his in itself makes a dedication from his workers who are very much compensated and in this way display a stunning excitement for their activity and their organization.

Most great of all is the way that he takes a cut in pay contrasted with the other CEO’s in his industry and still accomplishes better outcomes. while this is a one of a kind methodology and not one which is industry standard, having his employees all around compensated, he stays away from the costly promoting arrangement and enormous publicizing spending which makes Costco a great organization to work for and to turn into a normal customer.

It built synergy and delivered values because when employees are happy and energetic and they care as you come into their store, at that point the customer leaves glad and turns into a faithful client who will carry their recurrent business to the store which leads to the organization produces reliability and creates a profit because of the techniques to support the employees. whereas, Costco is considered among retail industry specialists the ‘counter Walmart’ in view of its procedure dependent on giving the most elevated quality items at the most sensible cost – which does not really mean least expensive, while treating workers like regarded individuals from the organization. By figuring an alternate technique for staffing its stores than its rivals and by giving more consideration to quality control issues, Costco is able to gain the interest of customers and make them happy. In this, it gives off an impression of being succeeding. Costco’s ‘impression’ is extensively littler than the other company, however its plan of action has been an advertising example of overcoming adversity, and its incomes and gainfulness stay amazing.

2.3

Costco’s composition and e-commerce has first as a logistical advantage, they have to open more warehouses in different location all around the globe. Having a stronger alliance with suppliers and manufacturers. Presently to go and see a long-time growth and market share they have a good distribution network. Most importantly evaluation of e-commerce increase sales activity in both domestic and foreign markets increase technological developments in e-commerce by creating opportunity to expand the online business operation. The competitive advantages, economic of scale Costco purchases large amount of items from the manufacturer or suppliers which allows them to sell the quantity to the discount members. Secondly lower consistent prices, caps of fourteen percent in brand items and fifteen percent for private level Kirkland signature items. It has lowered the marketing and advertisement costs. Then the reducing the products, which result in rapid stock, bargaining power with suppliers and lower the warehouse and distribution costs along with simplified the supply chain which are less prone to the bullwhip effect.

Costco is known for its always low price all wonder how they can sell at so cheap. cost leadership is straightforward you have to be able to produce products or provide services that are cheaper than the ones offered by competitor companies if a company adopts this strategy and sustains costs lower than its peers than it will succeed typically cost leaders will sell at prices lower than their competitors this way they will win price sensitive customers the ones looking for a bargain and given that price sensitive customers are the absolute majority cost leader firms can win a sizable market share.

So, a cost leadership strategy means more units sold and a lower margin per unit selling at prices lower than competitors is a valid idea, however companies must find a way to do that if you want to sell at a lower price then you have to do something differently than your peers. There are several ways to establish a competitive advantage related to lower cost and they all have something to do with the concept of efficiency a cost leader must be efficient. Let’s see how companies can do that one of the fundamental ways to push down unitary cost is to leverage economies of scale the more units of a product are sold the lower is its unitary cost the cost of one unit how come well there are several costs which are sustained only once these are the so-called fixed costs. There is an inverse relationship between the quantity of output and unitary costs meaning the higher the output level the lower the fixed cost per unit the reason behind this is that fixed costs are spread over a large number of products and services economies of scale are the main reason for the predominance of large corporations in most industries.

1.0 Conclusion

In the end we learned that how the Costco Company started and how they expand their work throughout the world in different countries and nations and become a famous company which is selling the products in low prices with different strategies. Furthermore, this company also always focus on the consumer satisfaction needs this company include some luxury goods in nutshell people can purchase the goods in bulks in cheaper rates without any interruption of agent. In the previous slides we learned that the success of this company happened because of the CEO of this company according to the research the CEO implemented various strategies and techniques I which company grow their business throughout the whole world and that person also didn’t break the morale of their employee’s in which they also feel happy for doing work with this company. Costco also establish throughout the world because of E-commerce due to changing of the technology people started purchasing the products online then this company also started to selling their products online which is definitely fruitful for the company and they started gain the profits due to these reason they can survive in competitive market for the long run and this company also gain profits in this in time as well because the company happily adapt the changes and those companies adapt the changes in the market that companies are able to survive in the international market for long run. In this whole study we figure it out that the Costco company faces lots of ups and downs the company also accept he challenging in which were coming on their path of long term success because that company always adapt he changeful environment so because of this reasons they are able to survive in this market for long time, various things are the root cause of this company success CEO and their strategies were one of them.

2.0 References

Derrick, J. (2017, Dec 18). Costco upgraded as analyst projects a widening competitive moat. Benzinga Newswires Retrieved from https://search.proquest.com/docview/1977874919?accountid=30552
MARKET TALK: Costco deal changes competitive dynamics in Mexico. (2012, Jun 14). Dow Jones Institutional News Retrieved from https://search.proquest.com/docview/2121123599?accountid=30552
Derrick, J. (2016, Dec 08). Costco’s competitive pricing moat widened in Benzinga Newswires Retrieved from https://search.proquest.com/docview/1846723270?accountid=30552
Www.companiesandmarkets.com: Costco wholesale – competitive intelligence. (2008, Aug 19). M2 Presswire Retrieved from https://search.proquest.com/docview/444398173?accountid=30552
By Emily Nelson and, Ann Zimmerman. (2000, Sep 07). Minding the store: Kimberly Clark keeps Costco in diapers, absorbing costs itself — under new system, supplier stocks retailer’s shelves and boosts bottom lines — averting a Huggies squeeze. Wall Street Journal Retrieved from https://search.proquest.com/docview/398786447?accountid=30552
Zimmerman, A. (2004, Mar 26). Costco’s dilemma: Be kind to its workers, or wall street? Wall Street Journal Retrieved from https://search.proquest.com/docview/398891964?accountid=30552
By, A. Z. (2001, Aug 09). Tres cheap: Taking aim at Costco, Sam’s club marshals diamonds and pearls — Walmart’s warehouse club, long the no. 2, invades its rival’s upscale turf — in this aisle, bronze sculpture. Wall Street Journal Retrieved from https://search.proquest.com/docview/398945560?accountid=30552