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BJ’s Wholesale Team C: Belinda Rose, Chaddrick Nevills, Keith Blum, Keith Wiltfong, and Vanessa Hill Florida Institute of Technology
Executive Summary (Belinda)
Executive summary outlining your strategic analysis and recommendations. (Guidelines for writing an executive summary can be found at: http://www.fsb.muohio.edu/fsb/content/programs/howe-writing-initiative/studentresources/Writing%20an%20Executive%20Summary.doc)
Synopsis (Chad Nevills)
Synopsis of the major case facts, key problems, and strategic issues that management needs to address
Three principal competitors: Costco Wholesale, Sam’s Club, and BJ’s Wholesale Club were a part of the nearly $125 billion discount warehouse and wholesale club segment in 2010. These companies drew consumers away from other wholesale markets because they provided lower prices and had lower operating and other costs than most retailers due to the fact that they purchased full truckloads of merchandise directly from manufacturers and displayed the merchandise on inexpensive shelving while always keeping extra inventory. Costco’s markups and prices were so fractionally above the level needed to cover operating costs and interest expenses that analysts criticized management for going all out just to gain customers at the expense of charging prices that would increase profits for shareholders and maintain loyal clientele. Costco’s strategy of not focusing much on marketing and advertising but relying on “word of mouth” strategy I believe needs to be addressed. Management believes that its emphasis on direct mail advertising kept its marketing expenses low relative to those at typical retailers, discounters, and supermarkets. Perhaps the use of social media networks such as facebook & twitter
the nearly $125 billion discount warehouse and wholesale club industry consisted of three principal competitors: Costco. the services that they DID have were provided by outside operators in space leased from BJ’s. Gasoline sales seems to have dropped over the past year. The company’s decision to abandon prescription filling at their 46 in-club pharmacies should be reconsidered possibly to add more of a customer base. Strategic Analysis (Keith Blum) Strategic analysis of those key issues utilizing tools and techniques presented in the text (using tables and charts if appropriate): o What is competition like in the North American wholesale club industry? In 2010. The company does not seem to have any type of strategy to keep their customers coming back.could help the company gain more customers and maybe even implementing some sort of program that educates younger consumers the benefits of buying in bulk. and 3. 3.6.7. 3. Each location should be within a 10 mile radius of the Sam’s and Costco’s.8 (and the related chapter discussions on p.4. BJ Wholesale needs to address the fact that it does not expand across the entire United States. An issue with Sam’s Clubs is that is that it operates too much like its Wal-Mart counterpart. 3. Their operations cost for overhead items is high as compared to other warehouses wholesale clubs. so having too many items on overhead is dangerous for and makes it more difficult to increase profit.5. I’d recommend management be sure that since there were a few more warehouses built and or remodeled that they be sure to also sell gas at these newer locations. 57-70) to do a complete five-forces analysis of competition in the North American wholesale club industry. The five competitive forces are: Threat of New Entry Initiate brand identity Extreme pricing in the industry Economies of scales . Sam’s and BJ’s. o Which of the five competitive forces is strongest and why? Use the information in Figures 3. Having overhead costs is unnecessary for any company in the business because it is never a guarantee that all the items in the overhead will be sold at the expected price.
and BJ’s Wholesale—have highly similar strategies? No. 1. What differences in their strategies are apparent? . Distribution channels limited access Threat of Substitute Too many substitutes Recognises that every customer has a choice when they buy Competitive Rivalry Switching costs are low Several sellers are in the market Fixed cost allocation per value added Exit barriers Rate of industry growth Supplier Power High cost of changing suppliers Many suppliers Similar products Able to substitute Buyer Power Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Of the five competitive forces. the Competitive Rivalry seems to be the strongest because competitors can carelessly compete away any profits and perhaps even create price wars that cause long term damage to industry profitability. 2. Do all three warehouse club rivals—Costco. all three warehouse club rivals do not have highly similar strategies. Sam’s.
Does one rival have a somewhat weaker strategy than the other two? Yes. because judging from the year by year displayed in the exhibit. Use the financial ratios presented in Table 4. Costco uses the low margin business to boost business at their warehouse. They’re also not benefiting from the economies of scales. 6. BJ’s does not have a good base number of customers mostly because they’re mainly located in the Eastern United States. Costco also benefits from the cost efficient distribution through the use of the cross dock distribution. The customer typically shops at Costco in hopes of getting the best value for their money. and 7. 4.. Does the data in case Exhibit 5 indicate that Costco’s expansion outside North America (the U. because their margins are very thin. It appears that Costco has been the strongest financial performer with its favorable Asset Turnover and CAGR Total Assets. Does one rival have a better strategy than the others? At this point. and Canada) is financially successful? Why or why not? Yes. 7.1 of Chapter 4 to help you with the needed number crunching. 3. Five years from now. total revenue has consistently risen from 2005 to 2009.Costco is provides the customer with items in bulk packaging at very low prices.S. I believe that Costco has a better strategy than the others. Which of the three warehouse club rivals has been the strongest financial performer in recent years? Support your answer with calculations based on the data in case Exhibits 2. 6. is Costco’s standing as the industry leader likely to be stronger or weaker? Are the other two rivals likely to gain or lose ground on Costco? Why or why not? . Compound Annual Growth Rate has a rate of about 10. BJ’s is focusing on retail shoppers offering more grocery items and smaller quantities of packaged goods to get the customer to come back more frequently. 5. which also allows the company to streamline distribution and marketing.22% for the total revenue. Sam’s strategy involved decreasing product costs by buying from low cost labor countries.
What recommendations would you make to Jim Sinegal regarding the actions that Costco management needs to take to sustain the company’s growth and improve its financial performance? o Perhaps consider merging with either Sam’s Club or BJ’s in order to eliminate some of the competition o Start using advertisement and marketing techniques to gain more consumers. Of course the other two rivals could gain some ground. Conclusion and Recommendations (Keith Wiltfong) Conclusion/Recommendations section which focuses on your well-supported action plan to address the strategic issues of the case . perhaps if BJ’s opens its business up to a more broader spectrum of consumers in the rest of the North America then they very well could challenge the likes of Costco. What actions do you think management at BJ’s Wholesale should take to boost revenue growth and overall financial performance? o o o Definately consider expanding service across North America. 9. Venues such as social media networks can also be used to gain the attention of younger consumers. o Be more innovative o Find methods to get customers to shop at your store more often 10.I think five years from now. What actions do you think management at Sam’s Club should take to boost revenue growth and overall financial performance? o Consider the sell of gas at each and every Same Club warehouse o Use more American made vendors instead of leaning heavily on low cost labor countries. Sam’s Club on the other hand has more operating stores but the financials of Costco still is enough to overcome the and I believe is Costco's stiffest competition. Costco will still be standing as the industry leader so it’ll definitely be stronger. 8. o Develop some type of marketing plan targeted towards younger consumers educating them on buying bulk and spending less money. Costco could even possibly merge with one of the two in order to eliminate competition . Use social media websites to advertise focusing on the younger consumers. not just the eastern half Move stores closer tot he competition (each store should be within a 10 mile radius of Costco and Sam’s Club Warehouses). Costco’s strategy of giving the consumer the best bang for their buck is not as risky as the other two rivals strategies.