Costco Case

Name: Arlette Traves Astudillo

Costco Case Study

1. What is Costco's business model? Is the company's business model appealing? Why or why not?

The Costco's business model is to generate high sales volume and rapid inventory turnover by offering low prices on limited selection of national branded and select private-label products in wide range of merchandise categories. Costco's offers these products to their members who are of two types' business members and gold star members.

These items consist of H&B, food, household items, electronics and many other item categories. The items offered through the warehouse club are in at lower prices than the average retailer, hence purchase of membership.

Costco's business model is to generate high sales while offering club members low pricing on items. The concept of rapid inventory turnover with operating efficiencies has enabled Costco to generate profitability at a lower profit margin, especially compared to traditional wholesalers, merchandisers and supercenters.

The overall business model is innovate and effective. The model has allowed Costco to attract consumers and have a lot of profitability.

2. What are the chief elements of Costco's strategy? How good is the strategy?

Strategy is the organization's pre selected means or approach to gaining its goals or objectives, while keeping in view current and future external conditions.

Costco's strategy's elements are:

* Low prices

* Limited product lines and selection

* Treasure hunt shopping environment

By keeping low prices Costco's is following cost leadership strategy which is good because on this base they can compete with their competitors. By limited product lines and limited selection they are offering limited 4000 items which are less as compared to its competitors. Costco's is adopted market development strategy by capturing new markets for existing products. By treasure hunt shopping environment they provides such product at low prices to its members which they believe will not be available in next visit. This works as an incentive and members try to take maximum advantage and therefore Costco's sales volume increases. At Costco's warehouse products are not offered in every size. The strategy they followed is that by offering every size their efficiency will decrease therefore it is said intelligent loss of sales.

3. Do you think Jim Sinegal is an effective CEO? What grades would you give him in leading the process of crafting and executing Costco's strategy? What support can you offer for these grades?

Yes, I think Jim Sinegal is an effective CEO. He has a vision and proper plans that where Costco's is and where it will be in long term time period. He plays an active role in overall strategy formulation, implementation and execution. He acts as producer, director and knowledgeable critic. He cut to the chase quickly, exhibiting passionate intent to detail and pricing. He used to firing a stream of questions at store managers about sales volumes and stock levels of particular items. He used to regularly analyze position of certain products in stores and give his comments on any aspect of store operations that caught his eyes. Jim Sinegal lead its team by front and the position where Costco's wholesale stand is proof that he is and effective CEO.

4. How well Costco's performing from financial prospective? How does the company compare to Sam's Club and BJ's wholesale?

Financial ratio analysis is the calculation & comparison of ratios which are derived from the company's financial statements. According to given data current ratio of Costco's wholesale is 1.07 which shows that it can meet it current liabilities on time. Profitability ratios shows return on sales, as it