Strategic Analysis Of Wholesale Company Costco Marketing Essay

Strategic Analysis Of Wholesale Company Costco Marketing Essay This report has performed a brief strategic analysis of the internal resources and external factors that affect Costco. The report includes an over view of the firms strategies using Porters five force model as well as a SWOT analysis of the firm. The report illustrates why Costco remains the Anti-Wal-Mart using aggressive scare tactics to achieve the lowest possible prices for its customers even if it means dropping high brand names. The report includes recommendations for the wholesalers, the main one being to carry on with their current successful strategies in order to maintain the fight for industry leadership and further their globalisation in to Eastern countries 1.0 Introduction to Costco Costco is a wholesale cash and carry, which operates through warehouses using a membership only service. The company sells high quality, private label merchandise at low prices to businesses buying for commercial use as well as individuals that are members of specific employment groups , for example NHS or government employees. The basis of the company is to achieve high sale volumes and rapid inventory turnover, offering a limited array of merchandise, with a wide product category at low prices (www.costco.co.uk). Additionally Costco operates customer services ranging from health insurance to financial planning. The main competitor of the company is Wal-Marts -Sams club within the US, although they have 200 more stores operating in ten more states than Costco , Sams club does not experience the same revenues. Yet there is still a constant battle for increased market share with newer entrants such as BJs Wholesale Club (Hughes, 2007). Operating internationally the company has divisio ns in the US, Canada, Mexico, UK, Taiwan, Japan and Korea, Australia and an internet site operational in the US and Canada. Some of the stores include pharmacies, food courts, opticians, photo centres, travel desks and hearing aid centres within the warehouses. The company also operates 307 petrol stations with some of the US and Canada stores. Named as the only company Wal-Mart fears James Signal (2004) of Costco has captured a breed of urban sophisticates, who trade up for exiting products and trade down to private labels of more prosaic products (Duff,2009). 2.0 Costco existing missions/strategies Costcos Mission Statement; To continually provide our members with quality goods and services at the lowest possible prices (www.findarticles.com) In order to sell at the lowest possible prices Costco implement various pricing strategies through bargaining with suppliers and only adding a maximum mark up of 14% to each product, even in cases where demand is high as CEO Signal stated you always give the customer the best deal'(Shapiro, 2004). Costco falls into the Overall Price Leadership category one of Porters four generic competitive strategies (Mitchell, 2001). Price leadership is achieved by implementing a successful strategy using continual exceptional efforts to reduce costs, without excluding services or products which customers perceive to be essential. There strategies include; ? Low advertising costs to keep merchandise price down, using word of mouth ? High employee wages to retain employees and reduce new staff that would require training ? Merchandise stock on pallets to reduce labour and allow for maximum sales ? Inventory system detects items that are reaching thresh hold for re order ? Just in time approach to reduce over stock, buying direct from manufacturers and sent directly to warehouses within 24 hours ? Provide low prices through volume buying ? Willing to change manufacturers to gain the best possible price on a product 3.0 Strategic Management Costco Strategic management shows an ability to develop and sustain competitive advantage, resulting in of added value to their brand (Ramachandran et al, 2006). Illustrated by Costcos rise in net income by 1.1% to $266 million and revenue soared to $71.4 Billion compared to Sams club at $46.8 billion and BJs at $10 billion for the first fiscal quarter ended Nov 22nd 2009 (Business News, 2009) compared to Wal-Mart net sales which increased by 1.2%. The just in time approach implemented by the company means products are sold for cash before the payment to the suppliers is due ,creating a high operating cash flow. This operating advantage improves Costcos working capital and efficiency, resulting in a long lasting value difference in the product, compared to the competitors and as perceived by the customers (Duncan et al, 1988). 4.0 Porters Five Forces The nature of competition in an industry rely on five forces including; the threat of new entrants, the bargaining power of new entrants, the bargaining power of customers, the bargaining power of suppliers and the threat of substitute products or services (Porter, 1979). These are all competitors that may be more or less prominent or active depending on the industry. A companys awareness of Porters five forces can allow the organisation to stake out a position within its industry that is less vulnerable to attack (Bruton, 2008). 