This assignment is about the business model and strategies of Costco Wholesale Corporation based on the financi;il report of 2010. This studj here reflects the business strategies thnt are taken bi’ the innnngcment of the organization. Those strategies arc cffectii’e for the company to hold a prestigious position in the business market of United State or in greater i ie» in the business innrkct throughout thc »’orld. From this stndj it ii’ill bg clearly understand that »’hat business strategy could be more appropriate for a » liolesale firm like Costco Wholesale Corporation to stand in the top of the list of most successful business firm.
about Costco Wholesale Corporation
Costco Wholesale Corporation has started to operate in Seattle. Washington in the \ ear 1983. Gradually they spread their business in other eight countries like UK. Canada. Mexico, Tatu an and South Korea (Costco.coin. 201fi). The company is bound to deliver a high quality and cost effective household products to their customer. Costco Wholesale Corporation has flooded the market of US in tenns of their products such as electronics goods, coitiputer accessories, home and kitchen appliances. tires and automobile accessories. many home improi’ement and gal’deni ng pro ducts, office usage products, iiiany personal usage products like cloth s •• • C • S
and sunglasses. jeu eln and many more. The company at first mas serving as small businesses in
San Diego u ith the name Price Club in the year 1976 (Costco.com. 2010).
Later » hen Price Club and Costco had started to operate together as a single ors• ixation from 1993. they started to generate a sale of 16 billion dollar annuall y The operation of Costco Wholesale Corporation is based on the most simple but best effectii’e market strategy. The main focus of the company' is to proc ide efficient product at coinparatii eIj Ion er price to meet the saiisfactoy level of their customer, With the help of this » ondcrful businc ss strategy , Costco’s sale exceeded fi4 billion dollar in recent fiscal years (Costco.coin, 201fi).
Business model and Strategy of Costco Wholesale Corporation in 2016
Costco Wholesale Corporation is one of the largest wholesale retailers all over the uorld. They have 663 retail stores around the globe (Maenhout and Vanhoucke. 2G 16. p.1G7). Behind the success storj of Costco. there is a suitable business model u hich is follou’ed by the management
of Costco ii’hcn building a business strategy for thc firm, This ideal modcl lcads Costco to one step ahead from their competitor.
Membership: Costco follo» s thc subscription business model. In this modcl the customer must hai’c a mcmbcrship ii hich costs around 55 dollnr in US. to bu; am product at loci’ pricc. A i’cri popular strategy to earn a haiidsoitie amount of profit » hich is also folio» ed by many gyms, ncii’spapcr and tclccom companics (Ro»’linson. 2Gl7. p 45).
Froiii the above statistics it is observed the rapid grou th of both the Gold star as u ell as Business membership from the year 2012 to 201ñ according to the financial report of 2010 of the company. At the end of year 20.12, u here the total number of Gold star member u as 2fi.700. u hich is increasing gradually in ex cry follou ing ear and reach to 36.8GG in the end of year 2s16 For the statistics of the total number of business member it u’as ñ.4GG in the end of 2012 and reach to 7.300 in the end of financial year of 201fi in an increasing rate (PisIidad-Boz.orgi and Belie eau. 2G I t5. p 179)
Consistc•nt form Prtcinp: Costco Wholesale Corporation is i ery much an are of capturing the
mass customer In order to keep interest of the customer ton ards them. they maintain the lou er
pricc throughout the ycar. Other competitors of Costco loii’cr thcir product priccs in somc ccriain occasion (Azhar ct oJ 2015. p 15) Thus proc iding a consistent Io» er pricing for the products to thTir mcmbcr Costco gii’cs thc i’aliic for monGy’ to their pcnnancnt mcmbcrs.
