Company Analysis: the Walt Disney Company

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Costco Case
Mission:

To continually provide our members with quality goods and services at the lowest possible prices.

Vision:

The company’s business model was to generate high sales volumes and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private label products in a wide range of merchandise categories.

Porter’s 5 forces:

Threat of new entrants:

Costco has 53% of the warehouse sales; therefore we feel the threat entrants are low as they provide goods cheaper than their competitors. * Product differentiation: Offering over 4000 items in a central location for one stops shopping. Their prices are significantly lower due to the bulk which they purchase items in. * Capital requirements: Capital requirements are very high as there is a high turnover in products so they pay their suppliers off within the discount period. * Switching costs: there is a membership fee of $50 for businesses annually and a gold star plan for consumers at $50 with a spouse card. Their membership’s prices are higher than the others, although Costco is offering more value priced products. * Access to distribution channels: Costco has a great relationship with many distributors which would be a barrier for someone opening up a new competitive store. * Cost disadvantages independent of scale: Kirkland food has a great reputation which is Costco’s own brand. * Government policy: Licences and permits of Costco to sell products to business and consumers at wholesale costs, which could be hard to get for new entrants. * Expected retaliation: We feel Costco is a large chain and will not be threatened by any small entry competitors.

Bargaining power of suppliers:

We feel they have low bargaining power because Costco is a huge company and most suppliers are willing to supply products to them for cheap prices. If any supplier does not want to supply to them, than Costco has other...
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