4.1 The threat of new entrants- medium threat There are many potential new entrants into the industry, which could pose as a threat including, wholesale clubs, discounters and hypermarkets such as Aldi and Netto, which are both limited range discounters. Other large existing wholesale competitors such as Wal-Mart could gain market share through acquisition giving them new resources. However, barriers to entry in to the wholesale food industry are relatively high, as huge costs would be involved in imitating established distribution networks, brand name and financial capital that Costco have established. Furthermore it is unlikely customers will switch to a competitor when they have already paid a yearlong membership fee (Costco reported 85% of cardholders renewed their membership in 2009, www.phx.corporate-ir.net). 4.2 Bargaining power of suppliers-low/medium threat The bargaining power of Costco sells to many business owners, the power over their suppliers is very high, as suppliers are forced to cut prices to lessen the risk of them losing their contract. Costco have a small range of brands for each product, yet sell high quantities. They could be losing a large amount of sales compared to Wholesalers like Wal-Mart, whom give customers a larger amount of choice and therefore spread their sales between suppliers. Furthermore Costco have proven they are willing to lose even major brands to improve their leverage, margins and lower prices, forcing suppliers to compete amongst themselves and with the wholesalers cheaper own brand products. Highlighted through Costcos most recent decision to stop selling Coca-Cola in a pricing dispute due to growing power of private labels, by using details received from loyalty cards retailers are more aware of which brands to keep and lose (Neff, 2009). 4.3 Bargaining power of customers- low threat According to Bruton (2007) the threat is low because there is only a small concentration of wholesale buyers, predominantly middle class consumers, small business owners and families. The latter two however have a greater power over the higher and middle class customers as they would buy to satisfy needs rather than luxury items. They are likely to resort to finding alternative stores such as competitors to get what they want at the price they can afford to pay for their regular purchases, due to the growth and alternative availability in discount stores. 4.4 The threat of substitute products- low threat The threat of substitutes limits the profit potential of the wholesale industry by identifying the effectiveness of volume of sales at a particular price level. Substitutes include specialised stores, for instance The Home Depot in America and BQ in the UK competing against the non-food sales through discounting as well as hypermarkets. For these reasons, the threat of substitutes is low for the wholesale notion. However, there is an increased threat to particular sections such as furniture and electronics especially because supermarkets are now selling a wider array of products for example Tescos. A further threat is e-commerce businesses and sites such as EBay focusing on the customer directly (Bruton, 2007). 4.5 Rivalry among competitors-medium threat Rivalry between competitors in the growing wholesale industry is particularly low because the three main competitors concentrate on different consumer groups. Furthermore price wars are minimal due to the lack of advertising with the rivals especially Costco. However as Costco is gaining strength through globalisation, there are different levels of threats in particular countries. 5.0 SWOT analysis The basis of strategic management is the notion that strategy creates an alignment between an enterprises internal strength and weaknesses as well as its opportunities and threats (SWOT) in its external environment (Andrews, 1987). The following table illustrates alignments factors within and outside of Costco; 6.0 External factors Focusing on the external, broader environment in which the company operates it is clear the next stage in the Costco globalisation process would be expansion. Due to the fierce market in the US and saturation a large opportunity for the company would be to enter the Chinese and Eastern European market and according to Baker (2001) Globalisation of the markets is at hand. Competitor Wal-Mart have already entered the fast growing market in China through purchasing 35% of the recognised hypermarket- Trust-Mart. The alliance benefits Wal-Mart , gaining expertise in operations and logistics and allow Chinese consumers to build trust with their brand name- an important part of their culture. Globalisation forms markets where economies of scale lead to reduction of costs and prices according to Baker (2001). Therefore, Costco may have to adapt their strategy when entering new countries due to the barriers of entry; it would be difficult to compete with local companies that are already established as well as suppliers to cut prices as low as they do in the West. The main threat to Costco currently is online speciality stores, which can compete through lower operating costs and manufacturing abroad thus increasing the power of existing buyers. The economic slowdown in 2007 with the credit crunch attracted more customers to the company due to its low prices and bulk products which allowed customers to stretch their money in the economic crisis enabling sales to grow by 13% by 2008. However the net income still decreased by 15.3% by 2009 as of the weakened economy. Even fiercer pricing strategies reduced the impact of the recession by reducing costs on a range of popular products two weeks before the reduction came through anticipated from manufacturers. Thus allowing them to get ahead of competition by taking advantage of the opportunity to attract customers through surrendering their profit (Duff, 2009). 