Research Paper on Costco Wholesales

Submitted by:
Rahul Ahirwar
322SM1004

Introduction
Costco is a membership warehouse and wholesaler. It’s one of
the world's largest and most successful consumer goods retailers. It’s third
largest in the United States and his seventh largest in the world. It grew rapidly.
From 2012 to 2015, sales were 27 Dollar and member camps were 88.
As of early 2016, Costco was ranked the second largest retailer in the world.
The membership warehouse concept was started in 1976 by Sol Price with a
store called Price Club. After gaining experience working at Sol Price and
Price Club and leaving the company, Jim Senegal decided to apply the concepts
and techniques he had learned to start his own business. He founded Costco in
Seattle, Washington with Jeffrey H. Brotman in his 1983 (the same year
Walmart founded Sam's Club.

Costco is off to a great start, he opened 9 stores in 5 different states and in the

first year he had 200,000 members. As of January 2016, there are 488 member

Source : Gap Inc.

camps in the United States and Puerto Rico, 90 in Canada, 36 in Mexico, 27 in

the United Kingdom, 24 in Japan, 12 in South Korea, 11 in Taiwan, 8 in
Australia, and 2 in Spain.

Environment
PESTEL Analysis
For more information on PESTEL theory and how companies use it as part of
their analysis, see the PESTEL Analysis Guide.

Political Analysis
The political environment in which a company operates can have a significant
impact. Costco is an American company headquartered in Issaquah,
Washington. Although they operate globally, government stability in their
home markets allows them to focus on executing their business strategies.
Net income has also increased since 2000 from $631 million to more than $2
billion.

Management Philosophy
Managers act as entrepreneurs running their own businesses. They have many
responsibilities such as developing new ideas, merchandising
techniques, product locations, and in-store displays. This way you can ensure
that your turnover is maximized and you have a quick turnover. Costco's most
successful managers lived on high pressure and crisis management.

Decision Making Methods

In individual businesses, managers are responsible for making strategic
decisions. At the corporate level, business her leaders make decisions that affect
smaller divisions of the business.

Products
Goods and Services
Costco offers 3,700 active items, 85% of which are premium His
branded products. They offer a wide range of groceries that are sold in
bulk. It also sells household goods, clothing, sporting goods, technology
products, entertainment products, pharmaceuticals, outdoor products, gasoline
and automobiles. We also offer car services.

What consumer needs does Costco products solve? can meet the needs of

customers who are looking for it. A very wide range of products
from one wholesaler.

Costco's Promotional Mix, Distribution Channels, and Pricing Strategy

Costco uses wholesale discounts as a form of promotion to attract customers to
its stores. Members are guaranteed low prices on products. Costco also
emails members and posts Costco her connections
But political issues in the country they are based in affect how the company
operates and whether it succeeds. The main economic environment
is generally stable. The world recently experienced a recession that has created
difficult times for global companies. But the global economy has improved and
the recession is over. This has made consumers feel more confident and
spend more money. This economic change has been beneficial to large
corporations. In 2015, the global economy generated over US$20 trillion for
her, and by 2020 he is projected to grow to over US$28 trillion. The labor
market is also improving and wages are rising.

Various type of Analysis

Social Analysis
Costco is driven by increasing globalization
and interconnection with diverse cultures, changing customer
lifestyles, and changing customer preferences regarding cost and quality. They
must be able to adapt the types of products they sell to changes in society.
Socio-cultural factors have a significant impact on Costco's overall business
and profitability.

Technology Analysis
Today's improved quality of technology has enabled Costco members
to purchase many items in-store online, giving members access to a much
wider range of products and services at affordable prices than they actually
have. It is now possible. The case was convenient. Store in company warehouse.
Online sales accounted for his $3.4 billion in total sales in 2015, and from 2012
to 2015, online sales accounted for about 3% of total merchandise sales.
Environmental Analysis
With increasing environmental awareness, sustainability and environmental
factors have become the focus of his 21st century business.
Costco already has brand recognition and a strong customer base. This leads
to powerful network effects.

Competition among Existing Competitors

Competition among existing competitors facing Costco is intense. He
has only three very important competitors operating in the wholesale industry.
Costco Wholesale, Sam's Club, BJ Wholesale. Walmart is
the world's largest merchandiser, and Sam's Club is part of that brand, so it's
Costco's biggest competitor. There are approximately 652 Sam's Clubs locations
in the United States, and an estimated 150 locations in other
countries. BJ's Wholesale Club has an estimated 210 locations in 15
states, 85% of which are within 10 miles of him from at least one Costco
or Sam's Club warehouse. In addition, buyers can keep switching costs low
between competitors in the wholesale industry.

