MBA555-Advanced-Strategy-Case-Kaung Khant Kyaw

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1 Running head: Advanced Strategy Case: Costco Wholesale Corporation Advanced Strategy Case: Costco Wholesale Corporation. Kaung Khant Kyaw MBA 555 Business Strategy June 12, 2018 Larry Frazier City University of Seattle

2 Advanced Strategy Case: Costco Wholesale Corporation Abstract The paper mainly describes Costco Wholesale Corporation strategy. The author will mention the industry of the company, Costco Wholesale Corporation’s profile and about its products. In addition, the author will provide the company business strategy and recommendations for the company.

3 Advanced Strategy Case: Costco Wholesale Corporation Introduction Costco Wholesale is an international warehouse club store founded in 1983. Costco Wholesale operates primarily within the United States and Puerto Rico. Costco employs 185,207 people worldwide. Costco currently has 1.76% total market share domestically, and 0.29% overall market share internationally. The company operates in a highly competitive industry where Wal-Mart, Target and Whole Foods Market are also the market leaders in these categories. To get the high market position in the industry, the Costco must continually implement strategies to improve itself in the consumers' eye and increase market share. By using some strategies that will stimulate growth and help Costco acquire a competitive advantage would be to seek top-level executives from competitors to boost new ideas, reform the financial structure and long-term debt with competitive finance offers, provide excellent services for card members, expand into growing foreign markets. Company profile Costco Wholesale Corporation is founded in 1983 that operates an international chain of membership warehouses. It offers a limited selection of nationally branded and private-label products across a wide range of merchandise categories, including foods, sundries, fresh foods, gas stations and pharmacy at lower prices. The company is headquartered in Issaquah, Washington. Today, the Costco's warehouse store is one of the largest retailers in the world with 663 stores across the globe like Canada, the United Kingdom, Taiwan, Korea, Japan, Australia, and Mexico. The Costco Corporation reported revenues of (US Dollars) US$118,719 million for the fiscal year ended August 2016 (FY2016), an increase of 2.2% over FY2015. In FY2016, the

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4 Advanced Strategy Case: Costco Wholesale Corporation company's operating margin was 3.1%, compared to an operating margin of 3.1% in FY2015. In FY2016, it recorded a net margin of 2%, compared to a net margin of 2% in FY2015 (Costco Wholesale Corporation SWOT, 2017). Also, the company offers an attractive value proposition to its customers, which enables it to drive customer traffic and generate strong membership renewals. Business strategy Plan Price per year Business membership $60 Gold star membership $60 Business executive membership $120 (Source: www.Costco.com) Costco has developed three levels of membership plans. The first level of membership is labeled at the business level. This level is for people who operate a business. They pay an annual to shop for items for resale, business items, or for personal use. The next level of membership is labeled as the gold star membership level. Gold star membership is designed for the individual shopper. This level grants customers access to Costco warehouses. The last level of membership is labeled as the executive membership level. The last executive level of Members can receive a 2% annual reward on most of their warehouse purchases. This member pays double the amount for this membership as compared to the business and gold level memberships. At the end of 2016, the Costco had 86,700 members in the membership plans (MarketLine, 2017). People know that the warehouse store has consistently lower prices when compared to traditional grocery stores. While other stores may have occasionally lower prices on their loss

5 Advanced Strategy Case: Costco Wholesale Corporation leaders, Costco has permanently limited its profit margins to ensure that members can justify paying for membership fees. Based on the research, 91% renewal rates in American and Canada and 87% renewal rates internationally as Costco' members for each year, it's clear that customers consider the price-cutting service well worth the membership cost (MarketLine, 2017). The company provides lower price products by private label brands like Kirkland. It helps to give for piece sensitive customers to get volumes at low prices. Also, Costco makes the shopping experience strategy by offering free samples in its stores more appealing and its customers more loyal. While some customers may claim to visit the store only for its samples, once they are in the store, they're more likely to buy Costco’s products (Mary, 2018). In addition, Costco participates in not only the retail business, but also the manufacturing business. It operates within specialty in food packaging, optical laboratories, meat processing, and jewelry distribution. These all businesses have a common goal of providing its loyal members with high-quality products at substantially lower prices. In addition, the online businesses' demands are increasing in the world. Costco operates its online business through its websites, www.costco.com, www.costco.ca, www.costco.com.mx, www.costco.co.uk, www.costco.co.kr and www.costco.com.tw. Therefore, Costco can leverage its online presence to serve a large customer base, which, in turn, will augment its revenue. Recommendation and Conclusion To remain competitive as a globally expanding business, Costco should ensure future strength in financials, technology implementation, and marketing like by integrating latest technology to improve business functions and retail/online experience, by expanding marketing efforts to continue to get high-end consumer and small businesses.

6 Advanced Strategy Case: Costco Wholesale Corporation Based upon the analysis of Costco Wholesale Corporation, it should expand its sales of its private label brand, Kirkland Signature to its international market and provide additional services based on its customer experience, more focus on its financial situation for future expansions and investments, focus on its overall brand awareness and marketing prowess against competitor Wal-Mart.

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7 Advanced Strategy Case: Costco Wholesale Corporation References Costco Wholesale Corporation SWOT Analysis. (2017). Costco Wholesale Corporation SWOT Analysis, 1-8. Retrieved From http://web.aebscohost.com.proxy.cityu.edu/ehost/pdfviewer?vid=3&sid=93f30780_6817- 4f4e-b25f-c7595ef17884% MarketLine. (2017). Company Profile: Costco Wholesale Corporation . Retrieved From http://web.a.ebscohost.com.proxy.cityu.edu/ehost/pdfviewer/pdfviewer? vid=7&sid=ed1a03b8-72d2-41bd-b772-8dc7f7054843%40sessionmgr4010 Mary. H. (2018). People are obsessed with Costco’s free samples. Retrieved from http://www.businessinsider.com/costco-free-samples-strategy-2018-3 Vanessa .P. (2018). Costco’s Business Model Is Smarter Than You Think. Retrieved From https://www.investopedia.com/articles/investing/070715/costcos- business-model-smarter-you-think.asp

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