Costco Wholesale's Business Analysis

Costco Wholesale Corporation’s organizational structure is based on the company’s current operation and locations as well as the market. The organization structure is the shape to connect different organizational components to address the business needs. Costco’s organizational structure active enables the management of operations in different markets. Even though Costco is the biggest membership warehouse club in America, and designed it structure for success in the management of it business in the U.S. and overseas. Costco would have to change its organizational structure within time to suit the expanding global operations.

Costco’s business model is called a subscription business model. This is a business model where customer must pay a subscription price to have access to the product/service. Customers who want to shop at Costco must buy a membership with the promise of lower prices to make up for the initial upfront cost; the current membership cost is $55 in the US. The service that Costco provides is its ability to use economies of scale to bulk buy a large amount of foods at low prices and then to pass these savings onto its customers.

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.

He answered, “Costco buys everything in bulk, meaning they can sell things in bulk and for a cheaper price. When feeding a hundred people twice a week, and being a church with no steady income, Costco would be an amazing resource to have here in town. We could buy more food for a cheaper price, for more people.” Another huge point Mr.Tevis made in the interview was that Costco could bring business, happiness, competition, and publicity to the Longview/Kelso area. I asked how and he replied, “Costco is a huge corporation with hundreds of employees. Having a Costco here would bring jobs, jobs, and more jobs. Having a job makes people happy and Costco employees are always happy. People here would be happier because of that. And not only would Costco have jobs and give jobs, but other companies would want to compete with Costco and those companies would provide jobs. Take Tumwater for example,” he continues “that Costco was built there and Tumwater got a lot more popular. Businesses want to be where other business are.”. Being a business owner, Mr.Tevis knows that businesses often compete with other businesses

According to Deloitte’s 2014 Global Powers of Retailing Report, it identifies the 250 largest retailers around the world based on publicly available data for fiscal 2012 encompassing companies’ fiscal years ended through to June 2013; however, here mainly focuses on the Top 10 retailers’ analysis.

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 Wholesale has generated a revolution in how people shop: for the first time, many Americans are willing to 'pay' for the privileges of membership to a store so they can buy its products and save money. Like Wal-Mart, Costco prides itself on its low, low prices. However, in stark contrast to Wal-Mart, Costco has also made its exemplary treatment of its employees part of its marketing and sales strategy. It advertises itself as an ethical company, a company where it is a pleasure to work. This use of its HR police as a marketing strategy has proven to be effective, particularly with its target audience. While it caters to a wide and diverse audience in terms of its product diversity, on the whole Costco's target consumer is more affluent and educated than the average consumer at a big box store like Sam's Club. Costco's target audience members are interested

The Costco strategy for getting into the wedding gown business is to have a set of touring trunk shows at its Western stores during the season where people are planning their weddings. Costco's typical pricing strategy is to undercut competition and make up for this with high volume sales. The company applies this strategy to the wedding gown business as well. Costco offers one of the lowest prices of any company on its wedding dresses. The company's business plan ensures that the details have been fleshed out, and that has led to the unique distribution strategy for wedding gowns.

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 Wholesale Corporation, which began operations in 1983 in Seattle, originated the membership wholesale club retail concept. By providing low prices on consumables like fresh foods, health and beauty care items, high-quality apparel, electronics, jewelry and other general merchandise, the company pioneered the retail concept that encourages members to visit regularly to achieve savings. In the meantime, the retailer has been successful in encouraging members to spend the savings on impulse big-ticket, discretionary purchases.

Costco is one of the nation’s top three retailers and the world’s largest membership warehouse chain, Costco wholesale Canada operates about 80 membership warehouse clubs across Canada. The company never advertises, charges its 64 million members to shop there and doesn’t mark up any product more than 15 percent, even at this lowest profit margin, 15% for Kirkland private brand, the products were 20% lower than comparable to other brand products. Costco works with this business model and generating $93 billion in annual sales.

In August of 1999, PriceCostco reincorporates and changed its name to just Costco Companies Inc. Now heading

“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 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).

They are performing very well from a strategic perspective. No, Costco does not enjoy a clear competitive advantage over Sam’s. It does however enjoy a competitive advantage over BJ’s. the nature of this competitive advantage includes the fact that BJ’s has too many products, which makes rapid turnover harder to achieve. I think that Costco has a winning strategy because they are selective with the