Case Study MGMT7007. Individual Case Study Analysis. Management

CASE STUDY
Name
Course
Tutor
Institution
Due Date
Case Study
Introduction
Costco Wholesale is a business warehouse club that operates on the discount platform and was established in the year 1983 in Seattle. The owner Brotman and Jim Sinegal had the vision of offering customers discounted merchandise within the global market. The business model that Costco applies within the warehouse club industry guarantees them unprecedented success. The business model is tailored to generate high sales volume alongside rapid inventory turnover by offering customers very low and attractive prices on a limited selection of product brands within a wide range of categories of merchandize (Thompson et al., 2018). The case study focuses on investigating the wholesale club industry as well as the retailing segment within the American market.
Analysis
Strategic management of Costco Wholesale
The concept of analyzing the strategic approach of Costco Wholesale is basically based on the availability of limited product selection, low pricing mechanism, ultra-low markups, high volumes of sales, availability of rapid inventory turnover capable of transforming shopping experiences into valuable activity through perpetual transformation and changing of products. The strategic model of the company ensured that it became one of the first companies in the U.S. history that reached approximately 1 billion sales within less than six years. The key attributes of Costco strategy entail the provision of ultra-low prices, their ability to provide a limited selection of private-label as well as nationally branded products. Moreover, they offer a “treasure hunt” shopping environment, which emphasizes low operating costs as well as the expansion of its geographical network within the global platform (Thompson et al., 2018).
The firm utilizes the business model that emphasizes the provision of restricted categories of the various stock that are trade-marked while projecting high-level proceeds from vending alongside timely stock returns. Evidently, the company’s just-in-time stock, the application of minimal handling of stock, the concept of purchases in volume, and the use of efficient delivery channels enable the generation of higher returns from entire operations. At the same time, the inclination of the corporation’s treasure-hunt merchandise helps in creating a process capable of attracting an expansive client base (Thompson et al., 2018).
Costco Wholesale generic strategy focuses on cost leadership which has basically ensured that they gain competitive advantage within various market segments. The concept of applying low costs strategy on their items ensures that customers feel they experience significant savings for any purchase of Costco products. For the secondary generic strategy, Costco partly utilizes the aspect of broad differentiation that is capable of making the business stand out based on value. For instance, the use of the Kirkland Signature representing the company’s house brand differentiates the company based on value and quality, therefore, making Costco base its competition on quality. Further, the concept of cost minimization through economies of scale presents the company with one of its financial strategies that reinforces its competitive advantage. The application of the market development strategy ensures that the company’s operations within new markets become intensive through sales. This aspect ensures that Costco operates new stores within new locations for the reasons of reaching new groups of customers. The strategy is further supported through the expansion of the supply chain that necessarily supports the operations of the new stores. Product development strategy also supports the aspect of tertiary intensive growth that provides support through the creation of new product lines such as the addition of seasonal products. One of the means applicable in this strategy involves the establishment of co-brands through alliances with other manufacturers by the use of the Costco Kirkland Signature brand. The strategy supports the company’s generic competitive strategy under cost differentiation which is directly associated with its high-quality brand, Kirkland Signature (Thompson et al., 2018).
Strategy on Pricing and products
The mechanism that Costco Wholesale applied in its effective pricing strategies proved effective hence making the company popular globally. The aspect of providing low price level was due to limited markups attached to brand-name merchandise of 14% as compared to that of other retailers that marked over 20% margins. In this case, the concept of providing great values could be seen in the company’s strategy of offering brand new merchandise at a far cheaper price than any departmental store. This aspect provides a clear indication of the company’s level of commitment towards long-term cooperation with different customers as opposed to yearning for quick profits owing to high markups (Gamble & Thompson, 2010). At the same time, contrary to the provisions of a wide range of product portfolio by big supermarkets. Costco Wholesale provides its customers with a narrow lane with only 4 thousand which rather makes the choice of products still high. However, the Costco products within each category seem to be limited to fast-selling models as well as colors. For example, Costco Company is involved in the selling of only big bottles of Advil, for the purposes of capturing a wide customer base for efficiency (Thompson et al., 2018).
Costco Corporation focuses on one of the key points of its merchandising model that involves a regular change of a quarter of its product line capable of making shopping experiences a real treasure hunt. In this case, the company offers great price reprieve on luxury items such as diamonds, espresso machines alongside digital equipment that are limited in number. The customers tend to search for these items, therefore, making an immediate purchase for the fear of missing the opportunity later whenever the product is out of stock.
In the aspect of advertising and marketing, the Costco Wholesalers prefers conducting direct mail advertising to maintain low costs. The belief of the management team is that involving elaborate and extensive sales and advertising campaigns may not provide much-needed results. In their case, the aspect of a treasure-hunt idea presents one of the main advertising tools, and at the same time, use of the word-of-mouth is crucial in attracting and maintaining a new client base (Thompson et al., 2018).
The growth strategy of Costco Wholesalers depends on the constant expansion of the company’s influence within and beyond the USA borders. In this case, there has been a beehive of activities that led to the opening of dozen of warehouses since 2005 with approximately over 120 warehouses being opened by the end of 2009. The strategy that they use for capturing new customers entails the concept of money-saving pricing, application of rock-bottom prices for various luxury items as well as ens...