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INTEGRATED BUSINESS
EXPERIENCE 2
-
CASE STUDY ANALYSIS
TRAN TRUNG HIEU - MBA29152271
NGUYEN HY MINH HOANG – MBA 29152195
N...
Rules:
 Same as Chiec non ky dieu Gameshow
 You will have 04 Hints to guess
 Point to be counted for correct answer at ...
Sample Question
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4
 Hint 1: 30% Total
Sample Question
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4
 Hint 2:
Sample Question
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4
 Hint 3:
Sample Question
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4
 Hint 4:
11:59
1 2 3 4 5 6 7 8
B U S I N E S S
1 2 3 4 5 6 7 8
S T R A T E G Y
1 2 3 4
G A M E
Sample Question
Question 1
 Hint 1:
1 2 3 4 5 6
 Hint 2:
Question 1
1 2 3 4 5 6
 Hint 3:
Question 1
1 2 3 4 5 6
 Hint 4: Start with letter “R”
Question 1
1 2 3 4 5 6
Question 1
1 2 3 4 5 6
R E T A I L
Question 2
1 2 3 4 5 6 7 8 9 10 11 12 13
 Hint 1:
Question 2
1 2 3 4 5 6 7 8 9 10 11 12 13
 Hint 2:
Question 2
1 2 3 4 5 6 7 8 9 10 11 12 13
 Hint 3:
Question 2
1 2 3 4 5 6 7 8 9 10 11 12 13
 Hint 4:
Question 2
1 2 3 4 5 6 7 8 9 10 11 12 13
M U L T I N A T I O N A L
1 2 3 4 5 6 7 8 9 10
Question 3
 Hint 1:
1 2 3 4 5 6 7 8 9 10
Question 3
 Hint 2:
Question 3
 Hint 3:
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
Question 3
 Hint 4:
Question 3
1 2 3 4 5 6 7 8 9 10
M E M B E R S H I P
Savings Too Big To Get Home
Costco Today
Costco Facts
- 2nd largest global retailer (National Retail
Federation, 2015).
- 18th largest in Fortune 500 (Costco, 2015...
Costco Stores
Overall Competitive Landscape
- Costco dominated Canada wholesale club
industry with a 72% share of value sales and
60% of...
Overall Competitive Landscape
- Competition is based among the following factors: price, merchandise quality and selection...
COSTCO’S
MISSION & BUSINESS MODEL
A company mission statement describes its present business scope
and purpose (“where we ...
BUSINESS MODEL
Overview:
The plan implemented by a company to generate revenue
and make a profit from operations.
The mo...
COSTCO’S BUSINESS MODEL
High sale volume and rapid inventory turnover.
 Offering fee-paying members attractively low pric...
COSTCO’S BUSINESS MODEL
A unique aspect of Costco’s business model:
 Limits marketing, advertising and promotional activi...
MARKETING AND ADVERTISING
 Costco has developed a reputation as a socially
responsible company by its actions and not by ...
MARKETING AND ADVERTISING
 Using direct marketing to existing customers to promote
merchandize.
 The executive membershi...
APPEALING BUSINESS MODEL
 Their mission is to provide quality goods and services at the lowest
possible price.
 Satisfyi...
Costco Strategy
1. Pricing:
2. Product Selection:
3. Treasure Hunt Merchandising:
4. Low Cost Emphasis:
Chief Elements of Costco Strategy
 Ultra-low prices: Keep the customers going to the
shop by wowing them with low prices
...
Product Selection
Product Selection
 The selection within each product category was restricted, in some
cases to a single offering.
 Costc...
Costco’ s Strategy -
Treasure Hunt Merchandising
Dozens of featured specials came and went very quickly, sometimes in sev...
Costco’ s Strategy
Low cost emphasis
 Costco eliminate all the frills and costs historically associated with conventional...
COSTCO’S WAREHOUSE
Costco’ s Strategy
Growth Strategy
 Costco had opened between 14 and 34 new locations
annually (most in the US).
 In the...
Grade the CEO
Game: Name
Right Names
By whom you
are inspired?
Source: http://www.cnbc.com/2009/04/24/Portfolios-Best-American-CEOs-of-All-Time.html?slide=12
Source: http://www.cnbc.com/2009/04/24/Portfolios-Best-American-CEOs-of-All-Time.html?slide=14
"If you've got to work for the rest of your life,
you'd better do something you'll enjoy”
http://www.exploringmarkets.com/...
What can you see?
What can you see?
Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama –
Cha...
Task 1 Developing Strategic, vision, mission and core value
• Strategic vision indicates the paths that company takes in d...
Back up
Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alaba...
Setting ObjectivesTask 2
• WHAT - “Objectives are an organization’s performance
target”
• WHO - “Objectives reflects manag...
Setting ObjectivesTask 2
https://www.youtube.com/watch?v=biyGxEix5Zs
First introduced by Kaplan and Norton, 1992, Havard Business
Review
• Tracking...
https://www.youtube.com/watch?v=biyGxEix5Zs
Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama –
Cha...
