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Niche Merchandiser

  • Low cost

-Low overhead

-Minimal markups

-Fast inventory turnover

-Minimize accounts receivable

-Small product selection

-No frills approach to store layout

-Limited work week

-Low advertising/marketing costs

-Membership fees reduce inventory loss

  • Differentiate
  • Growth: U.S. -> Mexico/ Canada -> World
  • Website sales

Discussion Questions

Costco's profit margins are roughly 2%, besides labor costs are there any additional areas you feel Costco could cut costs to boost profit?

In times of economic downturn, Costco has kept is costs low due to the purchase of options contracts. Do you have any alternate recommendations for keeping costs low from suppliers?

In Chapter 6 from the book, we discussed complementary strategic moves. What complementary strategic moves do you feel Costco should execute?

Do you think Costco is too customer-oriented (with such low prices, etc) and not enough shareholder-oriented? Why? Should Costco focus on increasing value to shareholders more?

Costco

Values

$799.99- Jay Strongwater Kay Nautilus Figurine

$549.99- Jay Strongwater Alma Victorian 4x6 Oval Frame

$7999.99 Daum Palm Tree Magnum Bowl-Botanics collection

$1749.99- Nikon D90 12.4 MP Digital SLR Camera

1. Obey the law.

2. Take care of our members.

3. Take care of the employees

4. Respect our suppliers.

5. Reward the shareholders.

Strategy

Financial Performance

Core Competencies

  • Customer service
  • Niche market
  • Employee retention

Mission

Recommendations

“to continually provide our members with quality goods and services at the lowest possible prices.”

http://alumni.sdsu.edu/enews/2006/oct/JimSinegal2.jpg

Jim Sinegal CEO of Costco Corp.

Costco

  • Study relationship between employee pay and productivity
  • Diversify leadership age

-Institute mentoring program

  • Explore possibilities for additional market niches
  • Maintain membership fees
  • Economies of scale
  • Take advantage of learning curve
  • Operate at full capacity
  • Boost sales to minimize administrative costs per item
  • Improve supply chain efficiency
  • Use lower-cost materials
  • Utilize online systems to increase efficiency
  • Apply labor-saving methods
  • Gain supplier concessions with bargaining power
  • Outsource/Vertical integration

Low Cost Strategies

Jeff Brotman Co-Founder

http://www.jewishinseattle.org/JF/images/email_graphics/WhyICare/thumbs/BrotmanJeff-web-small.jpg

Value Chain Activities

Problems

  • Aging management
  • Priority of shareholders
  • Labor costs
  • Financials
  • Higher membership fees
  • Limited advertising
  • Sell directly to the consumer
  • Replace some activities with cheaper online ones
  • Streamline operations
  • Minimize shipping & handling via closer facilities
  • Offer a frills-free product
  • Offer a more limited product line
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