7.0 Conclusions From carrying out the report on one of the leading wholesale suppliers it is clear they refuse to buy from suppliers that are not willing to pass on the reduction in manufacturing costs on to Costco. They are willing to remove high named brands from their shelves if they think they are being charged too much for the product. Through these publicly made choices it seems clear that Costco are on the customers side when it comes to prices, and are willing to lose profit to satisfy their customers. Both the Porters Five Forces Model and the SWOT analysis identify the main internal and external threats to the company, the highest threat of all being the power of suppliers. Costcos strategy of merging high wages with innovative ideas, and low cost products highlights that consumers, workers and shareholders can all benefit from a cost-leadership strategy. 8.0 Recommendations ? Continuation with their current successful pricing strategies of low prices and high volumes in order to maintain barriers against buyer power, supplier power and new entrants. Porters low cost leadership will also allow growth in revenues from further international expansion. ? The main threat to Costco currently is the threat of substitutes especially in discount stores and hypermarkets and the alternative to this is online speciality stores which can compete through lower operating costs and manufacturing abroad thus increasing the power of existing buyers. ? In order to compete with the threat of e-commerce businesses a further development in the online sales capability is likely to increase the companys strengths. Cannibalisation is unlikely to occur until the industry becomes completely saturated in the US in which case the company can then be ahead of competitors through the internet or through global expansion. ? Subsidiaries or Joint venture are a possibility as in Mexico where the 31 warehouses are 50% joint ventures, this strategy may benefit within the foreign Indian and Chinese market, to allow for a better integration and brand loyalty ( www.slideshare.net). The firm is likely to have the logistical capabilities to enter the Chinese market as they have entered nearby Japan successfully, and some networks would be partially formed through transportation. ? More strategic alliances with manufacturers as with Kirkland in expanding countries to gain trust from customers, enabling them to recognise brand names and build loyalty 9.0 References Andrews, K.R (1987), The concept of Corporate Strategy, Homewood: Irwin Baker.M.J Critical perspectives on business and management, Routledge, London Bruton. A, (2007) Five Forces Analysis, www.books.google.co.uk/books?id=9lmR75vPpEACprintsec=frontcover#v=onepageq=f=false accessed 21/02/10 Costco Financial Report 2009, www.phx.corporate-ir.net/phoenix.zhtml?c=83830p=irol-reportsannual, accessed 16/02/10 Ducan, W.J, Ginter, P.M Swayne, L.E (1998), Competitive advantage and internal organisational assessment, Academy of Management Executive Duff. M (2009) Costco Surrenders Profits To Make a Point www.industry.bnet.com/retail/1000461/costco-surrenders-profits-to-make-a-point/ accessed 19/02/10 Hughes, M.T (2007) Costco wholesale strategic analysis, Washington College Business Management Ireland, R.D, Hitt, M.A Simon, D.G (2003), A Model of Strategic Entrepreneurship: The construct and its dimensions, Journal of Management, 29, 963-989 Mitchell. R.C, (2001), Strategy Formulation, TAOFS Formulation, www.csun.edu/~hfmgt001/formulation.doc, accessed 20/02/10 Neff, J (2009) From CVS to Costco, retailers put the screws to brands, Advertising Age,Business Source Premier, 11/30/2009, Vol. 80, Issue 40 Porter. M.E, (1979) How competitive forces shape strategy, Harvard College, Harvard Business Review Porter, M.E, (1985), Competitive advantage: creating and sustaining superior performance, New York: The Free Press Prahalad, C.K Hamel, G. (1990), The Core Competence Of The Corporation, Harvard Business Review, 68, 79-91 Ramachandran, J.M Sud. M, (2006) Strategic Entrepreneurship in a Globalising Economy: Evidence from Emerging Economies, IIMB Management Review, 28, 291-302. Trout. J, (2004), Trout on Strategy: capturing mindshare, conquering markets, McGraw-Hill (Jan 14th 2008) Food industry , BNET UK, www.findarticles.com/p/articles/mi_hb3235/is_1_25/ai_n29402690 accessed 16/02/10 Shapiro, N. 2004. Company for the people. Seattle Weekly, December 15. Retrieved from www.seattleweekly.com/ generic/show_print.php on 15/02/2010. www.slideshare.net/guestce0202a/costco-strategic- plan accessed 20/02/10 www.findarticles.com/121753md5=91af14cebe7ede4/c72/169594b2badc8b accessed 20/02/10 www.costco.com accessed 21/02/10 Contents Page Executive Summary 1.0 Introduction to Costco 2 2.0 Costco existing missions/strategies 2 3.0 Strategic Management 3 4.0 Porters five forces 3 4.1 The threat of new entrants 3 4.2 Bargaining power of suppliers 3 4.3 Bargaining power of customers 4 4.4 The threat of substitute products 4 4.5 Rivalry among competitors 4 5.0 SWOT analysis 5 6.0 External Factors 6 7.0 Conclusion 6 8.0 Recommendations 7

Life Without Internet

