Welcome To Our Presentation
Group: B
Name
Sobrata Halder Abu Syed Priyanka Tarafdar Bristi Rifat Tanmoy
ID
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Topics Covered
Serial No. 01 02 03 Topic Oraganizations Basic Information Vision Mission
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05 06 07 07 08 09 10
Abells Model
Strategies Warehouse Operations SWOT Analysis Compensation Policy Workforce Practices Business Philoshopy, Ethics & Code of Ethics Competition
Organizations Basic Information
Costco Wholesale Corporation is a membershiponly warehouse club that provides a wide selection of merchandise.
Founded:September 15, 1983, Seattle, Washington, United States
Founders: Jeffrey H Brotman, James Sinegal
Organizations Basic Information Continued.
Headquarters: Issaquah, WA
Main Feature: Membership Based Wholesale Business
Organizations Basic Information Continued.
As of 2008, It had 544 warehouses in 40 countries & its sales totaled $71 billion. As of 2008, about 53.5 million individuals, 29.2 million house-holds, 5.6 million business had membership card.
Vision
Vision
Our business is to give the
customer the best value we can. Jim Sinegal, Founder of Costco
We're going to be a company thats on a first-name basis with everyone.
Business Model
Volume Purchasing Efficient Distribution Reduced Handling Of Merchandise No-frills, Self-service Warehouse Operating Efficiencies Membership Fees Purchases By Members Revenue Generation Low Prices Limited Selection Of Quality Mercahandise Wide Range Of Merchandise Categories Rapid Inventory Turnover
Operating Efficiencies Rapid Inventory Turnover Rapid Inventory Turnover Profit & Value Generation At a Very Low Gross Margin
Mission
Costcos mission statement is
To continually provide our members with quality goods and services at the lowest possible prices.
Boundary
Present Offerings, Types of Customers Served, Geographic Coverage
Boundary
Mission - Application Of Abells Model
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Who?
Costco targets independent small business owners and large rich families Customers are both national and international Revenue Generation Target customers are mostly Asian & Hispanic. Typically customer visits 8-11 times per Profit & Value Generation At a Very Low Gross Margin year
What?
Moderate & High Quality Products Relatively Low Prices Product Variety Efficiency Convenience Trust & Loyalty Good Service Level
Revenue Generation Profit & Value Generation At a Very Low Gross Margin
How? - Strategy
The cornerstones of Costcos strategy are low prices, a limited product line and limited selection, and a treasure hunt shopping environment.
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? - Membership
Executive Member - $ 110
Gold Star Member - $55
Business Member - $55
Revenue Generation
Membership -
fee is refuandable at any time helps to maintain a pool of consistent customers enables to maintain low margins
Profit & Value Generation At a Very Low Gross Margin
Strategy? - Pricing
Sells top quality national & regional brand products at prices consistently below traditional wholesale or retail outlets. Keeps member coming into shop by Revenue Generation wowing them with low prices . Stocks items that help members save costs.
Profit & Value Generation At a Very Low Gross Margin
Strategy? Pricing
Continued
Maintains an average margin of 14% where competitors charge 20 to 50%. Uses low pricing as the core competency. Tries to lower price from $9 to $8 where competitors try to increase the price from $9 to Revenue Generation $11. Wall Street analysis has criticized Costcos pricing strategy that they are satisfying customers at the expense of shareholders. Profit & Value Generation At a Very Low Gross Margin
Strategy? Product Selection
Provide members with a selection of only 4000 items. About one-fourth of Costcos line of 4000 proucts constantly changes. Uses treasure hunt technique- buy now or it Revenue Generation wont be available here next time. Sources high price & quality products from other wholesellers or distressed retailers looking to get rid of excess or slow-moving inventory. Profit & Value Generation At a Very Low Gross Margin
Strategy? Product Selection Continued
Costcos Offerings
Appliances Baby, Kids & Toys Clothing & Accessories Computers & Printers Electronics Food & Gift Baskets Funeral Furniture Gift Cards, Tickets & Floral Hardware, Auto & Tires Health & Beauty Jewelry & Watches Office Products Patio, Lawn & Garden Sports & Fitness Travel & Luggage Home & Dcor
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? Marketing
Low prices, membership and treasure hunt strategies makes it unnecessary to engage in extensive advertising or sale campaigns.
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? Marketing
Continued
Word of mouth- existing members tell friends & acquaintances about their shopping experience at Costco
But you HeyOkay. Sam, do you know will Wholesale have to be a Costco is selling Of course. member if you various brand HDTVs at want to buy. 30% discount?? Are those original? Then Really I will so? buy No problem, Illone. be.
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? Marketing
Continued
Promotes selected merchandises to existing members using direct mail program (The Crostco Connection- a multipage mailout containing selected Revenue Generation merchandise saving coupons).
Profit & Value Generation At a Very Low Gross Margin
Strategy? Growth
Costcos strategy to grow sales & profits has three main elements:
Open more new warehouses. Build an ever larger & fiercely loyal membership base. Revenue Generation merchandising technique to Employ well-executed increase purchases by members.
Expansion is both national & international.
