COSTCO WHOLESALE CORPORATION PROFILE

Type Traded as Industry Establishment Year Founder Headquarter No. of Locations

Public NASDAQ: COST Retailing (Warehouse club) 1993 James D Sinegal, Jeffrey H. Brotman Issaquah, Washington, U.S.A Total: 592 United States : 425 Canada: 82 Mexico: 32 United Kingdom: 22 Japan: 9 Taiwan: 8 Korea: 7 Puerto Rico: 4 Australia: 3

Product

Merchandise Private Brands

Revenue Operating Income Net income Employees Website

$88.915 billion (2011) $2.383 billion (2011) $1.462 billion (2011) 147000 Costco.com

The mission statement of the Costco is well understood throughout the organization by the management and employees.Mission “To continually provide its members with quality goods and services at the lowest possible prices”. at the best price Treat people right.” – Jim Sinegal. Founder of Costco • “We're going to be a company that’s on a first-name basis with everyone.” Strategic Vision • • Give customers the best value. and with respect Objectives Employment Objectives: • • • • Hire great people Treat them well Give them good jobs Do right by them Management Objectives: • • Always promote from within Training happens constantly . but to do it with integrity at every level of the company while valuing the interests of the stakeholders. Costco’s mission statement is to focus on bringing high quality goods and services to the market at the lowest possible prices every day. Vision • “Our business is to give the customer the best value we can.

• • Grow our own talent Model what you want from your employees Business Objectives: • • • • Don’t try to be too much to too many Know on what level you compete Know your customers Stay focused on your core business Growth Objectives: • • • • Run the business for long-term sustainability Open new stores 50-60 new locations per year Keep Internet sales growing Ethics Objectives: • • • • Obey the law Treat customers right Treat employees right Treat suppliers right Business Model: .

The Costco’s business model is to generate high sales volume and rapid inventory turnover by offering low prices on limited selection of national branded and select private-label products in wide range of merchandise categories. Costco strategy to increase sales and profits largely depends on some of the key strategic components such as increase the number of new warehouse. Costco frequently used business and household merchandise at money-saving prices.Business Model is used to exemplify the methods and ways which we used to generate planned revenue. build larger and loyal customers base and finally implement such a merchandising technique to motivate and attract members to shop at Costco more often and induce volume purchase per shopping trip. Strategy: Strategy is the organization’s pre selected means or approach to gaining its goals or objectives. And finally they try to encourage their members to regularly visit Costco so as to not miss out on the those special best value products offering selections that would otherwise will sold out in a matter of days. Costco provides opportunities to purchase ever changing array of big merchandise at lowest possible prices. By limited product lines and limited selection they are offering limited 4000 items which are less as compared to its competitors. This works as an incentive and members try to take maximum advantage and therefore Costco’s sales volume increases. Costco’s strategy’s elements are:     Low prices increase sales and profits Limited product lines and selection Treasure hunt shopping environment By keeping low prices Costco’s is following cost leadership strategy which is good because on this base they can compete with their competitors. By treasure hunt shopping environment they provides such product at low prices to its members which they believe will not be available in next visit. To achieve these strategic objectives. Costco’s offers these products to their members who are of two types’ business members and gold star members. Beside this. while keeping in view current and future external conditions. Costco’s is adopted market development strategy by capturing new markets for existing products. At Costco’s warehouse products are not offered in .

Their membership base is growing and they are able to retain their customers. Virtually. 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. The strategy they followed is that by offering every size their efficiency will decrease therefore it is said intelligent loss of sales. they maintain in-stock positions without being overstocked and transition seasonal merchandise. they have thousand packet box of Splenda (sugar free sweetener). expense reduction and low gross margins etc. They generally engage in bigger packages because they believe that bigger package provides better value and cost savings to their customers. Most importantly they have very incredible return policies in hand to attract and retain customers. Costco doesn’t spent 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. Furthermore. Costco applies several other strategies to achieve corporate wide price leadership strategies. For example. Costco sells limited numbers of products in fewer varieties to keep the cost down and they rely on high volume sales.every size. They have unique way or mechanism that helps them keep the price lower than that of competitors and they can still afford to pay 48 percent higher salaries to their employees than their major competitors mainly WalMart. high sales volume per warehouse. they do everything to retain their customers. They advertise very less thereby reducing the cost by two percent each year. to achieve the price leadership they reduce handling and storage cost. For example. Costco offers their customers with low prices on selected private and a limited selection of nationally branded products in a wide range of merchandise categories. But unlike their competitors they pay well to their employees. Rapid inventory turnover. Businesses and families can rely on Costco to offer high quality goods and services at everyday low prices. keep best value pack product to assure low prices through volume buying. In the core of their strategy. they utilize just-in-time principles when ordering merchandise to minimize the cost of inventory. One of the crucial factors of Costco is their pricing strategy. in addition to this. leveraging an efficient operating . they try to find the best value pack for almost every product they sell in their location (store).

reduced handling of merchandise. inventory. they are willing to give back to their community and the society in terms of quality . and finally they reward their shareholders. motivated and satisfied workforce with the mission “to continually provide its members the best quality products at the lowest possible prices”. they respect their suppliers. And they successfully operate themselves in the competitive environment serving not only individual customers but also a legal customers. sales people. Therefore. Costco believe that society and the community is one of the key factors of their success. Some of the reasons how Costco can serve those highest quality goods of national brands for the lowest possible prices is that they eliminate different cost associated with delivery expenditures. they take care of their members. and fancy buildings. Costco’s strategic mission. they take care of their employees. and marketing which make it stand out from the rest of the retailers who are also said to be competitive in the retailing and wholesaling business globally. and making themselves the low cost operator in retail are all key elements that make the company so successful. vision and objective analysis Costco Wholesale Corporation (Costco). account receivable. Costco is one of the innovative wholesalers teamed by very dynamic management team and dedicated.structure. Some of the fundamental principle of the Costco is that they obey the law. one among the few largest wholesaler giant differentiates itself applying unique strategies relating to production and operations. and small business customers.

