Costco ppt


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Costco ppt

  1. 1. Creative Exposure Consulting, LLC Mission, Business Model, & Strategy
  2. 2. Introduction Founded in 1983 Fourth largest retailer in the U.S. As of 2010, 573 warehouses in 40 states and 7 countries Fastest growing company in the history among American businesses Creative Exposure Consulting
  3. 3. Costco Only company to achieve $6 billion in sales from zero in six years Founder Jim Sinegal coined as the inventor of the wholesale Club concept Philosophy is to “keep members coming in to shop by wowing them with low prices.” Does not engage in extensive advertisements or sale campaigns Five Guiding Principles  Obey the law  Take care of members  Take care of employees  Respect suppliers  Reward shareholders Creative Exposure Consulting
  4. 4. Product Diversification Core - Costco Wholesale  Warehouse Clubs and Superstores  Premium private-label products Core - Costco Business Centers  Cross business strategic fit: formula 1+1=3 Specialty - Consumer Services  Travel  Optical  Automotive Financial Services  401(K)  Loans Insurance Pharmacy Recycle electronics Creative Exposure Consulting
  5. 5. Business Model Low Cost/Low Price Limited selection of top quality merchandise Wide range merchandise categories “Treasure Hunt” shopping environment No frills, self-service warehouse Rapid inventory turnover Volume purchasing Operating efficienciesCreative Exposure Consulting
  6. 6. Business Model Low prices Volume purchasing Limited selection of quality merchandise Efficient distribution Reduced handling of merchandise +Wide range of merchandise categories +No-frills, self-service warehouse Rapid inventory turnover Operating efficiencies Rapid inventory turnover +Operating efficiencies Plus Membership Fees Profit at a low gross margin (8%-14%)Creative Exposure Consulting
  7. 7. Business Model Analysis Is Costco’s business model appealing? Evaluation matrix based on:  Customer satisfaction – Ranked chief among competitors  Out-competing rivals – Ranked 4th among competitors  Response to changing market conditions – One stop shop trends, Unique rotating merchandise, understanding affluent shopper spending behavior  Achieving financial/strategic objectives – Progressively demonstrates membership growth and net gains each year  Comparison to competitors – Differentiated, Industry leader Are Costco’s prices too low?  Not as of today, but could prove to be a problem in the future, especially in foreign markets due to currency value Creative Exposure Consulting
  8. 8. Competitive Advantage Building core competencies and competitive capabilities Finding and negotiating bargains On quality merchandise Building relationships with Manufacturers Suppliers Ingenuity Cost cutting Conservation  Human Resources Employing the best talentCreative Exposure Consulting
  9. 9. Costco vs. Competitors Last trade: $0.00 $0.00Creative Exposure Consulting
  10. 10. Costco vs. Wal-Mart Pricesmart Inc. Higher POperating Margin Sam’s Club Costco BJ’s Lower Few Many Number of Locations Note: Circles are drawn roughly proportional to the sizes of the club chains based on revenue Creative Exposure Consulting
  11. 11. 2008 Performance FY 2008 Costco vs. Competitors Net Comparable Revenue Income Operating Store Sales Company (Billions) (Billions) Margin (Decline) Locations Costco $70.9 $1.3 2.7% 6.0% 512 Sams Club $46.8 N/A 3.4% 4.8% 602 BJs Wholesale Club $10.0 $2.3 2.3% 9.4% 180Creative Exposure Consulting
  12. 12. Rivals’ Next Strategic Moves More stores in foreign markets  Facing market saturation in U.S.  cannibalization Copy Costco  Sam’s Club opens first Business Centers  July 22, 2008 Creative Exposure Consulting
  13. 13. SWOT Analysis Strengths Weaknesses S  Low Prices W  Burden of high wages  Strong Brand paid to workers  CEO’s retirement  Operating  Low price margins Efficiency  E-commerce activities  Exceptional  Small Marketing Workforce budget compared to  Strong membership discount retailers and Opportunities Threats Markets SuperO  Appeal to T  Aggressive price conscientious shopper competition by rivals  Expand into foreign  Political stable markets complications in  Mergers & Acquisitions foreign markets  Massive supplier pool  CannibalizationCreative Exposure Consulting
  14. 14. Strategic PerformanceCreative Exposure Consulting
  15. 15. Financial PerformanceCreative Exposure Consulting
  16. 16. Acquiring New Members 7.3% increase 1999 & BeforeCreative Exposure Consulting
  17. 17. Winning Strategy - YES Weighted FactorsFactor Strategy/Performance Score/WeightWell-matched Offensive strategy –Low cost, low 100%/30% price, First Mover (i.e. Business Center, Greening Warehouses)Competitive Advantage Best cost provider—top quality at 100%/30% lowest price, distribution efficiency, strategic alliances & partnerships, ingenuity/innovation via EFIM technology.Sustained performance From 2000 – 2004 net sales increased by 100%/40% 45%, 2010 SEC Filings reported net sales increased 9.1% from the prior year to $76,255, driven by a 7% increase in comparable sales, membership fees increased 8.4%, due to new membership sign-ups and increased penetration of the higher-fee Executive Membership program. Stock pricePerformance Total Outstanding performance 100/100 Creative Exposure Consulting
  18. 18. Strategic IssuesRemain focused on core businessMaintain First Mover StatusIncrease internationalization opportunitiesCreative Exposure Consulting
  19. 19. Recommendations Target Jim Sinegel’s replacement as CEO in an effort to preserve corporate culture Increase efficiency and effectiveness of E-commerce activities to increase sales in both domestic and foreign markets Acquire BJ in an effort to gain 180 stores and acquire R&D, talented employees, and loyal customers Results warrant…  Increase market share and business footprint  Ability to capture new customers resulting in membership growth  Attain BJ’s competences to streamline processes  Gain market presence in areas not currently located in(i.e. clustered club locations) Creative Exposure Consulting
  20. 20. Recommendations Are recommendations aligned with company growth strategy? Yes Sales and Profit Growth Strategy  Open more new warehouses  Build an even larger and more fiercely loyal membership base  Employ well executed merchandise techniquesCreative Exposure Consulting
  21. 21. QuestionsCreative Exposure Consulting