Profit & Value Generation At a Very Low Gross Margin
Strategy? Growth
Continued
Financial Growth
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? Growth
Continued
Membership Growth
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Strategy? Growth
Continued
Warehouse Growth
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Online Sales
Web Sites:
www.costco.com (for US) www.costco.ca (for Canada)
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Warehouse Operations
Warehouses are operated on a 7-day, 69-hour week. Warehouse managers are delegated authority over store opeartions
Revenue Generation Uses cross-docking in inventory movement
Arrived merchandise are directly moved onto the sales floor from warehouses
Profit & Value Generation At a Very Low Gross Margin
Warehouse Operations
Continued
For transactions, Costco accepts cash, most debit cards, American Express, and a private-lebel Costco credit card. Accepts merchandise returns.
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
SWOT Analysis
Strentghs
Low price Exceptional employees
Strong brand
Excellent merchandise
54 million members
Economies of scale Efficiency
SWOT Analysis
Weaknesses w
Continued
Burden of high wages paid to workers Low price margins E-commerce activities Small Marketing budget compared to discount retailers and Super Markets
SWOT Analysis
Opportunities
Continued
Expand into more foreign stable markets Mergers & Acquisitions Massive supplier pool
New Markets
Revenue Generation
Barriers Opportunity
New Suppliers
Profit & Value Generation At a Very Low Gross Margin
Mergers & Acquisitions
SWOT Analysis
Continued
Threats Aggressive price competition by rivals Political complications in foreign markets Cannibalization
Compensation
In September 2008, Costco had 70000 full time employees and 57000 part time employees worldwide. Costcos compensation package includes: Basic pay Bonus Other benefits Revenue Generation Executive compensation
Profit & Value Generation At a Very Low Gross Margin
Workforce Practices
The top management always tries to have a satisfied good workforce. It was company policy to fill at least 86% of higher level openings by promotion from within actually thr percentage ran close to 98%.(2008) Revenue a Generation They also make point of recruiting at local university. Only the skilled people move up to the higher positions.
Profit & Value Generation At a Very Low Gross Margin
Business Philosophy, Values & Code of Ethics
Jim Sinegal had ingrained five simple and realistic business principles into Costcos corporate culture and operation manner. The following are excerpts of these principles and operating approaches:
Obey The Law Revenue Generation Take Care Of Our Members Take Care Of Our Employees Respect Our Suppliers Reward Our Shareholders
Profit & Value Generation At a Very Low Gross Margin
Business Philosophy, Values & Code of Ethics Continued
Obey The Law
*Comply with all laws and other legal requirements. * Respect all public officials and their positions. * Conduct business in legal and proper manner in and with foreign countries. * Not offer, give, ask for or receive any form of bribe or kickback. * Promote fair, accurate, timely and understandable disclosure in reports filed.
* Comply with safety and security standards.
* Exceed ecological standards required in Revenue Generation every community.
* Comply with all applicable wage and hour laws.
Business Philosophy, Values & Code of Ethics Continued
Take Care Of Our Members
* Provide top-quality product at best prices. * Provide high quality, safe and wholesome food products. * Provide their members with a 100% satisfaction guaranteed Revenue Generation warranty on every product and service. * Assure to sell authentic product which represents the performance. * Make their shopping environment a pleasant experience. * Provide product that will be ecologically sensitive.
* Provide best customer service.
* Give back to their communities through employee volunteerism and employee Contribution.
Business Philosophy, Values & Code of Ethics Continued
Take Care Of Our Employees
* Competitive wages.
* Great benefits. * Safe and healthy work environment. * Challenging and fun work. * Career opportunities. * Harassment or discrimination free Revenue Generation atmosphere. * An open door policy to resolve issues. * Opportunities to give back to their communities through volunteerism and fund raising.
Business Philosophy, Values & Code of Ethics Continued
Respect Our Suppliers
* Treat all supplier as they would expect to be treated.
* Honor all commitments. * Protect all supplier assigned property. * Not accept anyGeneration kind of gratuities from Revenue a supplier. * Avoid actual or apparent conflicts of interest.
Business Philosophy, Values & Code of Ethics Continued
Reward Our Shareholders
Costco believes that their shareholders are their business partners. They can only be successful so long as they are providing them a good return of their investment. They pledge to operate their company in such a way that their present and Revenue Generation future stockholders, as well as their employees will be rewarded for their efforts.
Competition
Costco's main competitor is Wal-Mart's Sam's Club. BJs, a smaller retail warehouse chain, also competes with Costco and Sam's Club.
The three companies share a similar business model, selling high volumes of merchandise at low prices in a Revenue Generation membership-only warehouse club. Each company sells a similar array of general merchandise, including food, apparel, and gasoline.
Profit & Value Generation At a Very Low Gross Margin
Competition
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Competition Continued
Sam's Club operates 591 warehouse clubs nationwide and earned $44.4 billion in revenue in 2007.
BJ's operates 177 warehouse clubs across 16 states in the eastern U.S. In 2007, the company earned $9.0 billion in revenue.
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Market Positions of Rivals
Higher
Pricesmart Inc.
Operating Margin
Sams Club
Costco
BJs
Revenue Generation
Lower
Few
Number of Locations
Many
Profit & Value Generation At Very Margin Note: Circles are drawn roughly proportional to a the sizesLow of theGross club chains based on revenue
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Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
