Costco Wholesale Corp.: Mission, Business Model, and Strategy
What is Costco’s business model? Is the company’s business model appealing? Why or why not?
Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve a niche consumers at a lower price. (Gamble, John and Thompson, Arthur (2009)
Costco’s business model is appealing because they are able to continually sell to a niche market. This niche market has annual income which ranges from $75,000 to $100,000 or more a year. By offering the best products possible at lower price, they are able to have these members return. Presently there are 47,679,000 card holders which include Executive members, Business member, Primary cardholders and Add-on cardholders. Whereas Costco has offered the most popular products in order to have a rapid turn-over. Costco has proven that there business strategy has worked by continually producing higher net sale.
What are the chief elements of Costco’s strategy? How good is the strategy? Costco’s cornerstone strategy is to offer the lowest price possible, to offer a limited selection and a have a treasure-hunt shopping environment. This has provided significant cost savings to many members and has these members continuing to return. Other supermarket or retail stores may have stocked in between 40,000 and 150,000 different products for customers to choose from. However, Costco will provide members only with 4,000 items to choose from. Not providing a wide range but offering the most popular products in the market. While Costco is not presenting a wide range of products one-fourth of those item are constantly changing. They have a...
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