Many people say that the Internet is the most important invention ever. Do you agree or disagree with this and if not, what do you believe to be more important? Use specific reasons and examples to support your opinion. What Like Would Be Life Without Internet? Many people say that the Internet is the most important invention ever, and I definitely belive that it is true. Since the first artificial satellite, the Sputnik, was launched to the space, the world has never been the same. Nowadays computer is so affordable that in every home you can find one. What is more, the Internet connects people all around the world, and allow to make on-line businesses transactions and prove a special kind of education. Computers did not exist a century ago and people had happy lives without them . Nowadays, we take computers for granted and nothing can exist without them . Life would stop without computers. You wouldn’t even think how many common products are operated by computers. Our cars, microwave ovens, wristwatches and thousands of other gadgets. Appearing the Internet you can search on www – means World Wide Web – for information when you have to some. There are millions of websites storing an endless number of data. You can find many dozens of information about everything on the Internet. E. g. History, Animals, Plants, Nature, Music,famous people etc. There are countless of services available on the net. What is more you can download music, films, listen to foreign radio stations, play games, read and subscribe newspapers and magazines and you can even purchase or sell various products , order food,. In addition you can transfer money through the Internet, and learn languages on-line on several web pages and practise English because most users speak the language. You can keep in touch with friends or other people from other countries to write them e-mails if you have an e-mail access and it is very fast . The list is endless, and I honestly like to use it because as I have experienced I always get to useful information through the Internet ,e. g. practise my English and gain knowledge about healthy life. And luckily, I also have some good experience in connection with buying products on the Net. Thus, it always contributes for my life with a beneficial way. In conclusion, the above mentioned reasons I strongly believe that it is evitable nowadays to use the Internet. All in all besides entertainment using Internet is not only a pleasure pastime but also a way of education and also a workplace which let us to live a more convenient life. If you have a small laptop or a notebook that you can take anywhere , it is like an office in your briefcase,and it is very comfortable and saves you a lot of time. And if you use it only with awereness and only for its advantageous and positive aspects than you will be sure that it serves your development for a better life.

Twitter

What are you up to? – Twitter, of course Twitter is a great social medium. There are more people than you could imagine, tweeting at this very moment. It is a phenomenon which by the looks of I will remain popular for decades. In the following article, I will emphasize some of the advantages and disadvantages of using it for business, political and social purposes. The â€Å"hunch† Back to where it all started, a CEO of a company called ODE, hired an engineer named Jack. His name was Even Williams, and he presented the idea of people being able to send simple status updates to friends or however might find you interesting.He had found his main project, and in 2006 twitter was live. Even felt that the potential of Twitter was there, so he decided to pursue his hunch. The concept of Twitter is very simple. You fill out a status update containing 140 characters or less about what you are up to. In less than a second after, the update is readable for everyone who is followi ng you. The core of Twitter is to allow people to share moments of these lives, no matter the time and place. The purpose is similar to Passbooks, to let people feel connected and closer to each other. The usersUsers all around the globe helped building Twitter towards what it is today. As an example, the users started making references using â€Å"tags†. So if, hypothetically, I made an update about me hanging out with my teacher Jonas Rasmussen at the school, it would look like this â€Å"Oliver is chilling with his teacher @Assessments at @Whistler?d†. The tags were invented by the users, twitter Just made it a part of the site and easier to use. This shows that feedback from the community is something that twitter considers, and lets users help shape the medium. Using Twitter for business purposesThere sis a lot of companies that uses twitter to keep track of what people tend to think or say about them. Whenever a user tags the company or place, a scanning tool all ows them to instantly identify the status. For some users, this is very concerning. They are afraid that they cannot tweet freely, without companies spying on them. Often companies actually uses this tool to help people help themselves. To pull out an example, the game companies such as Valve, Riot Games and Blizzard frequently use Twitter to obtain valuable feedback from customers to improve their services or reduces.All this seems incredibly smart, but there are some disadvantages regarding the use of Twitter. Some people are actually addicted to Twitter, as some people are to Backbone. It leaves you easily distracted in your everyday life, and it interrupts you doing important things. People tend to Just disable your tweets