Costco Swot Analysis Paper

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)

Costco is turning in much higher numbers for total revenue than BJ’s and higher sales than Sam’s. Costco holds 57 percent of the market share while BJ’s has 8 and Sam’s has 35 percent.

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

Majority of Costco warehouses is located in U.S. and Canada. Therefore, Costco’s financial and operational performance is highly dependent on U.S. and Canadian operations. Within the U.S. it is highly dependent on its California operations, which contained almost third of U.S. net sales. Any substantial decline in California operations could

Costco’s business model is appealing because they are able to continually sell to a niche market. This niche market has

Costco is a company that has grown their business through customer service that goes above and beyond. Costco not only focuses on external customers they also care about their internal customers. They continue to strive to have affordable prices, great benefits for their internal customers, and Lenient return/refund policy. Costco has figured out a way to expand their membership by word of mouth(Timm,2014). They have done this by building a strong relationship with their customers. Having a strong relationship with customers is important, especially for a business such as Costco. Seeing as Costco is a retail business a majority of their customers will be return customers. Ensuring that their customers are satisfied has proved to be a key factor in their

Costco is a club card organization. Everyone wants to join. Joining Costco gives people access to great things that they must offer. Costco offers high wages, benefits and opportunities for growth. They offer the best wages around. They reward they employees not only with incentives but with bonuses. Employees can grow with the company because they promote within. Costco has some of the best top suppliers, PepsiCo, and Kraft Heinz. Having some of the best suppliers gives the company to bargain with their prices. A new competitor would find it hard to match Costco products and prices. Five Forces that outline Costco are rivalry among competitors. Rivalry among the company is high. Costco and Walmart are the top two in retail. Their or others, Best Buy and Target which are well known for holding their power. Retailers are competing against each other with whom can give lower prices to customers. The treat of substitute products and service is another force. This force is important because it is a technique to take customers away. They try to take customers away from other retailers by carrying items in one size with the best brands at a low price. Potential new competitors is down because competing with Costco and Walmart is hard. Power of supply. Costco does not spend that much on supplies because they buy in bulk keeping the

There are many strengths of Costco’s business. One of the main strengths is customer loyalty. Last year in the U.S. and Canada, the customer membership renewal rate was ninety-one percent. The global customer membership renewal rate was eighty-eight percent. These high renewal rates

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

Best Buy Strengths: A big strength that Best Buy has continued to possess is brand loyalty. Even as competitors have formed offering other ways to purchase products, Best Buy has carried on. A big part in why Best Buy has been able to survive in these changing times is the services it offers in the form of Geek Squad and Best Buy Mobile. As the Star Tribune stated, “The computer repair division has established best buy as a merchant of electronics expertise, generating more than $1 billion annually…

Costco’s business model focuses on selling limited selection of products at low prices, often at very high volume and rapid inventory turnover. These goods are bulk-packaged and marketed primarily to large families and businesses. Costco does not carry multiple brands or varieties where the item is essentially the same. It provides members with a selection of only about 4000 items, this results in a high volume of sales from a single vendor, allowing further reductions in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own

“The key elements of Costco strategy are extremely low prices, a limited selection of naturally branded and private label products, a treasure hunt shopping environment, strong emphasis on low operating costs, and ongoing expansion of its geographic network of store locations.” To provide low prices Costco caps its markup on brand merchandise at 14% compared to 20% to 50% at other supermarkets. The equals out to a sales revenue that only equales several million dollars. This number excludes all other operating factors including the membership fees. Another important element of the strategy is that unlike other retailers they don’t offer window displays or any other thrills with in the stores. They know because of the reputation and because of the value that they offer their customers that the items that they sell offer value over all else.

Costco is the best cost provider in the wholesale club category and the strategy is associated with Costco’s capabilities and resources, which includes; a streamlined supply chain, good supplier relationships, purchasing power, high sales volumes, quick inventory turnover, and excellent customer service. The three vital components of the company strategy are low pricing, limited product selection and high-end products acquired in closeouts and liquidations. While Costco strives to beat the competitors pricing, it also delivers exceptional value in its high-end offerings and customer service, giving consumers more for their money. Given its customers are the most affluent of all the warehouse clubs, with average incomes around $75,000 and this strategy works well for Costco. However, these customers are conscious not only about money but also value for the product, this fact is supported by the members who choose for executive

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.

Costco has maintained steady growth as well as healthy finances. The company has maintained its operating expenses at high although steady level ranging from 98%-99%. Operating income has been managed kept its relation to growth. Net income has also been sustained at a level constant to growth. A key factor to Costco’s finances is its membership fees. It accounts for a very small amount in comparison to its net sales, but it is the difference maker between breaking even, (or taking a loss), to making a healthy profit. Costco’s membership fees account for a little less than 2% and is almost equal to its net income. Based on the company’s income statements, Costco is perceived to be in good financial condition, as income to sales ratio remains the same.