moss header Strategy: According to Bygballc er n/ (2015. p 22). this stratcgj hclps Costco to sale other products as » ell i lien a customer is tends to buy a product A » eekli sale splash offcrs something in i’cy’ cheap rate ii ith an item ii ith higher i’aluc This stratcgj ntiracts morc customer hence sales increase accordingly
High W‹igc•s: Costco gis es an at erage of $21 per hour of » ages to their employ ees along » ith hcalth benefits. As the cinployccs get a dcccnt amount of ii’agcs. thcy scri’c their lci’cl best to increasc tlic profitability of Costco With this high i agcs an employ ce is cy much intcrcsted to scri’c as a long tcrm basis ii’hich is bcncficial for Costco. It costs about 40- 150% of annual salan’ of an cmploj cc to train n ncii’ cinployec (Mollaoglii-Korkmaz er o/. 2014. p.17)
Fc c•r Stock Kc•eping Units: lii order to limit the expenses on manpo» cr and maintenance Costco Wholesale Corporation adopt a strategy callcd fcii cr stock kecping units Thcrc arc tit o benefits of this stratcgy.
Firstly. ii itli lot er number goods thcy need smaller spacc for the warehouse With a small sized ii archousc. thcy nccd lcss inanpo»’cr to organize thc busincss (Al Siibaih. 2015. p 04).
Secondly. few er stock keeping units helps to increase the purchasing port er. With a limited spacc. suppliers sold thcir product at a loci price to kecp thcir brand i’aliic is’hich incrcases thc sale (Harrison and Lock. 2G17. p 11).
lii order to understand the intenial strengths, » eaLnesses and external threats and opponunities of the company SWOT anale sis is a cnicial tool, It is a framcii ork ii ith thc hclp of ii’hich thc managcmcnt of the company can take ncccssay’ actions by idcntifi ing thc strengths and
» eaLnesses of the firm (Costco coin. 201S)
Here is thc SWOT analysis of Costco Wholcsalc Corporation ii’hich could help thc managcmcnt to identify the strengths and » eaknesses
Strengths: The main intenial strengths of Costco Wholesale Corporation to lead in the ii holcsalc market arc:
+ Thc main business strategy’ to offer quality scri’icc to thcir cnstomcr in a cost cffcctii’c
» ay is the main rock solid platfonn of their business The company offers en good quality products from thc compare’ ’s ii cb storc or from the retail outlct in a cheapcr pricc (Costco com. 2018).
As Costco offers good quality products at a lo» er price, their sale i olume grow s rapidl,y hcncc thcir rci’cnucs also grows faster.
Costco Wholesale Corporation operates efficiently in the » holesale market in spite of their high volume of sales (Costco com, 201S) They are bound to delis er high quality products to the customcr to maintain thc rnpid grow th.
Their minimized ariablc cost of all products is helping to incrcase the efficiency of their opcration by incrcasing thc sale i’oliimc
Wcaknesscs: Though Costco Wholesalc Corporation is onc of the biggest ivholcsalc rctailcrs
Their operations liar e some weaknesses too. Those are:
+ Thc busincss of Costco Wholcsalc Corporation is i’cy’ much conccntratcd to that custoincr i mo has the membership of Costco (Costco coin, 20 lh). The custoincr can gct the iiecessay products at lot est price only if tliej have the iiiembership of Costco
+ As Costco Wholcsalc Corporation offers attractii’c cost effcctii’c products only to thcir members. hence tliej are unable to capture the iiiass non member customer.
+ Limitations in products and scri’iccs arc anothcr ii’eakness of Costco Thc i’aricti of products is limited in Costco Wholcsalc ii hcrcas in othcr reiail likc Wal-Mart. thcrc arc many options for the customer. Due to the lack of i’arious options the customers of Costco turn their heads to the othcr retail (Costco.com. 2Gl S).
External Opportunities: lii order to operate in a long term basis in the iiiarket, a firm has to explore i arious opportunities that are at ailable iii the market The opportunities in the external markct bi adapting ii’hich Costco Wholesale Corporation can gain inorc rei’eniie are.
