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Costco and those other two wholesellers

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by

Raul Gonzalez

on 29 January 2013

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Transcript of Costco and those other two wholesellers

Pilar

Do all Three Warehouse Club rivals - Costco, Sam’s Club and BJ’s Wholesales Club. Have highly similar Strategies?

All three Wholesales compete among each other
• Offer Better Prices to the customers
• Do not spend a lot of designed to the warehouses
• Keep operating cost to a bare minimum
• Keep customer interested in keep coming to their stores by low prices and big sales volume


What different in strategies are apparent?

Costco and Sam’s have similar strategies
• providing items in bulk and at low prices
• Consumers gravitate toward discounting hoping to get the most out of their money.
• Most of the merchandise were supplied by name-brand
• Strong emphasis of low operating cost
• Induce members to shop more often and purchase more per shopping trip

Costco and Sam’s Vs BJ’s
• BJ’s focus on low cost but also incorporates other cost factors:
It focused on its Inner Circle members through merchandising strategies that emphasized a customer-friendly shopping experience in several respects.

1. BJ’s stock a broader product assortment than Sam’s Club and Costco
2. BJ’s had aisle markers, express checkouts lanes, self checkout lanes, and low-cost video-based sales aids.
3. Stores were open more hours than Costco and Sam’s
4. BJ’s offered some smaller package sizes that were easier to carry home and store
5. BJ’s had three price categories (C-71)
6. BJ’s accept manufacture’s coupons
7. Accept more major credit cards than the competitors
8. BJ’s has specialty services to clients such as food courts, home improvement services, BJ’s Vacations
9.
• BJ’s is considerably smaller than Costco and Sam’s Club but has still maintained success behind a best cost strategy. Even though BJs has fewer locations, their stores offer over 7,000 products compared to 4,000 at both Costco and Sam’s Club.

Does one rival have a better strategy than the others?
• Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution.
• Cross docking allows the club has the ability to minimize inventory, improve product quality and increase responsiveness to any changes in the market conditions.
• CEO Jim Sinegal tour all the Costco stores
• Costco has warehouses in the USA but also internationally

Does one rival have somewhat weaker strategy than the other two?

• Sams club has the weaker strategy because it is the shadow of Costco
• Many Sam’s locations were adjacent to Walmart Suppercenters
• The mission of Sam’s club is similar to Walmart
“To make savings simple for members by providing them with exciting, quality merchandise and a superior shopping experience, all at a great value” Strategic
Similarities and Differences Financial Performance Costco's International
Financial Performance Strategic Evaluations of Costco Offer significantly better prices per unit to the customers
Keep operating cost to a bare minimum
Do not spend a lot of designed to the warehouses
Keep customer interested in keep coming to their stores by low prices and big sales volume
Membership requirement with annual renewal
Top quality brands-names
Bought the majority of the merchandise directly from manufactures
Customers can use most all the cash, credit cards, debit cards Strategic Differences Strategic Strength/Weakness Sams club has the weaker strategy because it is the shadow of Costco
Many Sam’s locations were adjacent to Walmart Suppercenters
The mission of Sam’s club is similar to Walmart
“To make savings simple for members by providing them with exciting, quality merchandise and a superior shopping experience, all at a great value” Costco providing low prices and better quality
Keeping operating cost to a bare minimum
Strong emphasis of low operating cost
Costco bought the majority of the merchandise directly from manufactures
Costco trains and pays their store managers to find and provide products the local store customers want •Brand-name product but also private level
•Sam’s Club next to Wallmart supercenter
•Pay employees minimum wages Costco strategy includes a Best Cost Strategy better quality products that customers want
Sam’s Stragey focuses mostly on a pure Low Cost Strategy
BJ’s includes a differentiated strategy with a focus on customer-friendly shopping experience Costco, Sam's Club, BJ's - Low Cost Strategy BJ’s strategy includes a differentiated strategy by focusing on a customer-friendly shopping experience Free 60 day trial membership
BJ’s Stores were open more hours
BJ’s Stores accept manufacture’s coupons as well as accept more major credit cards than the competitors
BJ’s offered some smaller package sizes that were easier to carry home and store
BJ’s stock a broader product assortment
BJ’s had aisle markers, express checkouts lanes, self checkout lanes, and low-cost video-based sales aids. Competition among the North American Warehouse Clubs: Costco Wholesale Vs Sam's Clubs Vs BJ's Wholesale By:
Raul Gonzalez
Pilar Reyes
Doris Acosta
Clifford Vilbon
Lianeth Abelleira
Rosa Alfonso competing Sellers Pressure from Rivalry from Rivalry Pressure competing sellers among among Strategic Similarities Substitutes No Pressure,
Products are widely available and
substitute products are used against each other to ensure lowest prices Supplier Little or no pressure
because of ability to switch amongst substitutes
and extremely high volume of sales New Entrants Rivalry among competing Sellers Buyers Barriers
High Entry Costs
30 years of experience and networks with manufactures
Provide High barrier to entry in North America