Crafting Strategy to achieve objectives and visionTask 3
CORPORATE
STRATEGY
BUSINESS
STRATEGY
FUNCTIONAL
STRATEGY
OPERATIO...
Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama –
Cha...
Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama –
Cha...
Task 1 Developing Strategic, vision, mission and core value
Setting Objectives
Crafting Strategy to achieve objectives and...
Task 1 Developing Strategic, vision, mission and core value
Setting Objectives
Crafting Strategy to achieve objectives and...
Jim Sinegal’s core values for Costco
 Obey the law
 Take care of Members
 Take care of Employees
 Respect Suppliers
 ...
Jim Sinegal’s core values for Costco -
ABCD
 Adhering to a strict code of ethics: taking care of our employees and member...
Porter’s Five Forces
Analysis
Porter’ Five Forces
High Rivalry among Existing Competitors
- Fierce competition both from dominant players in wholesale club industry and oth...
High Threat of Substitute Products
- Various types of retailers are available that can be easily accessible, such as onlin...
Low Supplier Bargaining Power
- No single supplier who accounts for a large
proportion of merchandise that the wholesale c...
Moderate Buyer Bargaining Power
- Many customers are individuals who buy in
small quantities.
- Minimal switching cost inv...
Low Threats of New Entrants
High entry barriers that are derived from:
- Formidable competitors with firm positions
in the...
Financial Performance
Costco 2011 2010 2009 2008
Netsales 87,048 76,255 69,889 70,977
Membershipfees 1,867 1,691 1,533 1,506
TotalCost 86,476 75...
Source: 2015 Costco Annual Report
Growth rate 2007 2008 2009 2010 2011 2012 2013 2014 2015
Revenue %
Year over Year 7.06 12.55 -1.46 9.13 14.07 11.5 6.07 7....
Profitability Market Performance Efficiency
Return on Equity: ROE Net Income Earnings per share EPS Net Profit - Minority ...
18.8%
16.1% 16.0%
12.7%
11.6% 12.0%
10.8%
14.0%
2015 2014 2013 2012 2011 2010 2009 2008
ROE
6.1%
6.7%
6.0%
5.5% 5.5%
4.9%
...
Liquidity Ratios and Capital Structure
Is there any link among these ratios?
Profit
Margin
Asset
Turn-over
Debt ratio
Gross Profit Margin Expense Ratio
Current Asset
Turn-over
DII DSO DPO
CCC
Cash Co...
2009 2010 2011 2011
Costco -1.5% 9.1% 14.1% 12.5%
Sam's Club 8.2% -0.4% 3.5% 12.9%
BJ 11.2% 1.6% 6.8% -7.1%
2010
5.5%
-8.1...
Costco Wholesale Competition
Costco has not only wholesale competitors but also retailers.
Two main wholesale competitors ...
What make they are different?/ competitors?
Costco Sam’s Club BJ’s Wholesale Club
Position High-traffic routes in or
near ...
Costco Sam’s Club BJ’s Wholesale Club
Added service
(pharmacy, optic,
gasoline...)
   Beside, BJ also has
some special ...
Costco Sam’s Club BJ’s Wholesale Club
Customer Care Service
(Returns, Refunds &
Exchange Policy)
Payment method approve
St...
Costco Sam’s Club BJ’s Wholesale Club
Website Security & Safety
Transfer Money
Delivery method.
Use security and safety
tr...
Costco Sam’s Club BJ’s Wholesale Club
Membership • Business members: fee of $55
(include a supplemental card).
• Individua...
Competitive Advantages
Costco’s wholesale is better than Sam’s Club & BJ’s Wholesale:
1. Low Price
2. Good customer servic...
Costco’s Prices
Costco Prices are Lowest.
(they always try to make try to make price is lower than their rivals)
1. Focus...
Compensation Policies
Overview
- In 2015, Costco employs about 205,000
employees (88,000 are part-time employees and
117,000 full-time employees...
Overview
- Craig Jelinek – the CEO of Costco believes that a more rewarding workplace will eventually
lower employee turno...
Compensation Practices Comparison
Costco Sam’s Club BJ’s
Pay rate Average of $20/hour (Aaron, 2014) $9 – 13/hour (PayScale...
COSTCO VS SAM’S CLUB VS BJ’S
SWOT Analysis
STRENGTHS WEAKNESSES
- Well-perceived private label brand (Kirkland
Signature) (Euromonitor, 2015).
- Availa...
SWOT Analysis
OPPORTUNITIES THREATS
- International expansion enable Costco to access to a
large customer base(Euromonitor...
Recommendations
Recommendation 1: Focus in developing internet retailing and multi-channel strategies
- Capitalize on its ...
Recommendations
Recommendation 2: Global expansions into untapped markets
- Reduce Costco’s dependence on North America ma...