Costco Wholesale Corporation is operating largely in the market of US, ii hich leads them unable to captiirc a hiigc customer scction of Asian continent. They hai’e to understand the cffectii’cness of the Asian marLet and make a plan to opcrate in this market in order to increase their turno ’er (Costco coin. 20 lS)
« They have to expand thc opcration of their e-coininercc ii’ebsite bc;'ond the market of US. UK, Japan, Taiii‘an, Spain, Mexico, South Korea and Australia.
Costco Wholcsalc Corporation has to make a i’ariation of their product and scri’iccs ii ith an attractii e offer to increase the interest among the customer to use their products (Costco com. 2018).
External Threats: Onc of thc grcat barriers to the business of Costco’s retail market is thc external threats The threats that lead Costco to limit their operations are:
+ Vicwing the success of Costco Wholesalc Corporation in thc rctail markct other ncii
» holesale retails are opened » hich leads a decrease in sale of Costco.
Other ne» Ij opened » holesale retailer also gives an attracti e offer to the customer to capturc the busincss in reiail markct. ii hich is a big thrcat to Costco (Costco.com. 201S).
Findings of the study
Froiii the above detailed study of the business model and strate s›’ and froiti the SWOT analysis it re flects an over ieu of the company tlirous this project. Froiti this research the business operations of all u arehoiises of Costco Wholesale Corporation can be measured. An idea of hon they are able to hold a remarkable place in the business of retail store can be drau n. It is also obseri ed from this study that hon the management of Costco setup various strategies and implement them to their busincss to maximize thcir profitable amount in an increasing manner (Al Subaih. 2015. p.64).
This study shou s that hon Costco follow’s a suitable busincss model to run their retail businc ss sharply, With the help of an appropriate business model and appli'ing suitable strategies they are i en much able to meet the custoiiier satisfaction, hence increase the sale of the products (Kadota eI al, 2G 18, p.2),
This article slio» s that hot Costco serves their customer by supplying cost effectii e products consistcntli to gain notablc amount rci’cniic ci’cn ycar (Roii’linson. 2G17, p 45).
This study flashes thc light on how’ thc compare rises thcir strong points to scri’c thc customer better in order to cam more profit Ho» they can able to transform their » eaknesses into the area of strengths to achici’c thc ultimate goal, How thcy can utilizc the ai’ailablc opportunities and or ercoine the present market threats to leads their coinpanr to the ever best position (Maenhout and Vanlioucke. 2016. p 107).
The abo e article is all about the business strategies that are follow ed bj the Costco Wholesale Corporation to cxccl their business »’orldii ids. Though Costco ruled oi’or the retail busincss ii ith the help of some certain strategies find they make n remarkable good in their field. brit there is aI» ays a scope of improvement in this ct er changing world
It is rccommcndcd to Costco that thcy should rcdncc the mcmbcrship cost to incrcasc the sale. Due to a high membership price. many consumers abstain from being a meiiiber of Costco They choose other retailer to buy the household products.
As the non-mcmbcr of Costco has to purchasc thc product at high pricc. hcncc thci arc automatically biased to» ards other retailer. It causes a greater loss in profitability . lii order to ai’oid thosc losses. it is recommcndcd to Costco Wholcsalc Corporation to introdncc some cxciting offers to thc gcncral customcr It »’ill bring thcir intcrcst to»’ards Costco.
It is concluded from the abo e brief study about Costco Wholesale Corporation and their business operation strategy based on effectii’e business model that. to rule the marLet a company has to dclii er cost effective products. The main focus of an ors• ' xation should be not only deli ering products at loudest price but they also have to maintain quality of the product
A firm should au’are of the qualit of their products u hile make it cost efficient to the customer. as a larse number of customer can afford a slightly higher price but not ready to compromise xx ith the quality,
It is also concluded from the study that. a finn has to identify their u eaknesses. strengths. market threats and opportunities and taLe necessarr actions to see e better in the market.
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