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Costco Company Analysis

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  • Direct Buying Relationship with many producers of national brand name merchandise. "Costco's corporate philosophy is to put its customers first, then its employees, then its vendors, and finally its shareholders. Shareholders get the short end of the stick. " Work on this one Costco is too generous to its employees. One reason that many people prefer Costco is precisely because it treats its employees well. Wal-Mart's philosopy: executives first, then shareholders, then customers, then vendors, and finally employees.
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  • Online services If a product is not available in a warehouse members are encouraged to look online. Online services also include renewing your membership and changing your personal information.
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  • Costco

    1. 1. <ul><li>Costco </li></ul><ul><li>Strategic Review </li></ul><ul><li>Team Six </li></ul><ul><li>MG 9703 </li></ul>
    2. 2. Agenda <ul><li>Imran Malik </li></ul><ul><li>Yung Ming Tsou </li></ul><ul><li>Waseem Mesri </li></ul><ul><li>Tyani Zhang </li></ul><ul><li>Lakshmi Ramamurthi </li></ul><ul><li>INTRODUCTION </li></ul><ul><li>FACTS AND FIGURES </li></ul><ul><li>BUSINESS MODELS </li></ul><ul><li>COMPANY STRATEGY </li></ul><ul><li>SWOT ANALYSIS </li></ul>
    3. 3. Company Overview <ul><li>Costco is the largest warehouse club chain in the world based on sales volume. </li></ul><ul><li>Founded by James Sinegal (CEO) </li></ul><ul><li>Headquarters: Seattle, Washington. </li></ul><ul><li>1993 , Costco merged with Price club </li></ul><ul><li>Number of warehouses: 551 </li></ul><ul><li>Locations: 512 </li></ul><ul><li>Annual revenues : $72.5 billion </li></ul><ul><li>Number of employees: </li></ul><ul><ul><ul><ul><ul><li>Worldwide: 142,000 </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>US: 104,000 full and part-time </li></ul></ul></ul></ul></ul>
    4. 4. Mission and Vision <ul><li>“ To continually provide our members with quality of goods and service at the lowest possible price control inventory .” </li></ul><ul><li>Code of Ethics </li></ul><ul><ul><ul><ul><ul><li>Take care of our members. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Take care of our employees. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Respect our vendors. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Reward our shareholders. </li></ul></ul></ul></ul></ul>
    5. 5. Corporate Strategy <ul><li>Direct Buying Relationship </li></ul><ul><ul><ul><li>Ensure an efficient and strong supply chain management. </li></ul></ul></ul><ul><ul><ul><li>Helps improve demand-forecasting accuracy. </li></ul></ul></ul><ul><ul><ul><li>lower inventory costs </li></ul></ul></ul><ul><li>Contributes to the development of better staffing plans </li></ul><ul><ul><ul><li>lower personal costs </li></ul></ul></ul><ul><ul><ul><li>Improved customer service </li></ul></ul></ul><ul><li>High quality products &lower prices </li></ul><ul><ul><ul><li>Sell more volume </li></ul></ul></ul><ul><ul><ul><li>Improves profitability </li></ul></ul></ul><ul><li>Members only </li></ul><ul><ul><ul><li>Members are more loyal shoppers </li></ul></ul></ul><ul><ul><ul><li>Helps bargaining power </li></ul></ul></ul><ul><ul><ul><li>Protect “integrity” </li></ul></ul></ul>
    6. 6. <ul><li>YUNG MING TSOU </li></ul>FACTS & FIGURES
    7. 7. Our Alliances <ul><li>American Express- The only accepted credit card </li></ul><ul><li>Atena- A healthcare company, help consumers access Medicare prescription drug plan. </li></ul><ul><li>Greensight - Pay customers to recycle their old electronics </li></ul><ul><li>Nutrisystem- Displays in all of its 384 continental in US stores </li></ul>
    8. 8. Key Success Factors-2000 – Present <ul><li>In July of 2001, Costco celebrates its 25th anniversary. </li></ul><ul><li>In 2006, Costco was named one of the &quot;most admired&quot; companies by Fortune magazine while approximately 30 million rotisserie chickens were sold company wide. </li></ul><ul><li>In 2008, Costco is 5th largest retailer in the U.S. and 8th largest in the world. </li></ul><ul><li>February 1, 2009, the Company reported net sales of $30.02 billion, an increase of one percent from $29.64 billion during the similar period last year. </li></ul>
    9. 9. Costco Memberships Membership: 53.5 million cardholders, membership fee is fully refundable at any time.
