Marketing: The Costco Strategy

The five forces strongest force in the food retail industry is the degree of rivalry. I will discuss the strongest one first. The degree of rivalry for Costco is strongest because the products that warehouses sale are not differentiated from one another. The buyers can switch stores easily because it is not costly for them to shop around. However, Costco tries to counter switching of buyers by having customers become members and pay monthly fees for their membership as well as offering low prices on products. Another factor that makes the degree of rivalry strong is the number of supermarkets and warehouses are increasing, and they are becoming more equal in size and strength causing rivalry to be very competitive. Among the rivalry in the industry Costco is considered to have the best quality which helps to attract more customers.

Costco operates membership warehouses based on the concept which offers member low prices on a limited selection of nationally branded and selected private–label products in a large range of merchandise categories which produce high sales volumes and rapid inventory turnover.

Costco uses a range of suppliers and buys in large quantities in order to achieve its goal of keeping costs down. It negotiates prices and drives a “hard bargain” so that low wholesale prices can be achieved. “Costco warehouses carry about 4,000 SKUs (stock keeping units) compared to the 30,000 found at most supermarkets. By carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members” (Costco:

Costco generic strategy is the Low-Cost Provider Strategy. According to Thompson, Strickland, and Gamble, “low-cost provider strategy is striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by under-pricing rivals”. (Thompson et al., 2008). Costco was successful in has successfully implemented low-cost strategy by driving costs out of their businesses, through low pricing, limited product selection, and a treasure hunt shopping environment. Pricing is Costco key element of their low-cost strategy. They implement their pricing strategy by capping its markup on-brand-name merchandise at 14% and markups on their private label items can be no higher than 15%. This strategy has kept Costco customers

As shown in the table below, days of inventory shows a decreasing trend, signifying its improved efficiency in its inventory management. Number of inventory turns per year also shows an increased performance. This contributes to its goal of rapid inventory turnover making Costco operate profitably, shown by increased net sales and net income.

A retailing company with a mission to continually provide members with quality goods and services at the lowest price possible, Costco Companies, Inc.’s business model was to generate high sales volume and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories. It is very much appealing as small businesses are the definite target customers. Low price definitely attracts more customers, and is strategically advantageous to this kind of industry.

Costco is very large wholesale retailer that is worth approximately $2 billon. Due to the competitive competition within the retail industry operations must become unique in generating revenue all while making a profit to stay in business. Advertising for the lowest price might not always keep you in business and generating profit. Even though your company does offer the lowest price are you still making a profit on the products and overall sale? Although in most industries profit margins will fluctuate based on the product and general advertise and promotions based on the supply of the

Costco CEO shows authentic leadership as he is a people person. He a lot of his chooses is made with his employees and customer in mind. It is more of a Theory Y leadership where trust, democracy, and competence ensure high productive employees, creativity, and high job satisfaction.

In 1971 Starbucks started as a small coffee shop that specialized in selling whole arabica beans in Seattle’s Pike Place market. After being inspired by Milan’s coffee culture - especially the role it espresso bars played in the Italians’ everyday social lives - Starbucks opened an espresso bar in the corner of their shop. Their ideal was to create a ‘third place’ - besides home and work - where people could relax and enjoy a good cup of coffee (Moon & Quelch, 2006). Over two decades the company enlarged and served over 20 million unique customers in over 5,000 stores around the world. Their brand strategy could best be described as ‘live coffee’, which meant creating an ‘experience’ around the consumption of coffee that fitted into people 's everyday lives (Moon & Quelch, 2006). Three components were fundamental for their branding strategy. First of all, the coffee itself which should represent the highest-quality coffee in the world, derived from Africa, Central and South America, and the Asia-Pacific regions (Moon & Quelch, 2006). Secondly, the atmosphere should be inviting and make customers feel comfortable. The ambiance in stores should make customers want to stay (Moon & Quelch, 2006). Thirdly, service - customer intimacy - is a key factor within their brand strategy, which aims to create an experience for the customers, and aims at building customer loyalty (Moon & Quelch, 2006). The employees - called ‘partners’ - are

Coca-Cola is the most famous and preferred carbonated soft drink in the world. Coca-Cola, otherwise known as Coke, is produced by The Coca-Cola Company, which is situated in Atlanta, Georgia. The company retails their ‘concentrate’ to certified Coca-Cola bottlers throughout the world, which holds exclusive contracts with the company.

“Costco is a wholesale warehouse that sells its merchandise in bulk at low prices to membership paying customers” (Lewis, 2017). “Costco was started by Jeffrey H. Brotman and James D. Sinegal in 1983” (Lewis, 2017). The first Costco went up in Seattle with the name of Price/Costco, but was later changed to Costco Companies Inc., and after a few years the name changed once again to its now current name of Costco Wholesale Corporation. Costco’s merchandise consists of many different name brand products, but they also carry their very own Kirkland brand items. With the Kirkland brand, Costco has made it so they can develop new products and have complete control over quality and price, to help compete with other leading brands. Costco’s target customers tend to be wealthier households with an income of around $100,000, due to the membership fee and on average spending of around $925 per visit (Bowman, 2016). With the revenue Costco brings in monthly they have become the number two retailer store in the world with stores in over nine countries, with $116.2 billion in revenue (Dhiraj, 2017).

The brand I have chosen is Coca Cola. Achieving a healthy market position requires a variety of integrated strategies, and promotional activity plays a vital part in that mix. Promotion is one of the elements of the marketing mix, the others being product, price and place. The promotion category focuses on strategies that a business can use to provide information to consumers about its products. Specifically, promotion involves the strategies of advertising, personal selling, sales promotion and public relations. The integrated marketing communication is the coordination of the promotional mix elements with each other and with other elements of the brand’s marketing mix such that all elements speak with one voice.

Airbnb is a two-sided peer-to-peer rental and accommodation online platform that integrates individuals that are interested in renting their real estate properties to those people who are attracted to short-term lodging. Airbnb was founded back in 2008 in San Francisco by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk. The co-founders of Airbnb came up with this idea after lacking enough money to pay their rent. As a result, they ended up renting part of their loft to strangers to assist subsidize their rent problems. Later, they saw it as a business opportunity and developed a website that would be used as a platform for their

The concept of strategic groups in the grocery industry is one that is used to group companies within the same industry that are alike in business model of that have similar combinations of like strategies or goals. When it comes to competition in the grocery retail industry. The selling of grocery’s is an important industry that affects the health and wellness of its countless customers and many of its staff, and can also have a major impact on the farming community and manufactures that assist the suppliers. In any industry their sometimes are many different companies with many different strategies to sell its products and services. Some company’s may target customers wanting lower prices like Walmart, and some

Wal-Mart Stores, Inc also known as Walmart manages a chain of department stores offering various products like grocery, fashion, sea food, clothing, electronics, etc. Many people prefer shopping at this store because it is considered as one stop shop.