Revision
1. The process of crafting and executing a company’s strategy consists of:
A. Developing a Strategic mission
B. S...
Revision
2. To improve Cash Collection Cycle, the company should:
A. Extend DSO, Shorter DPO
B. Extend DSO, Extend DPO
C. ...
Revision
3. Four main process in developingBalanced Scorecard:
A. Translating the vision, Communicating and linking, Busin...
Revision
4. Which statement is TRUE:
A. A company achieves competitive advantagewhen an attractive number of Buyers are dr...
References
Euromonitor International 2015, Costco Wholesale Corp in Retailing (World). Retrieved January 25, 2016,
from ht...
References
Cal State LA n.d., Sample Case Study: Costco. Retrieved January 23, 2016, from
http://web.calstatela.edu/facult...
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
Costco Mission, Business Model and Strategy
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Costco Mission, Business Model and Strategy

  1. 1. INTEGRATED BUSINESS EXPERIENCE 2 - CASE STUDY ANALYSIS TRAN TRUNG HIEU - MBA29152271 NGUYEN HY MINH HOANG – MBA 29152195 NGUYEN MINH HOANG – MBA29152299
  2. 2. Rules:  Same as Chiec non ky dieu Gameshow  You will have 04 Hints to guess  Point to be counted for correct answer at Hints:  Hint 1: 5 points  Hint 2: 4 points  Hint 3: 3 points  Hint 4: 2 points
  3. 3. Sample Question 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4  Hint 1: 30% Total
  4. 4. Sample Question 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4  Hint 2:
  5. 5. Sample Question 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4  Hint 3:
  6. 6. Sample Question 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4  Hint 4: 11:59
  7. 7. 1 2 3 4 5 6 7 8 B U S I N E S S 1 2 3 4 5 6 7 8 S T R A T E G Y 1 2 3 4 G A M E Sample Question
  8. 8. Question 1  Hint 1: 1 2 3 4 5 6
  9. 9.  Hint 2: Question 1 1 2 3 4 5 6
  10. 10.  Hint 3: Question 1 1 2 3 4 5 6
  11. 11.  Hint 4: Start with letter “R” Question 1 1 2 3 4 5 6
  12. 12. Question 1 1 2 3 4 5 6 R E T A I L
  13. 13. Question 2 1 2 3 4 5 6 7 8 9 10 11 12 13  Hint 1:
  14. 14. Question 2 1 2 3 4 5 6 7 8 9 10 11 12 13  Hint 2:
  15. 15. Question 2 1 2 3 4 5 6 7 8 9 10 11 12 13  Hint 3:
  16. 16. Question 2 1 2 3 4 5 6 7 8 9 10 11 12 13  Hint 4:
  17. 17. Question 2 1 2 3 4 5 6 7 8 9 10 11 12 13 M U L T I N A T I O N A L
  18. 18. 1 2 3 4 5 6 7 8 9 10 Question 3  Hint 1:
  19. 19. 1 2 3 4 5 6 7 8 9 10 Question 3  Hint 2:
  20. 20. Question 3  Hint 3: 1 2 3 4 5 6 7 8 9 10
  21. 21. 1 2 3 4 5 6 7 8 9 10 Question 3  Hint 4:
  22. 22. Question 3 1 2 3 4 5 6 7 8 9 10 M E M B E R S H I P
  23. 23. Savings Too Big To Get Home
  24. 24. Costco Today
  25. 25. Costco Facts - 2nd largest global retailer (National Retail Federation, 2015). - 18th largest in Fortune 500 (Costco, 2015). - $71 billion market cap (Costco, 2016). - 698 locations worldwide (568 in North America) (Costco, 2016).
  26. 26. Costco Stores
  27. 27. Overall Competitive Landscape - Costco dominated Canada wholesale club industry with a 72% share of value sales and 60% of the total number of outlets (Euromonitor, 2016). - In the US, Costco outperformed both Sam’s Club and BJ’s Wholesale club over the 2009 – 2014 period (Euromonitor, 2015). - In 2014, Costco accounted for 52% of the total US market share (Euromonitor, 2015).
  28. 28. Overall Competitive Landscape - Competition is based among the following factors: price, merchandise quality and selection, location and customer service (MarketLine, 2015). - Highly competitive industry whereas Costco will have to compete against: (1) other players in wholesale club industry (2) other forms of retailing businesses such as retail discounters (Walmart and Dollar General), supermarkets, general merchandise chains, specialty chains, gasoline station and Internet retailers (Arthur, 2012)
  29. 29. COSTCO’S MISSION & BUSINESS MODEL A company mission statement describes its present business scope and purpose (“where we are, what we do, and why we are here”). According to Costco’s, its mission statement is (“to continually provide our members with quality goods and services at the lowest possible price”)
  30. 30. BUSINESS MODEL Overview: The plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.
