Professional Documents
Culture Documents
PRESENTED BY:
Name Students ID
Products Meats, seafood, fruits, vegetables, paper products, cereals, coffee, dairy
products, cheeses, frozen foods, televisions, iPods, digital cameras, flowers,
wines, caskets, baby strollers, toys and games, musical instruments, ceiling
fans, vacuum cleaners, books, apparel, cleaning supplies, DVDs, light bulbs,
batteries, cookware, electric toothbrushes, vitamins, washers and dryers
around 4000+ items.
Country USA, Canada, Puerto Rico, UK, Taiwan, Japan, Korea and Mexico
Vision:
Our business is to give the customer the best value we can.
-Jim Sinegal, cofounder and CEO of Costco
Mission:
To continually provide our members with quality goods and
services at the lower price.
Costco Business Model
Volume Purchasing
Low Price
+ Efficient Distribution
+ Limited Selection of Quality Merchandise
+ Reduced Handling of Merchandise
+ Wide Range of Merchandise Categories
+ No-frills, Self-service Warehouse
Rapid Inventory Turnover
Operating Efficiencies
Low Pricing
Limited Selection
Merchandise Selection
Treasure-Hunt Merchandising
Main
Open More new Warehouse
Growth Strategy Ever Larger & Fiercely Loyal Membership
Employ Well-executed Merchandising Techniques
Marketing & Advertising
Secondary
E-commerce Strategy
Part B:
Business Analysis
Macro Environment
Factors
General Economy The estimated business was about US $120 Billion for wholesale club
and warehouse segments in USA in 2008
Costco attract most affluent customers
Average income of individual about $75,000
Over 30 percent having incomes of $100,000 or more annually
Costco had close to 53% share of warehouse club sales in United
States and Canada.
Sams Club had close to 37% share and BJs Wholesale and other
small warehouse had 10% share of warehouse sales
Substitute products Well established substitutes are readily available in the market
(Competitive like Sams Club / BJs Wholesale
Pressure High) Substitutes offers are good
More facilities like Sams club offers collegiate membership
More variety of products or services available BJs sells 7300
items compare to Costco 4000 items
Low switching cost for customer
Porter 5 Forces Cont . . .
Forces
New entrants Due to low switching cost new retailers can attract customers
(Moderate Entry Entry barriers are high because of high economies of scale and to
threat) compete directly against giant like COSTCO
Expanding current market vigorously where opportunities are
less for new entrants.
Market Positions of Rivals
Close Competitors Distance Competitor
Sams Club BJs Wholesale
Higher
Operating Margin
Sams
Club
BJs Costco
Lower
Few Many
Number of Locations
Note: Circles are drawn roughly proportional to the sizes of the club chains based on revenue
Costcos Financial Analysis
Performance
Ratio\Fiscal Year 2008 2007 2006 2005 2000 Remark
Parameter
Gross Profit
2.72% 2.50% 2.70% 2.79% 3.23% S/B Upward Not Stable
Margin
Profitability
Net Profit
1.77% 2.50% 2.70% 2.78% 3.22% S/B Upward Not Stable
Margin
Avg 12-15
Return on Average; Not
13.96% 12.56% 12.06% 11.97% 14.88% and S/B
Equity Stable
Upward
S/B Higher
Liquidity
Liquidity Ratio
1.4 70.00%
1.2 60.00%
Satisfactory but
Debt-to Equity 0.25:1 0.25:1 0.03:1 0.09:1 0.19:1 Usually less 1
Unstable
-
Inventory Days Days Days Days better Progressive
Inventory 12.57 11.50 11.44 11.16 Higher is Performance
-
Turnover T/Y T/Y T/Y T/Y better Progressive
Financial Analysis Graphical View
Leverage Ratio
0.25 1.2
0.20 1
Accepatble Range
2008 0.8
0.15 2008
2007
0.6 2007
0.10 Mergin
0.4 2006
2006
0.05 2005
2005 0.2
2000
0.00 0
long Term Debt to Capital Ratio Debt-to-Equity Ratio
Activity Ratio
33.00 13.00
32.00 12.50
31.00 12.00
2008 2008
30.00 2007 11.50 2007
27.00 10.00
Hard to Copy
- Maintaining staffs turnover
/ Inimitable
Non-
- Home grown management attitude
substitute
Costcos Value Chain
Elements Value Chain
Supply Chain Management Treasure Hunt
Operations Provide package product
Primary
Distribution Smooth delivery system
Activities and
Costs Sales & Marketing Word of mouth