    10. 10. Website
    11. 11. BUSINESS MODEL
    12. 12. Value Creation Value Creation
    13. 13. Costco Business Model ECONOMIC OUTPUT BUSINESS MODEL INPUTS Resources Operation Excellence Customer Focus
    14. 14. The BCG Matrix Revenue Growth: 10.10%, No.3. The industry average is 10.00%. Market Cap: 21.87 Billion, No.3
    16. 16. Growth Strategy <ul><li>Domestic: </li></ul><ul><ul><li>Cooperating with Malls </li></ul></ul><ul><ul><li>Providing Upscale Merchandise </li></ul></ul><ul><li>International: </li></ul><ul><ul><li>Aggressive International Expansion </li></ul></ul><ul><ul><li>Different Business Models </li></ul></ul>
    17. 17. Low- Cost Differentiation Strategy Competition Strategy Low Cost Differentiation Operational Excellence
    18. 18. Competitive Analysis Company Business Model Revenue (Billions) Comparable Store Sales (Decline) Number of Store Locations Current Strategy Costco Low costs and high volumes $71 6% 512 International Markets- 2009-2010 Sam's Club Low costs and high volumes $44.4 4.9% 591 25 new Sam's Club locations Nationwide BJ's Wholesale Club (BJ) Low costs and high volumes $9.0 3.7% 171 Focuses on retail shoppers and offers more grocery items
    19. 19. SWOT ANALYSIS
    20. 20. Porter’s Model : Costco Analysis <ul><li>Degree of Rivalry - MOD. </li></ul><ul><li>Number of Competitors -Low </li></ul><ul><li>BJ’s </li></ul><ul><li>Sam’s Club </li></ul><ul><li>Walmart </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>Bargaining Power </li></ul><ul><li>Of Buyers -HIGH </li></ul><ul><li>Buyer </li></ul><ul><li>Concentration – High </li></ul><ul><li>#of Buyers – High </li></ul><ul><li>Switching Costs </li></ul><ul><li>Bargaining Power </li></ul><ul><li>Of Suppliers - LOW </li></ul><ul><li>Supplier Concentration – Low </li></ul><ul><li>Substitute Raw Materials – High </li></ul><ul><li>Threat of Entry - HIGH </li></ul><ul><li>Absolute Cost Advantage - High </li></ul><ul><li>Brand Identity - High </li></ul><ul><li>Threat of Substitution- MOD </li></ul><ul><li>Functional Similarity – High </li></ul><ul><li>Price/Performance Trend – Mod </li></ul><ul><li>Product Identity – High </li></ul>
    21. 21. <ul><li>Majority of top management officials are “home grown”. </li></ul><ul><li>Employee retention </li></ul><ul><li>Membership increases steadily at 10% each year </li></ul><ul><li>Costco has consistent Return on Sales and Return on Assets. </li></ul><ul><li>Costco operates stores in the US, Canada, Mexico, UK, Japan, South Korea, and Taiwan. </li></ul>SWOT Analysis <ul><li>Simple layout may detract from luxury items offered in store </li></ul><ul><li>No advertisement- full membership potential. </li></ul><ul><li>Costco’s international sales - 6% of total net sales </li></ul><ul><li>Only American Express cards </li></ul>W Weakness S Strengths
    22. 22. SWOT Analysis <ul><li>O </li></ul><ul><li>Opportunities </li></ul><ul><li>BJ </li></ul><ul><li>Sam’s Club </li></ul><ul><li>Bi- Mart </li></ul><ul><li>159 million internet users in America </li></ul><ul><li>Open up to more niche markets </li></ul><ul><li>Cities for expansion </li></ul>T Threats
    23. 23. STRATEGIC CHALLENGES <ul><li>Uncertainties in the financial markets- Debt levels </li></ul><ul><li>Consumer and small business spending patterns </li></ul><ul><li>Rising costs associated with employees (including health care and workers' compensation costs) </li></ul><ul><li>Rising costs associated with the acquisition of merchandise </li></ul><ul><li>Competition and Regulation </li></ul><ul><li>Geopolitical conditions </li></ul>
    24. 24. Thank You !