Wholesale Competition

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Lecia Johnson
February 25, 2013
Knight

Case Study 4: Competition Among Wholesale Clubs

1. What is competition in the North American wholesale club industry? Which of the five competitive forces is the strongest and why? The competition in the North American wholesale club industry consisted of Costco, Sam’s and BJ’s. From looking at all five of the competitive forces, the threat of new entry is the strongest because of the extreme pricing and limited access to the distribution channels.

2. Do all three warehouse club rivals-Costco, Sam’s and BJ’s wholesale – have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy than the others? Does one rival have a somewhat weaker strategy than the other two? The three warehouse club rivals do not have the same similar strategies. The differences where their strategies are apparent are, Costco’s is providing items in bulk and at low prices, consumers allure toward using discounts hoping to get their monies worth. Sam’s is decreasing product costs by buying from low cost labor countries. BJ’s is focusing on retail shoppers offering more grocery items and smaller quantities of packaged goods. In my opinion, Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution. Yes, BJ’s has the weakest strategy than the other two because they are not as popular in the US, and they aren’t benefiting from the economies of scales.

3. Which of the three warehouse club rivals has the strongest financial performer in recent years? Costco has a favorable Asset Turnover and CAGR Total Assets and BJ’s has favorable CAGR total revenue.

4. Does the data in case Exhibit 5 indicate that Costco’s expansion outside North America (the U.S. and Canada) is financially successful? Yes, because CAGR has a rate of 10.24% for the total revenue and the operating income has 18.20% for the five year period....
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