Costco

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Appendix Content

Company’s External Environment (External)
(2-line Conclusion: the attractiveness of the industry and key insights from 1-6) 1. Key economic and industry variables: Industry analysis (provide data to support): a. Market Size
* $125 billion discount warehouse and wholesale club segment of North America consists of: Costco, Sam's club, Bj's. * Warehouse Club Sales In North America: Costco 56% , Sam's club 36%, Bj's 8% b. Scope of Rivalry

*
* supermarkets
* department stores
* drugstores
* office supply stores
* consumer electronics stores
* automotive stores
Due to the size and capital of these discount stores and the pricing they offer consumers it was difficult for other sellers to match the low prices of a wholesale club.

2. KSF in the industry – what are key success variables and note differences across segments and geography if applicable (maximum of 4) c. Distribution-Related
* Buy the majority of their merchandise directly from manufacturers * Routing it either directly to their warehouse stores or to one of the cross-docking depots * Served as distribution points for nearby stores who relocate the goods to individual warehouses in less than 24 hours. * Maximizes freight volume and handling efficiencies. d. Skills-Related

* Candidates for warehouse managers must consist of: * Top-flight merchandisers
* Gift for the details of making items fly off the shelves. * Having skills in people management, crisis management, and cost effective warehouse is not enough. * Employees promoted from within

* Compensated well to encourage and motivate good performance.

3. Drivers of Change or PEST (maximum of 4)
e. Technological Change
* Increase internet use gives customer’s option to shop online which may be a more convenient alternative. * For example, wholesalers offer Photo center shops that can be accessed online and efficiently/quickly printed in stores within an hour. * Technology has helped wholesalers display larger ticketed items online which can’t be economically displayed in store environment. f. Marketing Innovation

* Target members through promotional mail.
* Flyers sent to local business and potential new members prior to grand openings * Mostly rely on customers' word of mouth.
* No marketing cost spent on store décor, but shopping experience is kept interesting with the limited time treasure hunt offers. g. Cost & Efficiency
* Offer low prices and better values by eliminating the following: *
* Sales people
* Fancy buildings
* Prime real estate sites
* Accounts receivable
* Billing
* Delivery.
*
* Costs efficiencies are also achieved by lowering overhead costs through simple floor displays thereby reducing labor required for handling and stocking the merchandise. * In store signage is mostly done on inexpensive laser printer. h. Demographics

* Large high income families
* Business owners
* Bargain hunters.
* Locations are in high traffic upscale suburbs.

4. Porter’s 5F analysis
i. The Rivalry among competing sellers in the Industry * Moderate
* Still allows most industry members to earn acceptable profits * All competitors are in line in terms of:
* Creating websites for customers' convenience
* Introducing new products to provide greater selection * Building close relationship with suppliers
j. Firms in other industries offering substitute products * Moderate
* Some of the main...
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