Bargaining power of buyers
Bargaining power of buyers is strong. This is due to the low switching cost.
They are also well informed about product quality and cost through technology
and communication. Buyers also have the option to defer purchases.
If an individual shopper needs a particular item, it doesn't have to be
purchased in bulk, but can be purchased at stores such as Walmart and Kroger.

Substitution Threat
Substitution threat is strong. Alternatives include Walmart, Kroger, Target,
Dollar General, supermarkets, chain stores, specialty stores, gas stations, and
Internet retailers such as Amazon.
Costco's management aims to invest in environmental and energy-
saving systems. Their stated goal is to ensure that the company's carbon
footprint grows at a slower rate than the company's revenue growth.

Legal Analysis
Customs and import and export laws affect Costco because of its global
operations. Labor laws and consumer-impacting laws are on the rise, affecting
all businesses. Ethical standards and compliance laws are becoming more
important in today's society. Costco maintains a positive image (especially
compared to its biggest competitor, Walmart), and it needs to maintain that
image.

Industry
Porter's Five Forces Analysis
To learn more about the Porter Five Forces model and how companies use it as
part of their analysis, see the Porter Five Forces Guide.

Supplier bargaining power
Costco's suppliers have weak bargaining power. There are many suppliers
available, and none of the manufacturers supply the bulk of
the items Costco has in stock. Plus, Costco has no problem sourcing
items in sufficient quantities. Costco believes that if it has trouble sourcing an
item, it can switch to another supplier because it has so many options.
Costco's suppliers have little control over the distribution and sale of their
products to Costco due to little forward integration.

Threat from new entrants

Threat from new entrants is low. There is a modest cost of entry when entering
the industry. Given that Costco is one of the world's largest and most successful
merchandising companies, new entrants will find it difficult to
compete with established brands.
These alternative products can meet customer expectations. Additionally, some
of these substitutes offer quality that is equal to or better than that of Costco
products. Other alternatives offer cheaper products than Costco. , providing
excellent customer service and adhering to a strict code of ethics that protects
employee [Link] respects [their] suppliers, rewards [their] shareholders,
and [ We strive to be responsible corporate citizens
and environmentalists in their] business, meeting the needs of other businesses,
vending machine owners, those who want to save money, and those who want
to buy in bulk. increase. We meet these needs by providing high quality, low
cost, and large quantities.
Financial Position
Overall, Costco is in a strong financial position. Over the
past five years, Costco's stock has risen from $77.67 in November 2012 to
$145.88 in November 2017. It reached $166.44 in February 2017. Net
sales have grown from over $31 billion in 2000 to over $113 billion. However,
since 2013, the pace of sales growth has slowed.
A monthly magazine that introduces various products sold at Costco stores.
Costco has strong public relations. For example, the company's supply chain has
sustainability programs that donate to children's charities, education, health
and social services. Costco doesn't advertise like its competitors and can
get customers without using this method. Distribution will be done on the
spot. Most customers come to your store to purchase products. Some items can
be purchased online and through mobile apps and delivered to the customer's
door by a carrier.
Net income has also increased since 2000 from $631 million to more than $2
billion.
Other Factors

Management Philosophy
Managers act as entrepreneurs running their own businesses. They have many
responsibilities such as developing new ideas, merchandising
techniques, product locations, and in-store displays. This way you can ensure
that your turnover is maximized and you have a quick turnover. Costco's most
successful managers made a living under high pressure and crisis management.

Decision Making Methods

In individual businesses, managers are responsible for making strategic
decisions. At the corporate level, business her leaders make decisions that affect
smaller divisions of the business.
Competitive Advantages of Costco's Marke
ting Strategy
Costco has competitive advantages that include two memberships: Business and
Gold Star - Individual. Memberships have different prices and
are paid annually. These memberships allow customers to add value to the
benefits they receive. This also binds the customer. Additionally, the low-
cost manufacturing strategy Costco implements allows it to offer a
higher quality product than its competitors.

SWOT Analysis
Strengths
Costco implements a Best Cost Provider strategy. This provides customers with
high quality goods and very competitive prices. These prices are lower
than those of our competitors. This is an aggressive strategic option.
This strategy creates customer loyalty. To keep costs as low
as possible, Costco should be very structured. Costco offers its own generic
brand called Kirkland. This will increase brand awareness. In fact, his best-
selling product was his own Kirkland his signature his toilet paper. Costco
sold this product for over his $400 million in 2015
This is Costco's strength. In addition, Costco offers a wide variety of products
and services. This means that some products may attract customers, but when
customers arrive, they will see all of Costco's other purchasing options. When
customers fill up, they may also be drawn to the warehouse. The fact that they
offer a wide variety of products and services at low cost increases economies of
scope.

