Costco Wholesale in 2012 Essay

Costco is one of United States largest retailers, serving over 3600 variants of restroom products at excellent quality with competent prices. Founded in 1983, Costco quickly spread out in its operations to over 598 stores worldwide. One of the unique selling propositions of Costco is the item that they tin very poor prices as compargond to their competitors without requiring to compromise quality. This paper provide analyze Costcos key success factors in terms of its strategical management.Business ModelCostcos business model is simple and artless they offer superior quality products at affordable rates. The centerpiece of Costcos model entails higher(prenominal) sales volume and rapid inventory turnover. Costco enjoys high inventory turnover which federal agency that they dont request to melodic line a particular good for long period of time. Also, before they need to give the suppliers, they be able to sell it. Which means, they are able to pay suppliers with the ca sh derived from sales, leading to low working capital. This shows signifi bungholece in pecuniary health and good monetary management. This kind of business model is appeal for several reasons low prices cannister generate high number of customers, indicates sinewy operations, encourage rapid turnover, decrease warehouse costs and many more. However, in order to slip by up with this business model, Costco needs to continually fend for overhead costs, which will be discussed further into the paper.StrategyCostcos low pricing strategy highly depends upon several factors. In terms of pricing, they offer bargain products at low prices. Their earnings highly come from rank fees, over which members can join in an annual subscription and enjoy promotional rates as members. Even though Costco enjoys less profit margins, they involve high number of annual members and earn their profit by rank and file revenues. In terms of product, their Kirkland Signature is as well of good qualit y as a representation of their brand. They are also ready to experience pass of sales by customers who do not want to purchase in larger quantities. Treasure-hunt merchandising is also a smartmethod to continually renew their product lines to encourage members to purchase the item right remote in fear of not having them available at the next visit.Jim Sinegal and fondness Values as CEOJim Sinegal shows good examples of leadership as a CEO. He conducts an open-door policy which makes him accessible to staff, thereby increasing employee motivation. Jim also conducts continuous store visits as opposed to working at a desk, which shows his willingness to footprint down to the field to help improve the store. The business environment is do to be causal and unpretentious, so employees feel sense of belonging and are often committed to the organization, in benefit of themselves and the connection. Low employee turnover shows the compatibility of the employees and the company, which means that the corporate culture can be maintained or enhanced. pecuniary PerspectiveWe have come to understand that Costco achieves much of their revenue from social rank renewals. Observing the financial data, we see that Costcos membership fees if four generation over from 2000 up to 2011. This signifies their proficiency in making member packages attractive. Their actions in prioritizing members have been successful as we see that members are continually sign language up. Therefore, membership is encouraged to be sustained. However, we see that sales also attach significantly over the years, almost 3 times over. Therefore, we can fill up that despite having less merchandising activities, Costco is able to attract customers by accent on price efficiency. Their working capital ration ( on-going assets minus current liabilities) is kept at a low level overdue to high inventory turnover.Competitive Advantage over CompetitorsA key competitive advantage owned by Costco over its competitors is, without a doubt, their low prices. Although they do not invest much in store layout, store ambiance, grind and marketing, they have low overhead costs which contri andes to being able to keep prices low. Also, they offer a wide array of product categories from food products to gasoline, although within a product category, they offer less brands than usual retailers (Llopis, 2011).Strategic Weaknesses in Comparison to CompetitorsThe fact that Costco carries only 3600 selections of merchandises could potentially be a study flaw in their strategy. Generally, other stores carry over 10.000 selections. Customers may initially feel the thrill of shopping at cheap prices at Costco but could eventually dislike the lack of woofs in terms of brands and may occupy to shop at stores with larger varieties. Secondly, Costco spend less for advertisements and rely on word-of-mouth and certain campaigns. However, their competitors, Sams Club and BJs in large quantities Club sp end much more on advertisements. Presently, Costcos financial conditions show steady results in sales but the power of marketing is such that customers may choose to shop elsewhere for various reasons. It is also important to note that customers switching costs (from Costco to another) is relatively low.Compensations PoliciesCostco offers attractive compensations as compared to their competitors. The employee benefits covers all aspects such as fixed wages, health benefits, medicinal discounts, eligibility for company profits, counseling services and many more. At a quick glance, we invoice that Costco spends much on compensation, despite the comparatively lower amount of labor, due to the vast varieties of compensations.In my opinion, it shows good corporate culture to take address of employees. In most companies, CEOs are the first ones to be takingsed with sky-high numbers. It is opposite in the case with Costco, where CEOs are paid enough without failing to reward employees appropriately.Conclusions and RecommendationsAlthough from a management and operation point of view, Costco is doing everything to a tee, there are several recommendations provided to further improve its performance Increase product lines to preceding(prenominal) 3600 in order to compete in terms of product choice with their competitors, especially after understanding that customers switching costs are low. Costco already has a big advantage in terms of prices and can do wonders when they also holdproduct advantage. Prepare some funds for marketing.stigmatisation and brand awareness are two of the most important factors for warehouses to keep on sustainable in the market to be seen as reliant. With more marketing, Costco can retain top-of-mind positioning as the place to shop in customers mindsets. get membership fees at a fair rate. Currently, Costcos membership fees are higher compared to their competitors. They can maintain their fees at this level only if they can provide mor e attractive member benefits to their customers compared to their competitors.ReferenceLlopis, G. (2011, January 31). The Costco Factor To reach The Business Game, You Need to Change How You Think. Retrieved February 20, 2015, from Forbes http//www.forbes.com/sites/glennllopis/2011/01/31/the-costco-factor-to-win-the-business-game-you-need-to-change-how-you-think/