It is a situational analysis in which internal strength and weaknesses of an organization. weaknesses.goods in lowest possible prices. Analysis of Costco’s Wholesale is as follows: Strengths:        Largest market share Lowest prices Low overhead expenses Strong reputation of providing greater value Satisfied and talented human resource Loyal and affluent customer base High inventory turnover Weaknesses:  Comparatively less attractive store layout for luxury items. and external opportunities and threats faced by it are analyzed to devise a strategy. opportunities and challenges. Not only this but also. Costco encouraged its employees to actively participate in the social welfare program by volunteering in every possible occasions in the locality wherever they are located. . SWOC Analysis: SWOC stands for strength.

High competition from Sams’s Club and BJ. Positive image in terms of employees pay and social responsibility. Low geographical diversification. Increasing brand awareness.      Weak advertisement base leading to the inability of reaching full range of membership base. Advantage of economic downturn. . Opportunities:        Operation is mainly targeted in countries which have high GDP and high disposable income with low inflation rate. Low geographical expansion. Challenges:     Cannot attract people who are below poverty line due to it’s membership fees and bulk purchase. Rapid growth in membership. Serve the democratic countries with political and governmental stability. No self checkout. Primary focus on business customer than individual customer. Highly dependent on U.A and Canadian market. Possibility of international expansion. Declining or inconsistent profit margin.S. Locations are not that much attractive.

High market expectation in terms of price quality and financial performance. .  Largely dependent on vendors for timely supply of quality merchandise at reasonable price.

712 2.915 --------------------76.125 88.588 $ 23. August 28.840 2.682 24.867 $ 27.048 --------------------2010 2011 August 29. August 29.691 --------------------Total revenue 77.680 21.592 $ 87. except per share data) (unaudited) 16 Weeks Ended Ended ---------------------------------August 28. 2011 2010 --------------------REVENUE Net sales $ 1.255 Membership fees 590 533 1.COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (dollars in millions.178 24. general and administrative 7.024 77.995 Selling. ------------52 Weeks .946 OPERATING EXPENSES Merchandise costs 67.739 28.401 8.

542 --------------------272 247 841 772 684 2.Preopening expenses 26 Provision for impaired assets and closing costs.323 Net income attributable to noncontrolling 500 437 1. net.077 OTHER INCOME (EXPENSE) Interest expense (111) Interest income and other.439 ----------Operating income 2. 8 22 9 46 2 ----------- 3 ----------688 9 ----------2.383 --------------------46 30 60 (36) (34) (116) 762 . net 88 --------------------INCOME BEFORE INCOME TAXES 2.054 Provision for income taxes 731 --------------------Net income including noncontrolling interests 1.

99 $ 3.289 443.518 444.30 =========== =========== $ 1.094 436.770 $ 0.interests (20) (22) ----------- (5) ----------- (80) ----------- ----------NET INCOME ATTRIBUTABLE TO COSTCO $ 1.119 =========== =========== $ 1.596 437.08 $ 0.240 $ 0.970 Dividends per share $ 0.09 $ 0.92 =========== =========== Shares used in calculation (000's) Basic 438.97 =========== =========== Diluted $ 2.35 =========== =========== $ 478 $ 432 $ 1.205 $ 0.97 $ 3.611 Diluted 445.303 =========== =========== NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO: Basic $ 2.890 443.071 436.462 .

2011 2010 ----------------------ASSETS Cash and cash equivalents $ 1.638 Deferred income taxes and other current assets 437 ----------------------Total current assets 11. net 884 Merchandise inventories 5.708 Property and equipment.604 Short-term investments $ 4.314 Other assets 793 623 12. August 29.535 Receivables.214 1.COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in millions) (unaudited) Subject to Reclassifications August 28.009 .432 13.706 490 6. net 11.638 965 3.

885 ----------------------14.761 .063 Long-term debt.188 885 1.----------------------TOTAL ASSETS $ 23.050 4.947 Other current liabilities 4.253 12.090 ----------------------Total current liabilities 10. excluding current portion 2.606 26 6.815 ============ ============ LIABILITIES AND EQUITY Short-term borrowings and current portion of longterm debt $ 5.141 Deferred income taxes and other liabilities 681 ----------------------Total liabilities 12.544 Accounts payable $ 900 $ 26.

573 .829 Noncontrolling interests 101 12.002 571 ------------ -----------Total equity 10.761 12.Total Costco stockholders' equity 10.930 ----------------------TOTAL LIABILITIES AND EQUITY $ 23.815 ============ ============ $ 26.

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