Costco Corporation Was Founded By A Pair Of Entrepreneurs, James Sinegal And Jeffrey Brotman

The strategic objective of Costco is based on the concept of offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories while producing high sales volumes and rapid inventory turnover. This rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self service warehouse facilities, enables Costco to operate profitably at significantly lower gross margins than traditional wholesalers, discount retailers and supermarkets. (1)

Sam Walton’s extraordinary business strategies drove Walmart to its success and their key focus was customer satisfaction. As part of their customer centric initiatives Walmart had set up a unique pricing strategy with their “Every Day Low Prices” EDLP (Karen Robson, 2013). They would offer customers their daily needs at the lowest possible price to drive Walmart’s growth in the United States (Karen Robson, 2013) . Their pricing strategy was different than other major retailers in the U.S at the time; this provided an advantage towards rapid success and expansion (Karen Robson, 2013).

Costco has a simple strategy for being one of the leaders in the wholesales, which is concentrating on driving sales. If the sales of a company are good than everything else will take care of itself. While other companies such as Wal-Mart, Target and BJ’s pour money into marketing; Costco has a no-frills approach and doesn’t advertise. Costco focuses on selling fewer items which increases sale volume and

Costco’s former CEO Jim Sinegal designed the Wholesale Club Notion in 1983. Stores were quickly spread throughout the United States, Canada, and Mexico. According to Michaud (2012), “By the end of 2008, there were 550 stores in 40 states and 7 countries, with 54 million members” (Para. 3). The company creates a global chain of warehouses that carry value products as per their slogan. Michaud further discussed that “Costco is also one of the largest corporation in the world with 663 stores

Costco has many risks associated with its financial and operational performance. One of the biggest risks that Costco is facing todays is the competition from other retailers and wholesalers, such as Wal-Mart and Target. Costco compete with its competitors for customers, qualified employees and management personnel, suitable sites and suppliers. The retail business is extremely competitive and continues to get even more completive. Such events as the evolution of retailing in online channels has improved the ability of customers to compare prices and products and as a result enhanced competition. Any significant increases of competition may adversely affect Costco’s financial performance, and make Costco incapable to compete successfully in the future.

Costco does not have distributors or retailers to supply its products to the end users. They do, however, have reseller who buy their products for their business and sell to the end user. For example, Costco’s business membership offers tax-exempt purchases to restaurant and small grocery store owners; they then sell those purchased goods to the end user.

It was in the twentieth century that the world was first introduced to a now well-known household name, Costco. In 1976 that the first Costco was opened, formerly known as Price Club, in San Diego. The philosophy of this company is simply stated, “Keep costs down and pass the savings on to our members.” (Costco.com) It has held onto its philosophy of keeping prices low for almost half a century. Costco is self defined as a “membership warehouse club.” (Costco.com) It provides a wide variety of brand name products in their warehouse-style store, and strives to provide all members with the lowest prices that they can offer. Today, Costco is a well known and loved company by consumers.

Costco is one of the most profitable retail stores in the United States at the moment. This is in spite of the prevailing tough global economic times and stiff competition from stores such as Wal-Mart and Target. Costco, a members’ wholesale retail store, was founded in 1983 in Washington by Jeffrey Brotman, who serves as the current Chairman of the board of directors and James Sinegal, the current company president. Costco has not been spared by the current global economic conditions. They have affected it in a number of ways that have made the company’s management respond in a manner that is meant to ensure that the business not only survives but grows even stronger. First, Costco has taken strong measures to keep

Costco's mission is to “continually provide our members with quality goods and services at the lowest possible prices (Costco Wholesale Mission Statement - Profits and Prices Revolve Around Ethics, 2013)

In September 1983 Costco's first warehouse opened in Seattle, Washington. At this time, warehouse outlets had long existed, but the concept of a wholesale club was relatively new and promising. Dubbed "buyers' clubs" and begun in 1976, these warehouses were wholesalers that required shoppers to become members and pay an annual membership fee. The membership fee helped reduce already-low overhead, so that items could be sold at an average of 9 percent over cost from the manufacturer. At the time Costco was formed, membership warehouses were primarily a West Coast phenomenon; however, since then, their popularity has spread throughout the United States, across the borders to Canada and Mexico, and beyond to many other countries.

On September 15,1983 the world had witness the opening of Costco the first warehouse on Seattle, Washington by James Senegal and Jeffrey H. Brotman. The owners had started in distribution their wholesale by working for Price at both FedMart and Price Club and Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age.

Costco is among the leading global retailers which provide customers a wide range of merchandise, ranging from small to well-known brands. The company began operations in 1983. Over the years, Costco has been a retailer in low cost membership-only leader, in warehouse club of merchandise. Moreover, Costco does not offer frills warehouse business models as its competitors do.  Costco’s major competitors are BJ’s Wholesale Club and Sam Club (Costco, 2010).

According to Blacktown City Council (2014), Costco Wholesale Corporation operates an international chain of membership warehouses which carry quality brand name merchandise at substantially reduced prices compared to other conventional wholesale or retail outlets. It began its operations in 1983 in Seattle, Washington and later merged with The Price Company in October 1993 operating under the name PriceCostco, had 206 locations generating $16 billion in annual sales (Costco Wholesale, 2015). As of December 2014, the Company operated a chain of 671 warehouses in 43 states, Washington, D.C., and Puerto Rico (474 locations), nine Canadian provinces (88 locations), Mexico (34 locations), the United Kingdom (26 locations), Japan (20 locations), Korea (11 locations), Taiwan (10 locations, through a 55%-owned subsidiary), Australia (seven locations) and Spain (one location). The Company’s online business also operates websites in the U.S., Canada, U.K., and Mexico (Costco Annual Report, 2014).

Potential new entrants into the market are a low threat for Costco. We have the advantage of economies of scale and having learned by doing. Our economies of scale come from better management coordination of processes, long term relationships with our suppliers, and enhanced employee performance with low turnover (Pearce et al., p. 100). The cost for a new entrant would be significant given the capital investment required to start up a warehouse business. Any

At the end of 2012, Costco was a successful business, but there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is that their finances are too reliant on acquiring new members and not on selling their products. If they cannot keep acquiring new members at a steady rate, their financial infrastructure could suffer.