Costco Wholesale in 2008: Mission, Business, Model, and Strategy
Costco Wholesale in 2008: Mission Business, Model, and Strategy
Question 1: What is Costco’s business model? Is the company’s business model appealing? Why or why not?
The official Costco’ mission statement is “To continually provide our member with quality goods and service at the lowest possible prices”. This statement shows us what drives Costco and their long-term goal is. They want to sell high quality goods and services to their customers, along with the lowest price of the market. Thus it is easy to understand what why the company strategy is how it is: to generate high sales volumes and rapid inventory turnover by offering member very low prices on limited selection of national brand and select private-label product in wide range of merchandise category”. As a wholesale company, Costco purchase large amount of product from manufacturer. It has the ability then to obtain large and deep discount from supplier, in the same way as Wal-Mart does. This strategy give to the Washingtonbased company a high purchasing power compare to retailer. By generating high sales volumes and rapid inventory, Costco receive payment from customers before supplier’s payment are due. Here again, this gives to the company another way to get more discount, and pass this saving on to customers by lowering price. Moreover, the risk of obsolescence, one of the most financial issues with huge inventory, is decrease. Storage cost is in this case very low, because products move quickly in and out of the store. This model does not need high working capital, because the money flows 24/7. High liquidity value, and (almost) no need of additional loan. Thus, we have a company able to obtain deep discount and then get low prices for its customer, while still able to offer national brand and select private-label. All together, this looks really appealing. Customers get best price of the market and brand recognition at the same time. Business and Families come easily to shop at Costco
Question 1: What is Costco’s business model? Is the company’s business model appealing? Why or why not?
The official Costco’ mission statement is “To continually provide our member with quality goods and service at the lowest possible prices”. This statement shows us what drives Costco and their long-term goal is. They want to sell high quality goods and services to their customers, along with the lowest price of the market. Thus it is easy to understand what why the company strategy is how it is: to generate high sales volumes and rapid inventory turnover by offering member very low prices on limited selection of national brand and select private-label product in wide range of merchandise category”. As a wholesale company, Costco purchase large amount of product from manufacturer. It has the ability then to obtain large and deep discount from supplier, in the same way as Wal-Mart does. This strategy give to the Washingtonbased company a high purchasing power compare to retailer. By generating high sales volumes and rapid inventory, Costco receive payment from customers before supplier’s payment are due. Here again, this gives to the company another way to get more discount, and pass this saving on to customers by lowering price. Moreover, the risk of obsolescence, one of the most financial issues with huge inventory, is decrease. Storage cost is in this case very low, because products move quickly in and out of the store. This model does not need high working capital, because the money flows 24/7. High liquidity value, and (almost) no need of additional loan. Thus, we have a company able to obtain deep discount and then get low prices for its customer, while still able to offer national brand and select private-label. All together, this looks really appealing. Customers get best price of the market and brand recognition at the same time. Business and Families come easily to shop at Costco