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 largest retail 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 Low prices & Good quality products Optimized distribution costs Limited selection of products Low level of Advertising Decentralized management Warehouse locations

External analysis
Main figures about the wholesales 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 2 150 2007008009010 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 significant low prices, which makes it almost impossible to compete
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Supplier Power
•Low power •Good relationship •Large quantities at lower costs

Competitive Rivalry
•High Competition •Economies of scale/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 (membership fees) •High concentration/quantity of buyers •Customers have high mobility •Sell similar to same products

Substitutes
•Low threat of substitutes •Low cost shopping coupled with high value •Customer satisfaction/ member retention is high

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

KSF’s in the industry
Rapid inventory turnover

Volume purchasing

Distribution system Reduced gross mergin

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Internal analysis
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