Costco Case Study

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1 Costco: A Case Study John David 2 Costco: A Case Study Business Model Costco’s business model depends on high sales volume coupled with quick inventory turnover, made possible by low prices and limited product selection among a widevariety of branded and private label products. This business model is appropriate for this chain and has many benefits. For one, by gearing the business approach to rapidlyturning over inventory, the company is often able to sell new merchandise and paysuppliers before the invoice is due, even when the company pays early to benefit fromearly payment discounts. This frees up capital, as Costco finances most new inventorypurchases with supplier payment terms. Fittingly, the company passes these…show more content…
While these two spots are steadily increasing revenue and profits, thecompany has decided to instead add extra space to new storefronts and essentiallycombine these two operations. A third way the company intends to grow is byexpanding its private label brand from 400 items to 600 items over the next five years.From a pure math standpoint, this will prove effective incrementally, as the markup onthe private label is 1% higher than other goods. As for the direction the company isheading and why, Sinegal receives a C. Recommended action is to call a meeting of senior management to draft an exceptional vision statement with the direction thecompany is heading in the future to gain market share. The benefits are immeasurable.Phase 2 – This phase is setting objectives, whereby the company determines the stepsto take in order to reach its vision and sets specific, measurable goals accordingly.Considering Costco does not have an outlined strategic vision, Sinegal would receive an F in this area. Although Costco’s stated strategy includes low prices and its mission statement claims that the company is committed to selling its products at the lowestpossible price, no specific sales goals were discovered. A remedy to this problem canbe sought upon creating the vision. This involves setting SMART goals or specific,measurable, attainable, realistic goals with a timeline for completion. Once this is done,the company

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