Assignment 2: Costco Wholesale
1
Case Study Assignment 2: Costco Wholesale
1. What is Costco’s business model? Is the company’s model appealing? Why or why not. Costco’s business model is to generate high sales volume and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories.
The company’s business model is appealing from an operational standpoint; in the pursuit of its goal of selling a high volume of product at low prices it necessitates operating efficiencies to be sustainable. These operating efficiencies create core competitive advantages/strengths to Costco. The following are additional reasons why I find Costco’s business model appealing.
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Rapid inventory turnover …show more content…
The financial data in Case 2 shows the following FYE results ($ in millions) which further demonstrates the appeal of the business model.
Operating Income
Net Income
•
2008
1,969
1,283
2007
1,609
1,083
2006
1,626
1,103
2005
1,474
1,063
In addition an article by Timothy M. Otte dated February 13, 2008 states
“while the rest of the retail world is trying to figure out how to make money in a flat to down comp-sales environment Costco is running an 8% comp growth through its first 22 weeks of this fiscal year”. Its important to note that in reviewing Costco’s 2009 annual report, financial highlights, comparable sales growth for YE 2008 was 8% in comparison to 6% YE 2007.
2
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As of 3:30 pm EST January 21, 2010 stock price for Costco and its principal competitors were as follow. Given the economic downturn investor confidence in Costco is still high as shown by the premium stock price in comparison to its competitors. Stakeholder should be please with their value positions. Costco
Target Corporation
Wal-Mart
BJ’s Whole Sale Club
57.45 (COST)
50.30 (TGT)
52.90 (WMT)
34.14
Case Study Assignment 2: Costco Wholesale
1. What is Costco’s business model? Is the company’s model appealing? Why or why not. Costco’s business model is to generate high sales volume and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories.
The company’s business model is appealing from an operational standpoint; in the pursuit of its goal of selling a high volume of product at low prices it necessitates operating efficiencies to be sustainable. These operating efficiencies create core competitive advantages/strengths to Costco. The following are additional reasons why I find Costco’s business model appealing.
•
Rapid inventory turnover …show more content…
The financial data in Case 2 shows the following FYE results ($ in millions) which further demonstrates the appeal of the business model.
Operating Income
Net Income
•
2008
1,969
1,283
2007
1,609
1,083
2006
1,626
1,103
2005
1,474
1,063
In addition an article by Timothy M. Otte dated February 13, 2008 states
“while the rest of the retail world is trying to figure out how to make money in a flat to down comp-sales environment Costco is running an 8% comp growth through its first 22 weeks of this fiscal year”. Its important to note that in reviewing Costco’s 2009 annual report, financial highlights, comparable sales growth for YE 2008 was 8% in comparison to 6% YE 2007.
2
•
As of 3:30 pm EST January 21, 2010 stock price for Costco and its principal competitors were as follow. Given the economic downturn investor confidence in Costco is still high as shown by the premium stock price in comparison to its competitors. Stakeholder should be please with their value positions. Costco
Target Corporation
Wal-Mart
BJ’s Whole Sale Club
57.45 (COST)
50.30 (TGT)
52.90 (WMT)
34.14