Costco's strategic vision is to provide customers with the best value at the lowest possible prices. Its mission is to continually provide members with quality goods and services at the lowest prices while treating people with respect. Costco pursues a low cost strategy by offering a limited selection of fast-selling products in bulk quantities and by aggressively pricing items lower than competitors. It focuses on satisfying customers to build loyalty rather than prioritizing shareholder profits. Currently, Costco is a mature company with over 55 million members and 567 warehouse locations globally.

1. A Case Study B-School Interaction Committee

2. Costco Profile 13 July 2010 2 B-School Interaction Committee

3. Strategic Vision Give customers best value at the best price Mission : To continually provide members with quality goods and services at lowest possible prices Treat people with right, respect and act ethically 13 July 2010 3 B-School Interaction Committee

4. Business Model 13 July 2010 4 B-School Interaction Committee

5. 13 July 2010 5 B-School Interaction Committee

6. Low Cost Generic Strategy 13 July 2010 6 B-School Interaction Committee

7. Low Cost Strategy Works best when the competition among rival sellers is vigorous Products are identical Most buyers use products in the same way Buyers incur low cost in shifting from one seller to another “ Some years ago, we were selling a hot jeans brand for $29.99, when they were $50 in a department store” -Jim Sinegal Disadvantages Aggressive pricing can reduce profitability in the long run WSJ accused Costco of pleasing customers at the expense of the share holder’s profits 13 July 2010 7 B-School Interaction Committee

8. 4000 items were available on the shop floor compared 40000 in other shops Limited selection in each product category: Fast selling models Sizes Colours Products sold in big container, case, carton or multiple pack quantities Product Selection 13 July 2010 8 B-School Interaction Committee

9. Constantly changes 1/4th of its product offering Irresistible deals on luxury items  Entices shoppers Create a sense of urgency among customers An item once displayed may not be available next day Luxury items obtained legally from the gray market or from distressed retailers looking to get rid of excess or slow selling inventory Treasure-hunt Merchandising 13 July 2010 9 B-School Interaction Committee

10. Warehouse Operations 13 July 2010 10 B-School Interaction Committee

11. “HOW” 13 July 2010 11 B-School Interaction Committee

12. Growth Strategy 13 July 2010 12 B-School Interaction Committee

13. Supplementary Strategy 13 July 2010 13 B-School Interaction Committee

14. No excessive advertising or sales campaigns due to good reputation Promotional activities through direct mail programmes Word of mouth Marketing and Advertising 13 July 2010 14 B-School Interaction Committee

15. 13 July 2010 15 B-School Interaction Committee

16. Internal Environment External Environment Satisfied employees Highly paid Many benefits Decentralisation of authority Operations were environment-friendly Solar powered offices Timed lighting Growth opportunities in other developing countries like India, China, Brazil etc General economic condition Legislation and regulation Rival business firms 13 July 2010 B-School Interaction Committee 16

17. 13 July 2010 B-School Interaction Committee 17 Competitors

18. 13 July 2010 B-School Interaction Committee 18 Comparison With Competitors

19. Market Positions of Rivals Higher Sam’sClub Costco Operating Margin BJ’s Lower Few Many Number of Locations 13 July 2010 19 B-School Interaction Committee

20. Current Scenario Costco is in the maturity stage 3rd largest retailer in the US 55 million members (As of Sept, 2009 ) Net profit  $1.28 billion (Aug, 2009) 567 locations (April, 2010) 13 July 2010 B-School Interaction Committee 20 Source: http://joshbersin.com/2008/07/31/make-learning-part-of-your-business-strategy/

21. 13 July 2010 21 B-School Interaction Committee