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Title of Assignment: Costco Case Study
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Executive Summary
Jim Sinegal and Jeff Brotman in Seattle Washington founded Costco Wholesale in 1993. Costco merged with Price Club, and doubled their market share in the wholesale industry. They became an immediate leader in the industry.
Costco's sales model is to sell a wide variety of products for low prices at a high volume. These …show more content…
Consumers are not buying large ticket items due to a decrease disposable income. The demand for large volume purchases has decreased with the increase of single-parent families. The high-volume low price model has continued to work, but the economic recession has slowed its growth.
Costco's employees make a higher wage than Sam's employees do. These employees also benefit from a multitude of costly benefits. These expenses have caused the company to accrue less revenue. It will be difficult to maintain their profit margin under the circumstances. Any decline in membership renewals would decrease revenues.
The plan to increase warehouses may infringe on their current stores. The expenses associated with building the warehouse could negatively affect their sales in such tough economic times. Although they are behind Sam's Club in number of facilities, this is not the best time to expand.