1. Internal Analysis
To continually provide members with quality goods and services at the lowest possible prices
Definition & Corporate Objective
Costco operates membership warehouses based on the concept which offers member low prices on a limited selection of nationally branded and selected private–label products in a large range of merchandise categories which produce high sales volumes and rapid inventory turnover.
Combining the turnover with the operating efficiencies achieved via volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities allows Costco to operate profitably at significantly lower gross margin than traditional wholesaler, mass merchandisers, supermarkets, and supercenters.
Sales generated $76.3 billion in 2010 (increased 9% from 2009 -69.9 billion) •
Comparable sales in warehouse opened more than a year increased 7%. •
Net earnings of Costco in 2010 achieved $1.3 billion
(Refer to Appendix 1)
Adopts a low cost operating model - depots receive container-based shipments from manufacturers and reallocate these goods for shipment to the individual warehouses, in less than twenty-four hours. •
Maximizes freight volume and handles efficiencies, which enable low receiving costs. •
High sales volume and rapid inventory turnover.
Takes advantage of early payment discounts whenever possible. •
Use of selling space, handling of merchandise and control of inventory allows for economy and efficiency. •
Labour reduced for handling and stocking by storing merchandise on racks and above sales floor.
Marketing Mix Strategy
Product and Services
Offers sundries, major appliances, electronic, packaged and fresh food, furniture, apparel and jewelry. •
Operates various ancillary and other services including US online shopping, pharmacy stores, food court, print and copy shops and travel desk services within or next to the warehouse. •
Provides self-service gasoline stations in US and Canadian locations. •
Offers own brand-Kirkland Signature for products including food, tires, housewares, luggage, appliances, clothing and detergent.
Low prices at high volume
Lower margins compared to competitors
Fixed price markup limited to 15%
Offers weekly “specials”
Operates two retail formats: Costco Home and Costco Business Centres •
581 warehouses (Refer to Appendix 2)
Below-the-line promotion: Use of direct mail marketing to prospective new members and use of coupon booklets to existing members •
Engages a marketing team to contact businesses
Existing Customer Groups
Gold Star Membership is offered to individual consumers, with an annual fee of US$50.
This refers to individuals with a business license, retail sales license or other evidence of business existence. The annual fee is the same as the Gold Star Membership.
Customer Needs and Value
Individuals, families and business owners who are seeking for household savings through low prices, good quality products, reliability and convenience
2. External Analysis
Identifying the major forces in the macro-environment allows Costco to respond and adapt to the ‘non-controllables’ of the new country.
2.1 Macro Environment Analysis of Australia
2.1.1 Demographic Environment
Estimated Australian population is 22.4 million as of December 2010 •
Increase in baby boomers due to increased life expectancy •
Growth rate of 1.5% per annum as of December 2010
Large diversified ethnicity due to result of migration
Increased of number of households by approximately 9,000 2.1.2 Economic Environment
National household expenditure has increased by 0.6%
Net disposable income increased by 6.4% as of...
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