The paper 'Costco Strategic Management" is a great example of a management case study. Costco is a UK retail company that uses membership-only service and operates through warehouses based on wholesale cash and carry. The company has internet site operation in Canada and the US and other operating divisions in Australia, Korea, Japan, Taiwan, UK and Mexico. In the warehouses, the company handles hearing aid centers, travel desks, photo centers, opticians, food courts and pharmacies. Furthermore, it operates over 330 petrol stations in Canada and the US as well as customer services in financial planning and health insurance (Costco, 2015). Mainly targeting businesses, Costco also sells to specific employment groups at low prices of its private label and high-quality merchandise.
The company offers a wide product category in a limited array of merchandise to achieve rapid inventory turnover and high sales volumes. Sam’ s club of Wal-Mart, Safeway and B’ J’ s Wholesale Club are major competitors. The company pursues the differentiated business strategy of treasure-hunt shopping environment, limited selection, bulk buying and low prices (Costsco, 2014). Compared to the industry average returns, Costco generates below-average profit margins.
With low-cost strategies, Costco has been able to edge out some of its competitors despite high expenditures on labor. Started in 1983 in Seattle, Washington, Costco provides customers with well-established brands and private labels. 1.1 General environment analysis Costco’ s market entry is predicted by demographic factors such as income distributions as well as the population size, density and its age. Major targets of discount retailers like Costco, Kroger and Wal-Mart are women. About 90 percent of women with a household income of $55,000 have a median age of 46 years (U. S.
Census Bureau, 2015). Unlike the previous, generations many of these women live at home into adulthood and about 38 percent of them have children. Costco stores tend to be located close to each other because counties have an industrial composition similar to neighboring counties (Costco, 2015). According to the Miniwatts Marketing Group, about 2.4 billion global Internet users existed as of June 2012 (Lutz, 2013). Moreover, approximately 3.5 billion users were expected in the list of global Internet users in 2013. Internet is used by 84.1percent of the UK population and 78.1 percent of the US population (U. S.
Census Bureau, 2015). In the UK, about 50 percent of internet users use mobile phone devices to access the web with opportunities being similar to e-commerce sales (BBC, 2011). Operating margins are also affected adversely by trends (Lutz, 2013). Changes in government and military policies also affect the profitability of companies. For example, coverage for Costco’ s 160,000 plus employees increased owing to the increases in US healthcare costs. With an indefinite time frame to profitability, about 107,000 US employees have a negative impact (YCharts. com, 2012).
Also, of great importance is the increase in the US minimum wage of workers. This is because, in the past 2 years, the US unit labor costs have increased by roughly 3 percent (YCharts. com, 2012). Costco is recognized widely for remunerating its employees higher than the industry average wages and maximizing employee benefits (Greenhouse, 2005). In the retail industry, stores have Radio Frequency Identification and bar code technology available so as to increase the incentives of stores and reduce inventory tracking costs (Stacey, 2011). The face of retail is also being changed by social-media data, the convergence of smartphone technology, and futuristic technology such as 3-D printing.
In a matter of a few years, industry experts will upend the bricks-and-mortar model. For example, Big-box stores such as Best Buy, Old Navy and Office Depot will embrace online purchasing as they become test centers.
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