Possibilities
Limited international exposure and
Continually merging companies accross industries
leaves the door open for a large company to start from different region internationally and eventially compete with the wholesales clubs in North America Always provide some pressure,
in this industry, its strongly related to pressure from Rivalry.

Buyers can always choose alternate ways to purchase, however,
Significantly lower prices from any other retail industry and very
similar pricing amongst industry competitors,
plus membership fees
limit buyers ability to shop around. They can choose amongst different service alternatives. Similar pricing
Small Operating Margins (operating income/sales) leaves no room for discounts
Leads competitors to use alternative strategies in order to compete 2nd Largest Pressure These alternatives gives buyers choices amongst wholesale clubs 5 Competitive Forces on Warehouse Club Industry Costco strategy is not just a Low Cost Strategy but also a Best Cost Strategy Sam’s focus on Low Cost Costco's
Strategic Strength Sam's Club
Strategic Weakness Sam's Clubs
Strategic Weakness Costco's
Strategic Strength •Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution.
•Cross docking allows the club has the ability to minimize inventory, improve product quality and increase responsiveness to any changes in the market conditions.
•CEO Jim Sinegal tour all the Costco stores
•Costco has warehouses in the USA but also internationally Costco Wholesale is the 3rd largest retailer in the U.S and the 18th largest in the world. Costco planned to double its store count in Taiwan from 6 to 12 stores in the next 5 years (because sales tripled from 2004 to 2009). From 250 million in sales to 747 million.

However, less than 10% of Costco’s operating income came from warehouse located outside the United States and Canada.

Advantage over the International Market. 567 Total Warehouses 3/2010
523 stores US/Canada Market
414 in the US and Puerto Rico
77 in Canada
32 in Mexico 44 Stores in Total
21 in the United Kingdom
9 in Japan
7 in Korea ( the Companies most profitable store)
6 in Taiwan ( the companies second most profitable store)
1 in Australia North American Market International Market Operating Margin Costco operates 2 websites from the United States and Canada. www.costo.com (US) www.costco.ca (Canada) 2007 ($ 1.2 Billion)
2005 ($ 534 Million)
2004 ($ 376 million) I’m a fan of Costco and I can vouch for their customer loyalty; I love their Treasure hunts and seasonal products
Costco continues to open more warehouses, maintain and grow a loyal membership base and continually induces members to shop more often to Costco
Costco is growing not only domestically but international
Costco maintains a productive workforce with low employee turnover through much better pay and advancement opportunities, especially when compared to Sam’s club and BJ’s but gets more out of their workers
Revenues continue to increase
Costco doesn’t need to advertise; their way to advertise is by words of mouth Costco standing as the industry leader will likely be stronger 5 years from now because: COSTCO SAM'S CLUB BJ'S Strategic Recommendations Sam’s Club is similar to Costco and their business strategies are comparable

Should work with Walmart to try and obtain further financing and strategic methods to boost their revenues.
They can increase their membership fee to generate stronger profits
Management should try and continue to expand, building new stores while focusing on gaining a stronger customer base
Should continue to price products accordingly to compete with Costco and Sam’s Club, but they must gain market share to boost their revenue and overall profit to help with expansion
Costco created a niche market and provides the most economical prices with a limited product selection to reduce expenses

Senegal should focus on improving Costco’s long term financial performance
As well, keep evolving their current business strategy to the current economic characteristics
Create a strategic plan to continue international expansion and gain a customer base in key countries
Recommendations: Costco should divert more of their costs toward international growth. They need to create a footprint in various countries. They tend to rely more on their small business owners and word of mouth to represent the company and handle the marketing but they should spend more on mainstream media to promote and announce new locations. Recommendations: Offer more freestanding warehouse locations. Sam’s Club is usually adjacent to Walmart which forces customers to decide in which one to shop Recommendations: BJ’s should continue what they have been doing which is exploring their niche in the market through the use of differentiation. BJ’s is the only one of the three companies that has seen an increase on their return on assets and they continue to thrive.
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