Weaknesses
Costco's weakness is its low profit margins. In 2015, the company's profit
margin was just 20.6%. The ideal profit margin is 25% or more. This is
partly due to lower costs, but lower profit margins can also make it difficult for
Costco to repricing its products for its customers. Another potential weakness
is the initial business model. In this model, Costco is a membership store. Some
may find the membership fee high. People who can't afford this
membership can't shop at the store even if they want to. Some feel
excluded from it
What's more, people who have already paid a membership fee at other
merchandisers won't pay extra to shop at Costco.
It might delay people from shopping there because some people don't need a lot
of the items. may become. People who have already shopped are willing to pay
for memberships, so they are aware of the benefits of membership types and the
discounts offered. We are also aware of our products.

Opportunity
Costco's big opportunity is to expand into more populous countries. China and
India have his first and second largest populations, so an expansion into Asia
could lead to a significant increase in sales. Together, she makes up more
than 2.6 billion people of the world's population. This is almost the same as the
world's population. Costco already operates internationally, so expanding to
more countries will benefit Costco. Another opportunity for Costco is its
increased use of social media. This means that it could be profitable to start
advertising on social [Link] is a cheaper method of advertising and because of
the scale, the company is more likely to use social media. I can do it.
Many of Costco's customers are older, so this could also attract a younger
demographic.
In addition, it can increase brand awareness.

Threats
One of the threats to Costco is that it is performing better in its home country of
North America than in the rest of the world. This makes success in
this region of the world more important and a key focus of the company. Even
in the United States, some areas are more important than others. For example,
California has accounted for 32% of Costco's US sales in the last 12 months.
This means that a drop in demand in California will have a severe impact on the
company. Another threat is the intense online competition. Costco
is lagging behind other big companies (such as Amazon) in this area, so
catching up can be tough. Online opponents are also increasing.

Compared to other retailers, Costco has smaller margins on active items

available for sale. Some supermarkets have close to 40,000 items, while
Walmart and Target may have 125,000 to 150,000 items in stock. Costco only
offers 3,700 active items. This may make Costco less attractive to some
potential consumers and prevent them from purchasing the items they need.
Costco may consider expanding the variety of options [Link]
online competition so fierce and not getting much out of it, Costco has no
money to invest in its online store. You should consider investing to open more
warehouses around the world and focus on businesses that are not doing so well.
california
Issue
Major Issue
One of the biggest issues with Costco's business model is its
reliance on membership. This strategy works well as long as members keep
coming back and buying items in bulk, but there is
something that can affect this: Customers can transfer memberships to Costco's
competitors. increase. An example of a competitor that customers might switch
to is Sam's Club. The costs are very similar, and so are the
discount/bulk options. The biggest difference is the choices offered. If you
prioritize the product lineup, Costco may lose. Costco wins when product
quality is a priority.

Secondary Issues
A secondary issue with Costco's business model is the difficulty of
shipping products in large quantities. You can't compete with big online
players like Amazon in this regard. Companies such as Amazon can ship large
quantities of items at discounted rates compared to Costco. The main result of
this problem is customers looking elsewhere when they need product home
delivery.

Long-Term Problems
One of the long-term problems Costco may face is that one company will
be completely outmatched in certain industries (such as Amazon,
which completely dominates the online segment). Threat. In addition,
another long-term problem is the continued loss of profits from
Costco's membership program. products and lost profits
However, Costco has said it is not interested in losing customers who are only
interested in buying specific product sizes. Because having multiple
product sizes is seen as a wise loss of revenue as it makes the business
model difficult. management.
Social Analysis
Costco is driven by increasing globalization
and interconnection with diverse cultures, changing customer
lifestyles, and changing customer preferences regarding cost and quality. They
must be able to adapt the types of products they sell to changes in society.
Socio-cultural factors have a significant impact on Costco's overall business
and profitability.
Technology Analysis
Today's improved quality of technology has enabled Costco members
to purchase many items in-store online, giving members access to a much
wider range of products and services at affordable prices than they actually
have. It is now possible. The case was convenient. Store in company warehouse.
Online sales accounted for his $3.4 billion in total sales in 2015, and from 2012
to 2015, online sales accounted for about 3% of total merchandise sales.

Environmental Analysis
With increasing environmental awareness, sustainability and environmental
factors have become the focus of his 21st century business.
Costco already has brand recognition and a strong customer base. This leads
to powerful network effects.

