Costco allows their business to run following the model where they provide the best possible price to their customers
Management Discussion
Comment on, or make suggestions about each
1
Costco allows their business to run following the model where they provide the best possible price to their customers while actively cutting down on their operational expenses, to a point where they implement the lean methodology to the fullest. They sell memberships to their customers which generates them a fixed amount of income as well as reduce any overhead expense as much as possible. Their strategy has worked exceptionally for them providing them the competitive edge that they require to provide the services for their customers at a competitive price point.
My recommendation to the top management of Costco would be to expand into developing countries such as India, which will allow them the ability to be able to cater to a market with a huge population and spending potential, this allowing for better opportunities in terms of market competition. The current market they operate in has competition from companies such as Walmart which can be considered to be neck to neck when we compare services rendered to the cost spent as well as globalization potential.
2
The chief element of Costco’s strategy is ultra-low-price by limited merchandise selections (about 3700 active items compare to Super Walmart or Target might having 125000 to 150000 items for customers to choose from) at the bargain level price. Approximately 80% of Costco merchandises were quality brand name, 20% were Costco’s private label brand, Kirkland Signature. Kirkland have a wide range of selections to compete with others famous brand with an attractive price plus the quality of their private brand.
Since pricing is a major strategy at Costco, their merchandises offer large quantities count of items because it would be more efficient and easier to manage. Costco had open ancillary departments in or around its center to attract customers like pharmacy, gas station, optical centers, copy/print center etc., which make Costco more of a one-stop shopping destination. I think it’s good strategy because even though the COGS just fractionally above break-even level, but they’re generate profits through membership fees.
- I would tell Costco’s top executives to try and acquire BJ’s wholesale, thus acquiring their 8 percent market share. I would also encourage the implementation of self-checkout in stores for ease and convenience of the individual consumer. Other than that, I think that Costco has a strong business strategy and is implementing strategies currently to sustain the company’s growth and improve financial performance. I think Costco’s management team are doing very well overall. There is one suggestion that I would recommend Costco’s management is its international expansion, especially Canada. Canada only have 91 warehouses (2016) but they’re generate more profits (17028 million) compare to other international warehouse (15112 million)
subject: Management
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