if you distract them, and that causes your overall Twitter audience to decrease. Some will actually consider people as â€Å"spammed†, if you don't find the balance of being friendly, posting your online marketing. A common disadvantage for the users co uld which leaves you with a very limited audience to share you tweets with.Using twitter for social purposes Along with Backbone, Twitter is one of the most powerful social websites to date and serves a lot of purposes. The social aspect is obviously the key to make people entertained by Twitter. You visit the site to feel connected in a fun way. It is awesome to keep track of what you're friends are doing all the time. A bad thing about this is that now you know everything, and it ruins the content of the conversation you will have, when you actually meet. This online relationship could actually replace the real fife relationship to some extent.The growth of the media could potentially affect the kids, who obviously needs the social competence to develop in a proper way. Sliver lilt s?get†¦ Using Twitter for political purposes The substantial growth of Twitter is really reflected, when 47 Congress members sis live as well. Barack Obama, the most powerful man on earth, is very active on a lot of media. They use Twitter to get intimated with their fans and followers to stress their humanity to some extent. By sharing their everyday battles and struggles, it helps people relate to the given person.As a downside of politicians on Twitter, it would be crucial for them to tweet something that could damage their reputation or political career. Sharing family info, economy, beliefs or interest must be done with caution. Backbone & Twitter The biggest difference between Backbone and Twitter is that Twitter does not allow people to like or comment – only being able to read and enjoy. On Backbone, it is required for people to accept you as friend, to let them receive your updates. On twitter, you simply Just have to follow the given person without permission.Twitter is considered as being a freer site to some extent, compared to Backbone. Backbone has been left with a huge amount of struggles towards privacy issues and sharing personal information. On the ot her hand, Backbone is way more personal and allows you to get much more intimate to another person. O/PR Both websites cover the same needs; to connect people, no matter where in the world they are. As a sum up, the power of the social media should be emphasized. They can be used for a lot of purposes, some are right and some are wrong. And Freest?r effectuates†¦ (936 words)

Gothic Cathedrals, Compare and Contrast Two - 846 Words

Gothic Cathedrals The Gothic style has been the root for some of mankind’s most beautiful works of art. It was introduced by the Romanesque style of building. Romanesque style only lasted for nearly one hundred years before the Gothic style replaced it entirely. Abbot Suger was the founder of the Gothic style. One great form of Gothic architecture was the Notre Dame de Chartres cathedral that was built in France between 1145 and 1513. Another form is the Bourges cathedral, located in Bourges, France. Both works of art show extraordinary style and detail. Although similar in many ways, they both have different features. The Gothic style architecture began around 1145. Cathedrals styles were changing from round arches to†¦show more content†¦The Notre Dame de Chartres was used for meetings, concerts, and religious plays. It was the only indoor space that could hold all of the towns’ people. Most importantly, the Chartres cathedral was used as a place for worship. The Bourges cathedral was dedicated to Saint Stephen and was also used as a place for worship. In the construction of each of these cathedrals, sculptures were created to represent scenes and narratives of theology and mysticism. Both architects wanted to create a place for worship in their towns. By adding the detail of sculptures and paintings that portrayed religious images, the architects demonstrated gratitude for the Christian religion. Both the Notre Dame de Chartres and the Bourges Cathedral exemplified great technique and exquisite detail from each of the architects. The Notre Dame de Chartres and the Bourge s Cathedral were creations for the Christian communities. During the Middle-Ages, Pagan religions were beginning to diminish and the Catholic faith began to prosper. Both of these cathedrals are representations of the Catholic faith and the cathedrals were renown in their societies. Over the years, both cathedrals have seen many structural grievances. Each cathedral has been able to uphold its true meaning and value. They are examples of a historical time period that changed architecture for years to come. References: Unknown. Bourges cathedral. At the end of the 12th century: anShow MoreRelatedGothic Architecture in Europe Essay1897 Words   |  8 PagesThe research paper, shall be concerned with discussion Gothic architecture in Europe-namely England, France, Germany, and Italy starting from 12th to the 16th Centuries. Architecture was the most original and lasting form of art during the Gothic Period, which lasted for four centuries starting from the mid 12th century. The impetus for this architecture was the Roman Catholic Church, which sought to portray their houses of worship as something which transcended the realm of mankind. 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