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Competition among the North American

Warehouse Clubs:

Costco Wholesale versus Sam's Club versus BJ's Wholesale

What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related chapter discussions on pp. 57-70) to do a complete five-forces analysis of competition in the North American wholesale club industry.

Competition among the North American wholesale club industry is pretty high. Everyone tries to achieve lower prices by reducing the cost in displayed items on pallets or inexpensive shelving. They also have very low costs for store décor and fixtures and a comparatively low labor cost because they use fewer personnel to operate their facilities.

The five competitive forces among the industry are very important. However, rivalry among competing sellers, buyers and suppliers are the most important. Since the case discusses mayor wholesale clubs, the possibility of these being affected by potential new entrants is pretty low. Industries offering substitute products are not important factor because in this case we are talking about large quantities. Supermarkets offer the same types of products but the target market is completely different. On the other hand, the pressure of buyers is very important. Customers always look for better prices and the demand in the industry is pretty high. Rivalry among competing sellers plays an important factor. The ability to provide better prices depends on the company’s relation with suppliers.

Do all three warehouse club rivals—Costco, Sam’s, and BJ’s Wholesale—have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy than the others? Does one rival have a somewhat weaker strategy than the other two?

The three of them have managed to succeed in the wholesale industry. However, Costco has managed to stand up and acquired a better market share.

Costco has managed to establish a good relationship with their suppliers in order to provide better prices. They have a low-cost strategy that has been successful among the years.

In addition, they also have a good strategy to recruit future clients. You always see them in fairs and event trying to engage future customers in activities and offering them coupons so that their get enroll in their membership.

Costco focuses on the ability of increasing the membership base and to employ well-executed merchandising techniques to induce member to shop more often.

One on the advantages that BJ’s has, that could be a weak point on the strategies of the other two, is that it is the only major warehouse club operator to accept manufacture’s coupons, which provided added value for members.

We believe that Costco is the one that has finally manage to achieve all the requirements to succeed. Better prices, lager number of members, good selection of products and a well trained and pay work force.

Which of the three warehouse club rivals has been the strongest financial performer in recent years? Support your answer with calculations based on the data in case Exhibits 2, 6, and 7. Use the financial ratios presented in Table 4.1 of Chapter 4 to help you with the needed number crunching.

The strongest warehouse club rival has been Costco. Costco has a great strategy of trying to sell everything cheaper than the competitors and maintaining their loyal clientele.

By reading the case you defiantly tell that Costco is ahead of the competition and knows what they are doing.

By comparing the net sales for 2009 it is without a doubt that Costco is doing much better than Sam’s Club and BJs combined.

Costco’s net sales for 2009 is $69,889 million while Sam’s Clubs net sales is $46,889 million and BJs net sales are $$9,802.

Costco has 413 United States stores and 566 Worldwide, while Sam’s Club has 596 United States stores and 729 worldwide, and BJs has 187 United States stores and 187 Worldwide.

Does the data in case Exhibit 5 indicate that Costco’s expansion outside North America (the U.S. and Canada) is financially successful? Why or why not?

The data on Exhibit 5 indicates that Costco’s expansion outside North America has financially succeeded because they have been expanding little by little and they are increasing their revenues yearly.

Since 2005 they have opened 14 new International stores and have increased their total revenue by $2,000 million in 4 years.

The international operations are slowly expanding and becoming more and more popular.

Although the international Costco’s are less than 10% of Costco’s operating cost, they are slowly growing and expanding the international market. For example, in Taiwan they tripled their sales in just 4 years.

Five years from now, is Costco’s standing as the industry leader likely to be stronger or weaker? Are the other two rivals likely to gain or lose ground on Costco? Why or why not?

Costco has a very good chance of continue to stand as the industry leader and also continue to get stronger, because of its functioning strategy; also the management of Costco understands the overall vision of the CEO and one of key decision makers at Costco.

Costco’s most important client is not their shareholders, but their clienteles for even in the expanse of the shareholders opinions and wall street harsh criticism they stay true to their commitment to the customers.

The strategy they have worked, every customer of all sort no matter how financially stable or not want to get a great deal for the most minimal price as possible and Costco offers that to not just business owners but to the individual customers.

There is a possible rival that is gaining strength, but still not as strong as Costco which is Sam’s Club. The issue with Sam’s Club is the operate much like Wal-Mart and their operation cost for overhead item is high, as compare to Costco who only keep in stock a certain amount of items and constantly changing their items to keep customers coming back again and again to receive the best bargain possible.

What recommendations would you make to Jim Senegal regarding the actions that Costco management needs to take to sustain the company’s growth and improve its financial performance?

One recommendation for him and management team would be to focus a little more on marketing and advertisement via mainstream media instead of just depending on words of mouth or connections of other small business owner to represent for them.

Senegal could do a little more with making sure the word is getting out, they don’t have go all out, but they can use advertisements simple as a regular shopping day at Costco and filming it; not necessarily using high end commercials or anything like that, the issues is while they are not focusing on such streams other rivals are, any door for a rival to enter is a possible weakness even if not perceived as such.

What actions do you think management at Sam’s Club should take to boost revenue growth and overall financial performance?

The actions Sam’s Club should take to boost revenue growth and overall financial performance should be:

  • Definitely they can get involved in a little of what Senegal and his team is doing, and find a way to do it better.

  • For example the overhead cost is unnecessary for any company in that business because the it is not guaranteed that all the item in the overhead will be sold at the expected price, so having too many items on overhead is dangerous for company’s to increase profit also increase membership loyalty by giving variety and as low price as possible for name brands and non-name brands.

What actions do you think management at BJ’s Wholesale should take to boost revenue growth and overall financial performance?

The actions BJ’s Wholesale should take to boost revenue growth and overall financial performance should be:

• Compare their competitor’s prices and try to lower or match their price

• They need to buy higher amounts of items, so they can have a lower selling price and compete with Costco.

• They need to open up more warehouse locations.

• They need to make more of their name brand items so they can compete with big name items and keep more of a profit for themselves.

• They also need to increase their member base.

• Try to find a better relationship among suppliers in order to provide better prices.

• They should try to outsource and find niche products to create a competitive advantage.

The End

Three of them have managed to succeed in the wholesale industry. However, Costco has managed to stand up and acquired a better market share. Costco has managed to establish a good relationship with their suppliers in order to provide better prices.

They have a low-cost strategy that has been successful among the years. In addition, they also have a good strategy to recruit future clients. The differences among the three companies are things like the hours of operation, the amount of products offered to clients and the diversity of products as well.

One on the advantages that BJ’s has, that could be a weak point on the strategies of the other two, is that it is the only major warehouse club operator to accept manufacture’s coupons, which provided added value for members. We believe that Costco is the one that has finally manage to achieve all the requirements to succeed. Better prices, lager number of members, good selection of products and a well trained and pay work force.

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