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Costco strategic management Analysis

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angelo bond

on 6 August 2013

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Transcript of Costco strategic management Analysis

First Costco Warehouse- 1983 Seattle, WA
1993 Price/Costco Inc.
Costco Wholesale Corporation, "COST"
Founders: James Sinegal and Jeffrey H Brotman
CEO: Craig Jelinek , 60
CFO: Richard A. Galanti, 56
COO: Joseph P. Portera, 60
History/Executive Officers
International chain of membership warehouses
Carry quality, brand name merchandise at substantially lower prices than typical retail stores
Largest and most exclusive product category selections to be found under one single roof (groceries, automobile, health, funeral, travel, etc)
Costco Business Model
To continually provide our members with quality goods and services at the lowest possible prices.

Obey the law
Take care of our members
Take care of our employees
Respect our suppliers
Reward our shareholders

Membership: Customer Loyalty - 66.5M
Quality goods paired with low prices
Customer Service (reliable return policy)
Coupon promotions
Compete with Suppliers (Kirkland)
Partnership with different companies, and local businesses
International Expansion
Major Strategies
1985 Burnaby, B.C., Canada
1992 Mexico City
1994 Seoul, Korea
2009 Melbourne, Australia
International Expansion
Economic Indicators
GDP trends usually indicate the health of the retail sector
Retail Categories
Differentiation on quality, quantity, price, and selection of products available
Sales
Increasing sales by opening new stores
Gross Margin
Mark ups and inventory management are vital
Retail Industry Highlights
Growth
20 new warehouses by 2012, most of them in Japan
Customer Service and Profitability
Low Cost High Dividends
Costco’s net sales in 2011 rose 14%
Future Strategies
-Slow growth
-Strong brand awareness
-Share market with
established competitors

Costco’s Life Cycle
Hiroshima 2013

Current locations in Japan
Buy out partner in Mexico
Other Strategies
1st Wholesale Operator in the USA
Less locations than its largest competitor (Sam’s Club)
3rd Largest Retailer in the USA
Competition being: Wal-Mart, Target, Kohl’s, Amazon, etc.
7th Largest Retailer in the World
24th on the Fortune 500 List
Costco Industry Overview
Costco
West Coast, East Coast
Canada, Mexico, U.K., Japan, Taiwan,
S. Korea, Australia, Puerto Rico


Sam’s Club
East Coast, Midwest
Puerto Rico, Mexico, China, Brazil


BJ’s
East Coast
Locations
Co-founder James Sinegal gave DNC speech
Various small lawsuits
Overtime pay, discrimination, shrimp label, “organic” label
Political/Legal
Supplier Day" to foster strong relationships
Increased use of Kirkland brand
Merchandise purchases spread out
Roadshow program allows small vendors to sell at Costco
Bargaining Power of Suppliers
Strong
Wholesale market share (% of sales)
Costco: 57%
Sam’s Club: 36%
BJ’s: 7%
Compete on Price, Quality, and Benefits
Rivalry Among Established Firms
Risk of Entry by Potential Competitors
Weak
Many Small Customers
Businesses comprise 10% of memberships
Relatively High Switching Costs
$55+ membership fee
Bargaining Power of Buyers
Weak
Not something that affects retailers strongly
Costco has a majority of market share
Threat of Substitutes
Mexico, Russia, China expansion
Good time to invest in new warehouses
Low interest rates, low real estate prices
Strong growth in ancillary services
15% to 18% of sales
Opportunities
Sam’s Club attached to Walmart
Highly dependent on sales of U.S./Canada and California
Increasing international sales bring new problems
Exchange rates, laws, taxes, cultures, etc.
International Competitors
Threats
Price
Merchandise
Quality
Selection
Warehouse Location
Member Service
High Competition!
Competitive Analysis
Indirect Competitors
Direct Competitors
Competitive Analysis
Wal-Mart
Kroger
Target
Kohl’s
Amazon
Lowe's
Home Depot
Sam’s Club
BJ’s Wholesale Club
Competitive Analysis
Competitive Analysis
Office Depot
PetSmart
Staples
Trader Joe’s
Whole Foods
Best Buy
Barnes & Noble
Mission:
Code of Ethics:
External Environment Analysis
Mission and Vision
CEO-founder James Sinegal gave DNC speech
Various small lawsuits
Overtime pay,
Competitors
#2: Carrefour (France)
#3: Metro AG (Germany)
#4: Tesco (Britain)
Currencies
Dollar currently weak (Costco's favor)
International
Dimension
Technological Dimensions
Outsource technology support from Best Buy
-Increase sales
-Improve customer satisfaction
-Provide customers with technical advise while shopping
So What?
Strategic Partners
Verizon Wireless
American Express
Ameriprise Insurance
Various companies that provide cruises, cars, & more
Economic dimension
The END
Macro Environment
Demographics
Package Size
Social Conditions
Food
Supplies
Price of Real State
Natural Forces
Energy Cost
Jelinek
Sinegal
Brotman
Galanti
Portera
Political/Legal

SAOUD ALMOHANNADI

CIBU 624
Professors
Dr.Bugarin
Dr.Schleuder

Local Vendors
Laws and regulations growing against large retailers and warehouse clubs
EPA lawsuit over Clean Air Act
Agreement with McKesson for online prescription refill
Reduce energy consumption by using solar systems as a source of energy to operate their businesses
Technology department decreased sales 3% the last three years
Organic
Mechanistic
Overview
History/Executive Officers
Overview
Mission & Vision
Business Models
Strategies
Competitive Analysis
External Environment Aalysis
Opportunities/Threats
Conclusion
Weak
Crowded Warehouse Market
Costco, Sam’s Club, BJ’s
Crowded Retail Market
Walmart, Target, Amazon
Barriers to entry – large upfront costs
Large warehouses, shipping depots
Conclusion
Costco has a majority of market share 56%
the best wholesale strategies
strong growth
international expansion
California International Business Universty
Thank you for listening
Question
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Full transcript