Costco Strategy

1950 Words Apr 1st, 2011 8 Pages
Costco Wholesale Corporation entered the wholesale club industry in the early 1980s. The idea behind a wholesale club was to maximize profits by minimizing operational costs and maximizing inventory turnover ratio. The company experienced tremendous growth from 1997 up to 2001 and has caught the attention of its competitors. Costco Wholesale is one of the largest retailer stores in the market. The company has differentiated and positioned itself well in the market through its mission statement. The company’s mission statement well understood throughout the firm.
Business Model
Costco’s business model relies on high sales volume doubled with quick inventory turnover, made possible by low prices and limited product selection among a wide
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Another element of their strategy is to create a self-service with proficient distribution system and to reduced man-handling. Both of these strategies are good because they cater to consumer’s needs, profit the business, help keep a low gross margin, and stay ahead of competitors. “A best cost provider strategy works best in markets where product differentiation is the norm and attractively large numbers of value conscious buyers can be induced to purchase midrange products rather than the cheap basic products of low cost producers or the expensive products of top of the line differentiators” (Thompson, 2010). The idea behind a Best Cost Provider Strategy is giving customers “more value for their money”. As a company Costco is trying to employ this strategy, the things that make it successful is providing greater value to customers by sustaining their expectations on quality features, and charging less than their expecting to have to pay compared to prices your competition is offering for similar products and services. “When a company can incorporate appealing features, good to excellent product performance and quality, or more satisfying customer service into its product offering at a lower cost than rivals, then it enjoys best cost status” (Thompson,2010). It appears that Costco is well above the curve when it comes to this strategy.
Leadership and
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