Describe Costco’s Business Model.
Description must identify and describe model components.
Answer: Costco’s Business Model was to generate high sales volumes and rapid inventory by offering members low price on a limited selection of nationally branded and selected private label products n a wide range of merchandise categories. •
Include discussion of how each component impacts profit generation. Answer: The model components utilized made management believe that rapid inventory turnover when combined with the operating efficiencies achieved by volume purchasing, efficient distributions, and reduced handling of merchandise no frills, self service warehouse facilities what enabled Costco to operate profitably at lower gross margins than traditional wholesalers, mass merchandisers, supermarkets, and supercenters. Describe Costco’s strategy.
Identify strategy elements; include specifics that communicate how Costco employs each element. Answer: Costco’s strategy elements were low prices, limited selection, and treasure hunt shopping environment. With the low pricing Costco’s pricing strategy was to cap its markup on brand name merchandise at 14% compared to 20% to 50 % markup at other discounters and other supermarkets. Another element was limited selection. Costco’s strategy was to provide members with a selection of only about 4000 items. The company deliberately limited the selection in each product category to fast selling models, sizes and colors. Lastly, Costco use the element of treasure-hunt merchandising. While Costco’s product line consisted of approximately 4,000 items, about one-fourth of its product offering were constantly changing. By doing this buyers remained on the lookout to make one-time purchases of items that would appeal to the company’s clientele and that would well out quickly. B)
What each is designed to accomplish.
Answer: Costco’s low price was to give customers equal or better quality than the national brands at a lower...
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