  31. 31. COSTCO’S BUSINESS MODEL High sale volume and rapid inventory turnover.  Offering fee-paying members attractively low prices on a limited selection of nationally branded and selected private- label products in a wide range of merchandise categories.  Allowing it to sell and receive cash for inventory before it had to pay many merchandise vendors, even when vendor payments were made in time to take advantage of early payment discount.
  32. 32. COSTCO’S BUSINESS MODEL A unique aspect of Costco’s business model:  Limits marketing, advertising and promotional activities to new warehouse openings.  Occasional direct mail marketing to prospective new members and regular direct marketing programs (such as The Costco Connection, a magazine we publish for our members, and coupon mailers…)
  33. 33. MARKETING AND ADVERTISING  Costco has developed a reputation as a socially responsible company by its actions and not by its marketing.  Costco does not have a public relations department or staff.  Costco relies primarily on word-of-mouth from its members to spread its brand messages.
  34. 34. MARKETING AND ADVERTISING  Using direct marketing to existing customers to promote merchandize.  The executive membership program offers additional benefits on member services.  Its low prices and reputation for making shopping at Costco something of a treasure-hunt made it unnecessary to engage in extensive advertising or sales campaigns. These practices result in lower marketing expenses as compared to typical retailers.
  35. 35. APPEALING BUSINESS MODEL  Their mission is to provide quality goods and services at the lowest possible price.  Satisfying buyer needs and requirements at a price they will consider a good value.  The greater the value delivered and the lower the price to get the value, the more appealing a company’s value proposition and product offering.
  36. 36. Costco Strategy 1. Pricing: 2. Product Selection: 3. Treasure Hunt Merchandising: 4. Low Cost Emphasis:
  37. 37. Chief Elements of Costco Strategy  Ultra-low prices: Keep the customers going to the shop by wowing them with low prices  Low markup on brand-name merchandise at 14% (compared to 20 – 50% markups at other discounters and many supermarkets  Jim Sinegal - CEO of Costco said: “We understand that our members do not come to us because the window displays or the Santa Claus or the piano player. They come and shop with us because we offer great values”.
  38. 38. Product Selection
  39. 39. Product Selection  The selection within each product category was restricted, in some cases to a single offering.  Costco stocked only a 325 – count bottle of Advil – a size that many shoppers might find too large for their needs . Costco had opened ancillary departments within the next to most Costco warehouses , see the table on the next slide…
  40. 40. Costco’ s Strategy - Treasure Hunt Merchandising Dozens of featured specials came and went very quickly, sometimes in several days or a week – like Italian – made Hathaway shirts priced at $29.99 and $800 leather sectional sofas. The strategy was to entice the shoppers and bargain – hunting shoppers would go to Costco more frequently than for periodic “stock up” trips. The shoppers quickly learned that they need to buy treasure – hunt specials that interested them because these items would very likely not available on their next shopping trip.
  41. 41. Costco’ s Strategy Low cost emphasis  Costco eliminate all the frills and costs historically associated with conventional retailers, including salespeople, fancy buildings, delivery, billing, and accounts receivable.  They locate warehouses on high – traffic routes in or near upscale suburbs that were easily accessible by small businesses and residents with above – average incomes, it avoided prime real estate sites in order to contain land costs. Warehouse building material: Metal pre-engineered design, concrete floors and minimal interior décor
  42. 42. COSTCO’S WAREHOUSE
  43. 43. Costco’ s Strategy Growth Strategy  Costco had opened between 14 and 34 new locations annually (most in the US).  In the fiscal year 2011, Costco spent $1.3 billion to open 20 new locations, two newly relocated warehouses, and several distribution depots.  In the fiscal year 2012: 4 new warehouses in the US and 2 new warehouses in Japan (first 4 months of fiscal year 2012) and planned to open an additional 12 new warehouses on September, 2012.
  44. 44. Grade the CEO
  45. 45. Game: Name Right Names By whom you are inspired?
  46. 46. Source: http://www.cnbc.com/2009/04/24/Portfolios-Best-American-CEOs-of-All-Time.html?slide=12
  47. 47. Source: http://www.cnbc.com/2009/04/24/Portfolios-Best-American-CEOs-of-All-Time.html?slide=14
  48. 48. "If you've got to work for the rest of your life, you'd better do something you'll enjoy” http://www.exploringmarkets.com/2014/02/costco-founder-james-sinegal-might-have.html
  49. 49. What can you see?
  50. 50. What can you see?
  51. 51. Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama – Chapter 2 – Page 13
  52. 52. Task 1 Developing Strategic, vision, mission and core value • Strategic vision indicates the paths that company takes in developing and strengthening its business as preparing for long-term future • Key consideration in Deciding Company’s Future Direction: External vs. Internal • What is your Slogan? • Strategic vision vs. Mission Statement? • Strategic vision sets company’s future direction “where are we going” • Mission statement describes the present “who we are, what we do, and why we are here”
  53. 53. Back up Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama –
  54. 54. Setting ObjectivesTask 2 • WHAT - “Objectives are an organization’s performance target” • WHO - “Objectives reflects managerial commitment to deliver results and outcomes. • WHY: • Helps organization to be focus on what should be completed to deliver expected overall outcomes • Considered as Benchmark to track company performance • Motivates all members to deliver best possible results • WHERE & WHEN? HOW???
