Professional Documents
Culture Documents
BUS-670 M4 Costco Case Analysis
BUS-670 M4 Costco Case Analysis
CK MILLER
M4 CASE STUDY
Costco Wholesale in 2012: Mission, Business Model, and
Strategy
1.
2.
the strategy?
Costcos key strategy elements consist of:
ultra-low prices,
a limited selection of nationally branded and private-label
products,
a treasure hunt shopping environment,
low operating cost emphasis, and
geographic expansion
Due to ultra-low prices, they have been able to lure a larger
population of affluent customers. From 2010 to 2011 net sales
increased by14.0% and membership fee revenue by 10.4% -annual goal was 5% or more. However, when membership
revenue is consistently higher than net income. Therefore,
without the membership revenue, Costco would be operating in
the red. Also, when reviewing ROS from 2000 to 2011, even
though sales have increased, cost have not been contained as
efficiently. This is evidenced by the gradual ROS erosion of 2000
ROS of 1.96% to 2011 ROS of 1.64%. With such a small ROS, any
increase in variable cost could be detrimental.
On the other strategic elements such as geographic expansion,
limited product selection, and providing a treasure hunt
shopping environment, Costco was very successful.
3.
4.
membership fee.
4 3. Take care of our employees. As the most important
asset,
5
employees should be highly valued by providing
them with
6
rewarding challenges and opportunities for personal
and career
7
growth.
8 4. Respect our suppliers. As business partners, honor
9
commitments and approach relationship from a winwin
10
perspective.
11 5. Reward our shareholders.
5.
6.
7.
When comparing Sams Club and Costco, only 2011 U.S. data
was considered as International sales and operating income data
was not included in Exhibit 5 for Sams Club. Costco
outperformed Sams Club in total revenue and sales growth.
However, Sams did a much better job of reducing costs as even
though Sams had meager sales growth, it increased its
operating income 4 times the amount of sales growth. Possibly
this large increase in operating income could be due to the fact
that Sams Club only added 4 warehouses in 2011 as opposed to
Costcos 8 warehouses. This reduced the fixed expenses that
accompany any expansionary effort.
U.S. Sales
U.S. Sales Growth
U.S.Operating Income
# of Addl Stores
Costco
$64,904
8.9%
6.5%
8
Sams Club
$49,459
3.5%
12.9%
4
8.
Costco
BJs
$88,915
$10,877
14.1%
6.8%
17.4%
-7.1%
6
4
10.