1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?
Business Model is used to exemplify the methods and ways which we used to generate planned revenue. The Costco’s business model is to generate high sales volume and rapid inventory turnover by offering low prices on limited selection of national branded and select private-label products in wide range of merchandise categories. Costco’s offers these products to their members who are of two types’ business members and gold star members. This business model is tempting because it gives a test to Costco’s management to continue to devise strategies and methods through which they can keep hold of existing members and catch the attention of new members. Otherwise they will suffer failure because there will be a risk that discontented members will not renew their membership. This business model takes company towards total quality management.
2. What are the chief elements of Costco’s strategy? How good is the strategy?
Strategy is the organization’s pre selected means or approach to gaining its goals or objectives, while keeping in view current and future external conditions. Costco’s strategy’s elements are: • Low prices
• Limited product lines and selection
• Treasure hunt shopping environment
By keeping low prices Costco’s is following cost leadership strategy which is good because on this base they can compete with their competitors. By limited product lines and limited selection they are offering limited 4000 items which are less as compared to its competitors. Costco’s is adopted market development strategy by capturing new markets for existing products. By treasure hunt shopping environment they provides such product at low prices to its members which they believe will not be available in next visit. This works as an incentive and members try to take maximum advantage and therefore Costco’s sales volume increases. At Costco’s warehouse products are not offered in every size. The strategy they followed is that by offering every size their efficiency will decrease therefore it is said intelligent loss of sales.
Posted by Zita Mac. | Posted Date: 8/7/2011 12:04:29 PM
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