  55. 55. Setting ObjectivesTask 2
  56. 56. https://www.youtube.com/watch?v=biyGxEix5Zs First introduced by Kaplan and Norton, 1992, Havard Business Review • Tracking Financial result while monitoring progress in building the capabilities for future growth. • To integrate Long-term strategy with Short-term financial goals • Not as replacement of Financial measures, but complement. • Four main processes: 1. Translating the vision 2. Communicating and linking 3. Business planning 4. Feedback and learning
  57. 57. https://www.youtube.com/watch?v=biyGxEix5Zs
  58. 58. Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama – Chapter 2 – Page 9 Back up
  59. 59. Crafting Strategy to achieve objectives and visionTask 3 CORPORATE STRATEGY BUSINESS STRATEGY FUNCTIONAL STRATEGY OPERATIONAL STRATEGY CEO and Other Senior Executives General Managers Functional Heads Sub-Functional Heads Two-way Influence Top down vs. Bottom Up Reproduced: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama – Chapter 2 – Page 14
  60. 60. Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama – Chapter 4 – Page 2 Back up
  61. 61. Source: Textbook - Strategy: Core Concepts and Analytical Approaches – Arthur A. Thompson, The University of Alabama – Chapter 2 – Page 13  Resources preparation: Human resources, Physical Resources, Financial Resources  Internal process, policies and supporting systems  Rewards and Recognition, Employee Engagement
  62. 62. Task 1 Developing Strategic, vision, mission and core value Setting Objectives Crafting Strategy to achieve objectives and vision Implementing and Executing Task 2 Task 3 Task 4 Task 5 Monitoring developments, evaluating performance, and initiating corrective actions Costco’s case
  63. 63. Task 1 Developing Strategic, vision, mission and core value Setting Objectives Crafting Strategy to achieve objectives and vision Implementing and Executing Task 2 Task 3 Task 4 Overall Grade: A- Task 5 Monitoring developments, evaluating performance, and initiating corrective actions Costco’s case
  64. 64. Jim Sinegal’s core values for Costco  Obey the law  Take care of Members  Take care of Employees  Respect Suppliers  Reward shareholders
  65. 65. Jim Sinegal’s core values for Costco - ABCD  Adhering to a strict code of ethics: taking care of our employees and members, respecting our suppliers, rewarding our shareholders  Bringing the highest quality goods and services to market at the lowest possible prices  Complying to Law, seeking to be responsible corporate citizens and environmental stewards  Delivering excellent customer services.
  66. 66. Porter’s Five Forces Analysis
  67. 67. Porter’ Five Forces
  68. 68. High Rivalry among Existing Competitors - Fierce competition both from dominant players in wholesale club industry and other forms of retailing businesses (Euromonitor, 2015). - Minimal switching cost involved (Cal State LA, n.d.) - No notable differentiation between the merchandise offerings of players in the market (Cal State LA, n.d.) - Competitors compete on pricing and accessibility through frequent new stores’ openings (Arthur, 2012).
  69. 69. High Threat of Substitute Products - Various types of retailers are available that can be easily accessible, such as online retailers (Euromonitor, 2015). - Products are not differentiated and can be easily purchased at other locations (Cal State LA, n.d.). - Minimal switching cost, especially for members without membership (Cal State LA, n.d.).
  70. 70. Low Supplier Bargaining Power - No single supplier who accounts for a large proportion of merchandise that the wholesale club stocks (Cal State LA, n.d.). - Wholesale clubs are big-volume purchasers. - Dominant firms like Costco and Sam’s Club possess strong bargaining power due to their reputation in the market.
  71. 71. Moderate Buyer Bargaining Power - Many customers are individuals who buy in small quantities. - Minimal switching cost involved whereas customers can easily switch to other alternative forms of retailers without facing any substantial disadvantages (Cal State LA, n.d.). - Undifferentiated products’ (Cal State LA, n.d.).
  72. 72. Low Threats of New Entrants High entry barriers that are derived from: - Formidable competitors with firm positions in the market that enjoy the benefits of economies of scale that are not easily accessible by new players (Cal State LA, n.d.). - Effective competition requires sizeable capital (Cal State LA, n.d.). - Current players’ popularity remain a major obstacle for newcomers to build up trust and customer relationship (MarketLine,20 15).
