Costco Wholesale in 2012 Essay Example for Free

Costco sweeping in 2012 EssayCostco is one of United States largest retailers, serving all over 3600 variants of convenience intersection points at excellent property with competent prices. Founded in 1983, Costco quickly expanded in its operations to over 598 stores worldwide. One of the unique exchange propositions of Costco is the fact that they offer very pathetic prices as compared to their competitors without requiring to compromise persona. This paper will analyze Costcos key success factors in terms of its strategic management.Business ModelCostcos business stick is simple and straightforward they offer high quality products at affordable rates. The centerpiece of Costcos forge entails high sales volume and rapid inventory turnover. Costco enjoys high inventory turnover which means that they enduret bring to stock a particular sizeable for long period of time. Also, before they need to pay the suppliers, they are able to sell it. Which means, they are able to pay suppliers with the cash derived from sales, leading to low working capital. This tapers significance in financial health and good financial management. This kind of business fabric is appealing for several(prenominal) reasons low prices can generate high number of customers, indicates healthy operations, encourage rapid turnover, decrease warehouse costs and many another(prenominal) more. However, in order to keep up with this business model, Costco necessitate to continually maintain overhead costs, which will be discussed further into the paper.StrategyCostcos low determine strategy highly depends upon several factors. In terms of pricing, they offer bargain products at low prices. Their network highly come from membership fees, over which members can join in an yearbook subscription and enjoy promotional rates as members. Even though Costco enjoys less profit margins, they get hold of high number of annual members and earn their profit by membership revenues. In term s of product, their Kirkland Signature is also of good quality as a representation of their brand. They are also ready to experience loss of sales by customers who do not want to purchase in larger quantities. Treasure-hunt merchandising is also a aptmethod to continually renew their product lines to encourage members to purchase the item right away in fear of not having them available at the next visit.Jim Sinegal and Core Values as CEOJim Sinegal shows good examples of leadership as a CEO. He conducts an open-door policy which makes him accessible to staff, thereby increasing employee motivation. Jim also conducts well-ordered store visits as opposed to working at a desk, which shows his willingness to step down to the field to admirer improve the store. The business environment is made to be causal and unpretentious, so employees feel sense of belong and are often committed to the organization, in benefit of themselves and the company. Low employee turnover shows the compatibi lity of the employees and the company, which means that the corporate horticulture can be maintained or enhanced.Financial PerspectiveWe have come to understand that Costco achieves some(prenominal) of their revenue from membership renewals. Observing the financial data, we attend that Costcos membership fees if four times over from 2000 up to 2011. This signifies their proficiency in making member packages attractive. Their actions in prioritizing members have been successful as we see that members are continually signing up. Therefore, membership is encouraged to be sustained. However, we see that sales also accession significantly over the years, al nearly 3 times over. Therefore, we can conclude that despite having less marketing activities, Costco is able to attract customers by emphasizing on price efficiency. Their working capital ration (current assets negatively charged current liabilities) is kept at a low level due to high inventory turnover. matched Advantage over CompetitorsA key competitive advantage owned by Costco over its competitors is, without a doubt, their low prices. Although they do not invest much in store layout, store ambiance, labor and marketing, they have low overhead costs which contributes to being able to keep prices low. Also, they offer a wide raiment of product categories from food products to gasoline, although within a product category, they offer less brands than usual retailers (Llopis, 2011).Strategic Weaknesses in Comparison to CompetitorsThe fact that Costco carries only 3600 selections of merchandises could potentially be a major flaw in their strategy. Generally, other(a) stores carry over 10.000 selections. Customers may initially feel the thrill of grass overping at cheap prices at Costco but could eventually dislike the lack of choices in terms of brands and may choose to shop at stores with larger varieties. Secondly, Costco spend less for advertisements and rely on word-of-mouth and certain campaigns. Ho wever, their competitors, Sams fraternity and BJs Wholesale Club spend much more on advertisements. Presently, Costcos financial conditions show steady results in sales but the power of marketing is such that customers may choose to shop elsewhere for various reasons. It is also distinguished to note that customers switching costs (from Costco to another) is relatively low.Compensations PoliciesCostco offers attractive compensations as compared to their competitors. The employee benefits covers all aspects such as fixed wages, health benefits, medicinal discounts, eligibility for company profits, counseling services and many more. At a quick glance, we notice that Costco spends much on compensation, despite the comparatively lower inwardness of labor, due to the vast varieties of compensations.In my opinion, it shows good corporate culture to take care of employees. In most companies, CEOs are the first ones to be rewarded with sky-high numbers. It is different in the case with C ostco, where CEOs are paid fair to middling without failing to reward employees appropriately.Conclusions and RecommendationsAlthough from a management and operation point of view, Costco is doing everything to a tee, there are several recommendations get outd to further improve its performance Increase product lines to above 3600 in order to compete in terms of product choice with their competitors, especially after understanding that customers switching costs are low. Costco already has a big advantage in terms of prices and can do wonders when they also holdproduct advantage. Prepare some funds for marketing.Branding and brand awareness are two of the most important factors for warehouses to remain sustainable in the market to be seen as reliant. With more marketing, Costco can retain top-of-mind spot as the place to shop in customers mindsets. Maintain membership fees at a fair rate. Currently, Costcos membership fees are higher compared to their competitors. They can maintai n their fees at this level only if they can provide more attractive member benefits to their customers compared to their competitors.ReferenceLlopis, G. (2011, January 31). The Costco Factor To Win The Business Game, You Need to Change How You Think. Retrieved February 20, 2015, from Forbes http//www.forbes.com/sites/glennllopis/2011/01/31/the-costco-factor-to-win-the-business-game-you-need-to-change-how-you-think/