Costco's strategic analysis

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Costco’s Case Study

A few words about
1983 : Foundation by Jim SINEGAL in Seattle 1993 : Merge with Price Club 1999 : Name changed to Costco Wholesale Corporation Nowadays : One of the largestretail store in the industry

Business model
High sales volume Rapid inventory turnover Very low prices Restricted choice

A differenciation low-costs STRATEGY
Membership-based system Lowprices & Good quality products Optimized distribution costs Limited selection of products Low level of Advertising Decentralized management Warehouse locations

External analysis
Main figures about thewholesales industry
120 billion $ in USA (2008) Growth 20% faster than retailing 1200 warehouse locations accross USA 4,000 products available vs 40,000 av. for competitors 3 main actors
2 2 2 1502007008009010 0

PORTER analysis
New Market Entrants
High barriers to entry •Costco has high competitive advantage •Threat of new entrants is low •Costco has wide array of products at significantlow prices, which makes it almost impossible to compete

Supplier Power
•Low power •Good relationship •Large quantities at lower costs

Competitive Rivalry
•High Competition •Economies ofscale/supply chain management is easily replicated •Battle for lower costs results in lower profit margins

Buyer Power
•Bargaining power of buyers is high •Little to no switching costs (membershipfees) •High concentration/quantity of buyers •Customers have high mobility •Sell similar to same products

•Low threat of substitutes •Low cost shopping coupled with high value •Customersatisfaction/ member retention is high

PEST Analysis
Economic factors: Economic crisis and purchasing power Political factors: Law and ecological standards Social factors: New way to buyTechnological factors: New technology development,

KSF’s in the industry
Rapid inventory turnover

Volume purchasing

Distribution system Reduced gross mergin

Internal analysis
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