  73. 73. Financial Performance
  74. 74. Costco 2011 2010 2009 2008 Netsales 87,048 76,255 69,889 70,977 Membershipfees 1,867 1,691 1,533 1,506 TotalCost 86,476 75,869 69,645 70,514 OperatingIncome 2,439 2,077 1,777 1,969 Findings:  2011-Strong revenue growth at 14.1% and a 17.4% increase in operational profit – Flow through algorithm  2015 – Moderate revenue growth at 3.2%. However, Operating profit grow at 12.6% to maintain the flow through.  Membership is the main contributors to Profit, ultra-low pricing mark-up rate 60,151 88,915 112,640 116,199 1,626 2,439 3,624 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Operating Income USD Mil Net Income USD Mil Free Cash Flow USD Mil Revenue USD Mil Net Revenue (Secondary axis) % COGS/NR: 87.7% % SG&A/NR:9.6% % COGS/NR: 87.0% % SG&A/NR:10.0%
  75. 75. Source: 2015 Costco Annual Report
  76. 76. Growth rate 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue % Year over Year 7.06 12.55 -1.46 9.13 14.07 11.5 6.07 7.12 3.16 3-Year Average 10.21 11.04 5.89 6.57 7.05 11.55 10.5 8.2 5.44 5-Year Average 10.69 11.24 8.22 8.05 8.13 9.01 7.73 9.54 8.31 Operating Income % Year over Year -1.05 22.4 -9.74 16.88 17.43 13.12 10.66 5.47 12.55 3-Year Average 5.1 10.12 3.01 8.89 7.4 15.79 13.7 9.7 9.52 5-Year Average 7.29 11.23 5.1 7.1 8.45 11.39 9.17 12.62 11.78 Net Income % Year over Year -1.85 18.47 -15.34 19.98 12.2 16.89 19.31 0.93 15.5 3-Year Average 7.06 6.46 -0.52 6.37 4.46 16.32 16.1 12.07 11.63 5-Year Average 9.12 12.21 4.24 4.15 5.79 9.56 9.71 13.64 12.78 EPS % Year over Year 3.04 21.94 -14.53 18.22 13.01 17.88 19.02 0.43 15.48 3-Year Average 8.61 9.85 2.41 7.2 4.52 16.35 16.61 12.11 11.35 5-Year Average 9.87 13.56 5.95 6.02 7.49 10.42 9.88 13.49 12.96 Back up
  77. 77. Profitability Market Performance Efficiency Return on Equity: ROE Net Income Earnings per share EPS Net Profit - Minority Interest Asset Turn-over Net Revenue Total Equity Number of share Total Asset Return on Asset: ROA Net Income Cashflow per share CFPS CFO - Preference dividens Days in Inventories DII Inventories Total Asset Number of share COGS Gross Profit Margin Gross profit Dividen per share DPS Dividens paid Days of Sales Outstanding DSO AR Net Revenue Number of share Net Revenue Profit Margin EBIT Dividen payout ratio Profit distributed as dividens Cash Collecting Cycle DPO Net Revenue Total Profit Cashflow to Sales CFO Price Earning ratio PER Current market price Cash Collecting Cycle CC C Net Revenue EPS Liquidity Capital Structure Current ratio Debt ratio Liabilities Asset Quick Asset ratio Debt to Equity Liabilities Equity Cashflow ratio Equity ratio Equity Asset Cash from Operating Profit Current Liabilities x 365 days x 365 days Current Asset - Inventories Current Liabilities Current Asset Current Liabilities
  78. 78. 18.8% 16.1% 16.0% 12.7% 11.6% 12.0% 10.8% 14.0% 2015 2014 2013 2012 2011 2010 2009 2008 ROE 6.1% 6.7% 6.0% 5.5% 5.5% 4.9% 6.2% 2015 2014 2013 2012 2011 2010 2009 ROA 13.0% 12.6% 12.6% 12.4% 12.6% 12.8% 12.7% 12.4% 2015 2014 2013 2012 2011 2010 2009 2008 Gross Profit margin Profitability Ratios
  79. 79. Liquidity Ratios and Capital Structure
  80. 80. Is there any link among these ratios?
  81. 81. Profit Margin Asset Turn-over Debt ratio Gross Profit Margin Expense Ratio Current Asset Turn-over DII DSO DPO CCC Cash Collecting Cycle ROA Leverage ROE Entities Financial Health Interest Coverage http://www.investopedia.com/video/play/dupont-analysis/ DuPont Analysis
  82. 82. 2009 2010 2011 2011 Costco -1.5% 9.1% 14.1% 12.5% Sam's Club 8.2% -0.4% 3.5% 12.9% BJ 11.2% 1.6% 6.8% -7.1% 2010 5.5% -8.1% 1.4% 2009 10.7% 0.1% 13.3% 72.48 71.42 77.95 88.92 44.34 47.98 47.81 49.46 9.01 10.03 10.19 10.88 2008 2009 2010 2011 Net Revenue - Bil US$ Costco Sam's Club BJ 72.48 71.42 77.95 88.92 44.34 47.98 47.81 49.46 9.01 10.03 10.19 10.88 2008 2009 2010 2011 Operating Profit - Bil US$ Costco Sam's Club BJ Costco – Sam’s Club - BJ
  83. 83. Costco Wholesale Competition Costco has not only wholesale competitors but also retailers. Two main wholesale competitors are Sam’s Club, BJ’s Wholesale Club.
