Case Study: Costco Wholesale Corporation

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Costco Wholesale Corporation, which operates as a membership retailer, which specializes in selling quality products at low prices was founded in 1983 by James Senegal and Jeffery Brotman, with both having a background in retailing and established the first warehouse in Seattle, Washington. In 1993, there was a merge between Costco and Price club forming Price Costco causing a double in size in comparison with the parent company, and in 2007 the corporation became the seventh largest global retailer. By the corporation focusing on competitive pricing, a sizable selection of products, and treasure hunt merchandising, they developed a franchise that stood out from other competitors as a remarkable retailer. They have excelled in keeping their …show more content…
Therefore, they are willing to give back to their community and the society in terms of quality goods in lowest possible prices. Not only this but also, Costco encouraged its employees to actively participate in the social welfare program by volunteering in every possible occasion in the locality wherever they are located. In the core of their strategy, Costco sells limited numbers of products in fewer varieties to keep the cost down and they rely on high volume sales. But unlike their competitors they pay well to their employees. One of the key uniqueness and strength is that they sell membership to their customers that not only generate the fixed revenue every year but also increase the brand loyalty and awareness of the customers towards Costco. They advertise very less thereby reducing the cost by two percent each …show more content…
For example, to achieve the price leadership they reduce handling and storage cost, they maintain in-stock positions without being overstocked and transition seasonal merchandise, they utilize just-in-time principles when ordering merchandise to minimize the cost of inventory, keep best value pack product to assure low prices through volume buying, expense reduction and low gross margins etc. in addition to this, Costco doesn’t spend a lot in advertising and use word of mouth advertising for marketing which is not only one of the cheapest way to advertise but it is one of the most effective ways of advertisement. Costco tries to generate huge sales volume and quick inventory turnover by applying a business model that offers limited selections of nationally branded product in a wide range of merchandise categories. Costco applies to number of operating excellence or mechanism such as the efficient way of managing inventory and Just in time inventory, efficient distribution, minimum merchandise handling, and volume purchasing to reduce the price of its product. One of the major benefits of high sales volume and rapid inventory turnover is that they can sell their inventory and receive cash which can be used to pay its vendors and take the advantage of early-payment discounts. And because Costco is able to sell its product before they have to pay their suppliers or manufacturer for

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