Competition among Existing Competitors

Competition among existing competitors facing Costco is intense. He
has only three very important competitors operating in the wholesale industry.
Costco Wholesale, Sam's Club, BJ Wholesale. Walmart is
the world's largest merchandiser, and Sam's Club is part of that brand, so it's
Costco's biggest competitor. There are approximately 652 Sam's Clubs locations
in the United States, and an estimated 150 locations in other
countries. BJ's Wholesale Club has an estimated 210 locations in 15
states, 85% of which are within 10 miles of him from at least one Costco
or Sam's Club warehouse. In addition, buyers can keep switching costs low
between competitors in the wholesale industry.

STRATEGIC PLAN
VISION, MISSION STATEMENT AND CORE VALUES I believe there is.
Costco is expected to expand its global presence in the world's most populous
market over the next five years. At the moment these countries are India and
China. Additionally, you should focus on improving your advertising and
marketing strategy. Improvements in these areas will increase brand awareness
and visibility and educate potential customers about the benefits
of being a Costco member.

Five years later, Costco is still in the wholesale merchandise business. They will

continue to serve businesses and individuals looking for products to buy
in [Link] the future, this will include people from China and India. We will
meet the needs of those who want to purchase many products at once. To meet
these needs, they implement more globalization and advertising. Costco should
stick to his Theory Y and William Ouchi's Theory Z and actively treat
employees like family. This brings employees closer to the
company. Additionally, strict production and organizational strategies must be
maintained to keep costs down.
SMART Goal
Costco should open more stores worldwide within the next five years.
This will increase the number of customers. This goal is specific, measurable,
achievable, realistic, and time-bound.

Implementation Plan
Costco may lease land in China and India to build its business. We can advertise
in these countries because they are new and we need to inform
our citizens about our organization. More people use social media, so
there should be more promotion on social media. Product
offerings should vary based on culture and popularity in those countries.

Key Performance Indicators

The key performance indicators that Costco should monitor are revenue growth,
membership, and share price.

Organizational Design and Effectiveness Assessment

External Environment Analysis

The external environment of Costco companies is typically highly competitive

and dominated by large retailers and wholesalers such as Walmart Inc. and
Target Corporation. A key factor that The Costco Company must consider
in order to maintain progressive economic performance for the foreseeable
future is an accurate interpretation of current market trends in the
wholesale trade. For example, the Costco Company's main competitors focus
on producing quality products not only to achieve mega-sales, but also to
improve the health of their progressive customers. The emergence
of obesity and obesity not only impacted human quality of life, but also claimed
human lives (Tikhonova, 2021). Therefore, Costco Company's
management's decision to sell health foods is a fundamental principle that
enables the company to outperform its market competitors, such as Walmart
Inc. and Target Corporation. is. The reason behind the concern that most
wholesalers in all parts of the world are focusing on cost cutting and larger
sales without consent to acknowledge the health of their target customers is one
reason for Costco to move forward with wholesale. increase.

Costco's interpretation of the PESTEL framework related to its analysis of the

global business situation confirms that the company has the opportunity to
experience the challenges of economic factors, which will affect the company's
performance. (Rahman, MD Habibur, 2020). In this context, the fact that all
retailers and wholesalers may have strategies to guarantee higher wages to their
employees and offer lower prices on groceries is an indication that
Costco is the company and its loyal customers. It means that you need to rethink
your business strategy to maintain trust with your customers.

Given the nature of the wholesale business environment, it is important to note

that this industry is structured around competitive
tactics that companies use to outperform each other within the industry. As
such, the business environment in which the Costco Company is trying to
survive needs a little credit for the 5 Force model for maintaining
Porter's professional image and ensuring quality service in its wholesale
business. indicates that Wholesale success factors depend on the willingness
and determination of each firm to provide standard products and
quality services, taking into account the interests of potential buyers (Rahdari et
al., 2020). The main threat to Costco's business is competitive competition, due
to the presence of a large number of competitors in the market capable of
providing quality service.

Summary
Overall, Costco has delivered consistent results year after year. Overall, the
company is well positioned socially and financially. Your stock price and
net income increased. These financial results are achieved
through our membership program and the discounts that accompany our
purchases. In addition, Costco offers a wide range of quality products at
low prices. We don't sell different sizes, so our business model is simple and
structured. Strict rules and regulations keep production costs low.
In addition, employees are treated very fairly so they can remain loyal and do
what's best for the company.
As a
Group, Costco believes that its global presence should be expanded, especially
in countries with resources and capabilities that are beneficial to its
business. We disagree with Costco's stance on [Link] think they
should put more effort into promoting their business and the benefits of
shopping [Link] for now, Costco is doing very well.

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