ostco launched the warehouse shopping model when it opened its first location in 1976, requiring customers to purchase an annual membership in order to shop at the store.65 The first location was called Price Club and initially sold only to small businesses. More than 40 years later, Costco is one of the nation’s top retailers and the nation’s largest membership warehouse chain. They operate more than 700 warehouses located around the world, with more than 80 million members and over $116 billion in annual revenues. In addition to demonstrating steady growth throughout its history, the company consistently performs better than competitors. For example, Costco’s sales per square foot are nearly 70 percent higher than their closest competitor, Sam’s Club. So how has Costco achieved this level of success? Experts agree that Costco’s simple strategy has allowed the company to persist, even in challenging times. In fact, some say Costco has the best business model in the retail industry. The company’s strategies that differentiate it from its competitors are to treat employees well, limit the number of items it sells, and keep markups low. Costco clearly values its employees. The company pays its employees on average 40 percent higher than competitors and offers health care insurance to all employees who work more than 20 hours per week. The company is also known for promoting from within, with 98 percent of their store managers and many of their company executives having started out as stock clerks or cashiers. These efforts have helped build a loyal and hard-working employee base that actively contributes to building a profitable bottom line. Furthermore, low employee turnover helps save the company in recruiting and training expenses. The company’s average annual turnover rate is about 5 percent, compared to the average turnover rate of about 20 percent in the rest of the retail industry. Costco also has a sales strategy that has contributed to its success. They only sell a limited number of brands and, as a result, they are able to increase sales volume that leads to purchasing discounts. For example, Costco only carries four brands of toothpaste, compared to about 60 brands you’d find on the shelf at Walmart. Thus, the company is able to purchase those four brands in significant volumes, which allows them to negotiate with the product manufacturers for discounts. The company then passes along those savings to their customers through lower prices. Costco prices items at no more than 15 percent above their purchasing price. This markup strategy assures they are offering the lowest price possible, which is what draws customers and creates a loyal customer base. Sticking with these simple strategies has helped Costco build their retail empire. Can the company continue their growth trajectory and maintain their leadership position in the retail industry? There is some speculation that as consumers build confidence in online shopping, Costco and other brick-and-mortar retailers will face declining sales due to the competition. Costco has responded to this threat by expanding the diversity of their inventory, offering deep discounts on high-ticket items such as jewelry, electronics, and even cars. Such tactics help to encourage membership by making the company the go-to location for purchases that consumer prefer to make in person. And while they are there, they can pick up some toothpaste at a pretty good price. DISCUSSION QUESTIONS 1.How is Costco’s business model different from other retailers such as Walmart and Sam’s Club? Why do you think Costco’s strategy works? 2.Beyond lower turnover, how else does Costco benefit from treating its employees well? 3.Are you surprised that Costco sells cars? How does offering diverse products help the company attract new members? 4.Costco now has a comprehensive website and sells online. Is this a threat to Costco’s business model? Is there a downside to selling online?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Costco launched the warehouse shopping model when it opened its first location in 1976, requiring customers to purchase an annual membership in order to shop at the store.65 The first location was called Price Club and initially sold only to small businesses. More than 40 years later, Costco is one of the nation’s top retailers and the nation’s largest membership warehouse chain. They operate more than 700 warehouses located around the world, with more than 80 million members and over $116 billion in annual revenues. In addition to demonstrating steady growth throughout its history, the company consistently performs better than competitors. For example, Costco’s sales per square foot are nearly 70 percent higher than their closest competitor, Sam’s Club. So how has Costco achieved this level of success? Experts agree that Costco’s simple strategy has allowed the company to persist, even in challenging times. In fact, some say Costco has the best business model in the retail industry. The company’s strategies that differentiate it from its competitors are to treat employees well, limit the number of items it sells, and keep markups low. Costco clearly values its employees. The company pays its employees on average 40 percent higher than competitors and offers health care insurance to all employees who work more than 20 hours per week. The company is also known for promoting from within, with 98 percent of their store managers and many of their company executives having started out as stock clerks or cashiers. These efforts have helped build a loyal and hard-working employee base that actively contributes to building a profitable bottom line. Furthermore, low employee turnover helps save the company in recruiting and training expenses. The company’s average annual turnover rate is about 5 percent, compared to the average turnover rate of about 20 percent in the rest of the retail industry. Costco also has a sales strategy that has contributed to its success. They only sell a limited number of brands and, as a result, they are able to increase sales volume that leads to purchasing discounts. For example, Costco only carries four brands of toothpaste, compared to about 60 brands you’d find on the shelf at Walmart. Thus, the company is able to purchase those four brands in significant volumes, which allows them to negotiate with the product manufacturers for discounts. The company then passes along those savings to their customers through lower prices. Costco prices items at no more than 15 percent above their purchasing price. This markup strategy assures they are offering the lowest price possible, which is what draws customers and creates a loyal customer base. Sticking with these simple strategies has helped Costco build their retail empire. Can the company continue their growth trajectory and maintain their leadership position in the retail industry? There is some speculation that as consumers build confidence in online shopping, Costco and other brick-and-mortar retailers will face declining sales due to the competition. Costco has responded to this threat by expanding the diversity of their inventory, offering deep discounts on high-ticket items such as jewelry, electronics, and even cars. Such tactics help to encourage membership by making the company the go-to location for purchases that consumer prefer to make in person. And while they are there, they can pick up some toothpaste at a pretty good price.
DISCUSSION QUESTIONS
1.How is Costco’s business model different from other retailers such as Walmart and Sam’s Club? Why do you think Costco’s strategy works?
2.Beyond lower turnover, how else does Costco benefit from treating its employees well?
3.Are you surprised that Costco sells cars? How does offering diverse products help the company attract new members?
4.Costco now has a comprehensive website and sells online. Is this a threat to Costco’s business model? Is there a downside to selling online?
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