  84. 84. What make they are different?/ competitors? Costco Sam’s Club BJ’s Wholesale Club Position High-traffic routes in or near upscale suburb Near Wal-Mart Near Costco or Sam’s Club (within 10 miles) Items 3600 4000 7000 Treasure - hunt Treasure - hunt items are upscale Treasure - hunt items are less upscale but cheaper than Costco’s Price Lowest price Low price Low price
  85. 85. Costco Sam’s Club BJ’s Wholesale Club Added service (pharmacy, optic, gasoline...)    Beside, BJ also has some special services such as vacation and travel package, garden and storage sheds, patio and sun rooms.... Social Media Website, Facebook, Twitter Blogs which be operated by customers to share their experience. Website, Facebook, Twitter Website, Facebook, Twitter
  86. 86. Costco Sam’s Club BJ’s Wholesale Club Customer Care Service (Returns, Refunds & Exchange Policy) Payment method approve Store quality 90 days from the purchase date to return your order for a full refund. All of payment cards which include both Bill Me Later and American Express be approved in Costco Many customers feel Costco is much cleaner than BJ’s and prefer to shop at Costco for bulk items. Electronic device (90 days) other goods (30 days). American Express Card not be approved Clear Electronic device (90 days) other goods (30 days). One of the payment methods that is not accepted at BJ's Wholesale Club at this time is Bill Me Later. Less Clean
  87. 87. Costco Sam’s Club BJ’s Wholesale Club Website Security & Safety Transfer Money Delivery method. Use security and safety transfer money by third party –McAfee Only tires can be shipped to Costco stores for collections and not any others. The rates vary with service required, using UPS for its delivery services ensures smooth and timely delivery of products ordered. Use security and safety transfer money by themselves. Depend on size and weight of good, they will choose shipment method by themselves. Use security and safety transfer money by themselves. BJ’s Wholesale Club cannot ship packages to P.O. Boxes.
  88. 88. Costco Sam’s Club BJ’s Wholesale Club Membership • Business members: fee of $55 (include a supplemental card). • Individual members: fee of $55 (include a supplemental card). • Executive members : fee of $100. Save 2% on purchases, save on various service offered by Costco and third-party company such as insurance, loan, real estate and mortgage service... • Accept goods returns •Business members: fee of $35 (include a supplemental card). • Individual members: fee of $40 (include a supplemental card). • Premium members : fee of $100 (including health care insurance, personal and financial service, recreational vehicle program). Cash back 2% •Business members: fee of $50(include a supplemental card). • Individual members: fee of $50 (include a supplemental card). •Rebate 2% •Accept goods returns
  89. 89. Competitive Advantages Costco’s wholesale is better than Sam’s Club & BJ’s Wholesale: 1. Low Price 2. Good customer service. 3. Good Customer care. 4. Effective Social network. Costco have winning strategy to focus on customer need (Lowest price) and try to satisfy them (customer care & service).
  90. 90. Costco’s Prices Costco Prices are Lowest. (they always try to make try to make price is lower than their rivals) 1. Focusing on customer need. (Business strategy) (Buy quality product with the best price to save money). 2. Try to improve customer care & service better than other rival – payment, delivery methods…)
  91. 91. Compensation Policies
  92. 92. Overview - In 2015, Costco employs about 205,000 employees (88,000 are part-time employees and 117,000 full-time employees) (Statista ,2015). -Ranked as second best employer in the US (Clare, 2015). -The company’s turnover rate is kept at 5% for employees who have worked at Costco for more than a year (Aaron, 2014).
  93. 93. Overview - Craig Jelinek – the CEO of Costco believes that a more rewarding workplace will eventually lower employee turnover rate, boost their productivity and on-job performance (Aaron, 2014).
  94. 94. Compensation Practices Comparison Costco Sam’s Club BJ’s Pay rate Average of $20/hour (Aaron, 2014) $9 – 13/hour (PayScale, n.d.) $9 – 13/hour (PayScale, n.d.) Health-based benefits Medical, Dental, Mental health and substance abuse, Pharmacy, Vision and hearing aid coverage, Personal wellness tools, care network, behavioral health (Costco, 2016) Consumer-directed health plans, Vision, Dental, Counseling services, Illness protection (Walmart Careers, 2016) Medical, Dental, Employee assistance program (BJ’s Careers, 2016) Financial-based benefits 401(k) retirement plan, Stock purchase plan, Money management information, employee self-service (Costco, 2016) 401(k) retirement plan, Stock purchase plan, Discount cards when buying at Walmart and Sam’s club (Walmart Careers, 2016) 401(k) retirement plan (BJ’s Careers, 2016) Other benefits Reimbursement account, Various forms of insurance(Costco, 2016) Various forms of insurance (Walmart Careers, 2016) Flexible spending account, Various forms of insurance (BJ’s Careers, 2016)
  95. 95. COSTCO VS SAM’S CLUB VS BJ’S
  96. 96. SWOT Analysis STRENGTHS WEAKNESSES - Well-perceived private label brand (Kirkland Signature) (Euromonitor, 2015). - Available gasoline and other additional services encourage more frequent shopping (MartketLine, 2015). - Higher market coverage (9 markets) compared to Sam’s Club (only 4) (Euromonitor, 2015). - Low cost operating model (MarketLine, 2015). - Healthy financial position (Euromonitor, 2015). - Dependence on North America markets (MarketLine, 2015). - Limited product choice (only 3,700 products) (MartketLine, 2015).
  97. 97. SWOT Analysis OPPORTUNITIES THREATS - International expansion enable Costco to access to a large customer base(Euromonitor, 2015). - Multichannel retailing enables Costco to widen its reach (Euromonitor, 2015). - Face fierce competition from various types of retailers (Euromonitor, 2015). - Catered to middle-high income class but faces challenges in US as such class proportion continues to decrease (Euromonitor, 2015). - Low customers’ loyalty.
  98. 98. Recommendations Recommendation 1: Focus in developing internet retailing and multi-channel strategies - Capitalize on its strong financial position to invest in creating new retailing channels. - Allow to minimize threats posed by other retailing channels. - Stronger online presence enables Costco to reach a wider customer base.
  99. 99. Recommendations Recommendation 2: Global expansions into untapped markets - Reduce Costco’s dependence on North America market. - Partnerships with other Internet retailers can allow Costco to enter untapped markets without physical presence.
  100. 100. Revision 1. The process of crafting and executing a company’s strategy consists of: A. Developing a Strategic mission B. Setting Objectives C. Monitoring and corrective action to short-term fix issues. D. All are correct
  101. 101. Revision 2. To improve Cash Collection Cycle, the company should: A. Extend DSO, Shorter DPO B. Extend DSO, Extend DPO C. Shorter DSO, Shorter DPO D. Shorter DSO, Extend DPO
  102. 102. Revision 3. Four main process in developingBalanced Scorecard: A. Translating the vision, Communicating and linking, Business planning, Feedback and learning B. Translating the vision, Business planning, Communicating and linking,F eedback and learning C. Develop mission, Business planning, Communicating and linking, Feedback and learning D. Develop mission, Communicating and linking, Business planning, Feedback and learning
  103. 103. Revision 4. Which statement is TRUE: A. A company achieves competitive advantagewhen an attractive number of Buyers are drawn to purchase its products or services rather than those of competitors B. A company achieves sustainable advantage when the basis for buyer references for its product offering relative to the offerings of its rivals is durable, despite competitors’ efforts to nullify or overcome the appeal of its product offering C. Both are TRUE D. Both are FALSE
  104. 104. References Euromonitor International 2015, Costco Wholesale Corp in Retailing (World). Retrieved January 25, 2016, from http://www.euromonitor.com/ Euromonitor International 2016, Costco Wholesale Canada Ltd in Retailing (Canada). Retrieved January 25, 2016, from http://www.euromonitor.com/ MarketLine 2015, Costco Wholesale Corporation. Retrieved January 24, 2016, from http://www.marketline.com/ Statista 2015. Number of Costco employees worldwide from 2011 – 2015 (in 1,000s). Statista – The Statistics Portal. Retrieved from http://www.statista.com/statistics/284430/costco-number-of-employees-worldwide-2011-2013/ Aaron, T (2014, October 23) . Why Costco Pays Its Retail Employees $20 An Hour. Business Insider. Retrieved from http://www.businessinsider.com/costco-pays-retail-employees-20-an-hour-2014-10
  105. 105. References Cal State LA n.d., Sample Case Study: Costco. Retrieved January 23, 2016, from http://web.calstatela.edu/faculty/klai/Course/497Costco.pdf Clare, C (2015, March 25). America’s Best Employers 2015. Forbes. Retrieved from http://www.forbes.com/sites/clareoconnor/2015/03/25/americas-best-employers- 2015/#2351e9e76ceb Costco 2016, Costco Wholesale Corp in Retailing (World). Retrieved January 25, 2016, from http://www.euromonitor.com/ Payscale n.d. Average Hourly Rate for Sam's Club Employees. PayScale. Retrieved from http://www.statista.com/statistics/284430/costco-number-of-employees-worldwide-2011-2013/ Payscale n.d. Average Hourly Rate for Sam's Club Employees. PayScale. Retrieved from http://www.payscale.com/research/US/Employer=BJ's_Wholesale_Club/Hourly_Rate Arthur A. T. Strategy: Core Concepts and Analytical Approaches. The University of Alabama, Chapter 2 , Page 13

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