Welcome To Our

Presentation
Group: B
Name ID
Sobrata Halder ### 05-005
Abu Syed ### 05-006
Priyanka Tarafdar Bristi ### 05-007
Rifat Tanmoy ### 05-008
Topics Covered
Serial No. Topic
01 Oraganizations Basic Information
02 Vision
03 Mission
04 Abells Model
05 Strategies
06 Warehouse Operations
07 SWOT Analysis
07 Compensation Policy
08 Workforce Practices
09 Business Philoshopy, Ethics & Code of Ethics
10 Competition
Organizations Basic
Information
Costco Wholesale Corporation is a membership-
only warehouse club that provides a wide selection
of merchandise.
Founded:September 15, 1983, Seattle, Washington,
United States
Founders: Jeffrey H Brotman, James Sinegal
Organizations Basic
Information Continued.
Headquarters: Issaquah, WA
Main Feature: Membership
Based Wholesale Business
Organizations Basic
Information Continued.
As of 2008, It had 544 warehouses in 40 countries
& its sales totaled $71 billion.
As of 2008, about 53.5 million individuals, 29.2
million house-holds, 5.6 million business had
membership card.
Vision
Vision
Our business is to give the
customer the best value we can.
Jim Sinegal, Founder of Costco
Were going to be a company
thats on a first-name basis with
everyone.
Business Model
Membership Fees
Purchases By Members
Revenue Generation
Low Prices
Limited Selection Of Quality Mercahandise
Wide Range Of Merchandise Categories
Rapid Inventory Turnover
Volume Purchasing
Efficient Distribution
Reduced Handling Of Merchandise
No-frills, Self-service Warehouse
Operating Efficiencies
Operating Efficiencies
Rapid Inventory Turnover
Rapid Inventory Turnover
Profit & Value Generation At a Very Low Gross Margin
Mission
Costcos mission statement is
To continually provide our members with quality
goods and services at the lowest possible prices.
Boundary
Boundary
Present Offerings, Types of Customers Served, Geographic Coverage
Mission - Application Of
Abells Model
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Who?
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Costco targets independent small business
owners and large rich families
Customers are both national and
international
Target customers are mostly Asian &
Hispanic.
Typically customer visits 8-11 times per
year
What?
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Moderate & High Quality Products
Relatively Low Prices
Product Variety
Efficiency
Convenience
Trust & Loyalty
Good Service Level
How? - Strategy
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
The cornerstones of Costcos strategy
are low prices, a limited product line and
limited selection, and a treasure hunt
shopping environment.
Strategy? - Membership
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Executive Member - $ 110
Gold Star Member - $55
Business Member - $55
Membership -
fee is refuandable at any time
helps to maintain a pool of consistent customers
enables to maintain low margins
Strategy? - Pricing
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Sells top quality national & regional brand
products at prices consistently below
traditional wholesale or retail outlets.
Keeps member coming into shop by
wowing them with low prices .
Stocks items that help members save costs.
Strategy? Pricing
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Maintains an average margin of 14% where
competitors charge 20 to 50%.
Uses low pricing as the core competency.
Tries to lower price from $9 to $8 where
competitors try to increase the price from $9 to
$11.
Wall Street analysis has criticized Costcos
pricing strategy that they are satisfying
customers at the expense of shareholders.
Strategy?
Product Selection
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Provide members with a selection of only 4000
items.
About one-fourth of Costcos line of 4000
proucts constantly changes.
Uses treasure hunt technique- buy now or it
wont be available here next time.
Sources high price & quality products from other
wholesellers or distressed retailers looking to get
rid of excess or slow-moving inventory.
Strategy? Product
Selection Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Costcos Offerings
Appliances
Baby, Kids & Toys
Clothing & Accessories
Computers & Printers
Electronics
Food & Gift Baskets
Funeral
Furniture
Gift Cards, Tickets &
Floral
Hardware, Auto &Tires
Health & Beauty
Jewelry & Watches
Office Products
Patio, Lawn & Garden
Sports & Fitness
Travel & Luggage
Home & Dcor
Strategy? Marketing
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Low prices, membership and treasure
hunt strategies makes it unnecessary to
engage in extensive advertising or sale
campaigns.
Strategy? Marketing
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Word of mouth- existing members tell friends &
acquaintances about their shopping experience at Costco
Hey Sam, do you know
Costco Wholesale is selling
various brand HDTVs at
30%discount??
Really so? Are those original?
Of course.
Then I will buy one.
Okay. But you
will have to be a
member if you
want to buy.
No problem, Ill be.
Strategy? Marketing
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Promotes selected merchandises to
existing members using direct mail
program (The Crostco Connection- a
multipage mailout containing selected
merchandise saving coupons).
Strategy? Growth
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Costcos strategy to grow sales & profits has three main
elements:
Open more new warehouses.
Build an ever larger & fiercely loyal membership
base.
Employ well-executed merchandising technique to
increase purchases by members.
Expansion is both national & international.
Strategy? Growth
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Financial Growth
Strategy? Growth
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Membership Growth
Strategy? Growth
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Warehouse Growth
Online Sales
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Web Sites:
www.costco.com (for US)
www.costco.ca (for Canada)
Warehouse Operations
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Warehouses are operated on a 7-day, 69-hour
week.
Warehouse managers are delegated authority
over store opeartions
Uses cross-docking in inventory movement
Arrived merchandise are directly moved onto
the sales floor from warehouses
Warehouse Operations
Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
For transactions, Costco
accepts cash, most debit
cards, American Express, and
a private-lebel Costco credit
card.
Accepts merchandise returns.
SWOT Analysis
Lowprice
Strong brand
Excellent merchandise
Exceptional employees
54 million members
Economies of scale
Efficiency
Lowprice
Strong brand
Excellent merchandise
Exceptional employees
54 million members
Economies of scale
Efficiency
S
Strentghs
SWOT Analysis Continued
Weaknesses
Burden of high wages paid to workers
Low price margins
E-commerce activities
Small Marketing budget compared to
discount retailers and Super Markets
Weaknesses
Burden of high wages paid to workers
Low price margins
E-commerce activities
Small Marketing budget compared to
discount retailers and Super Markets
w
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
SWOT Analysis Continued
Opportunities
Expand into more foreign stable markets
Mergers & Acquisitions
Massive supplier pool
Opportunities
Expand into more foreign stable markets
Mergers & Acquisitions
Massive supplier pool
Barriers
Opportunity
New Markets
New Suppliers
Mergers &
Acquisitions
SWOT Analysis Continued
Threats
Aggressive price competition by rivals
Political complications in foreign markets
Cannibalization
Threats
Aggressive price competition by rivals
Political complications in foreign markets
Cannibalization
Compensation
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
In September 2008, Costco had 70000 full time
employees and 57000 part time employees worldwide.
Costcos compensation package includes:
Basic pay
Bonus
Other benefits
Executive compensation
Workforce Practices
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
The top management always tries to have a satisfied
good workforce.
It was company policy to fill at least 86% of higher
level openings by promotion from within actually thr
percentage ran close to 98%.(2008)
They also make a point of recruiting at local
university.
Only the skilled people move up to the higher
positions.
Business Philosophy,
Values & Code of Ethics
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Jim Sinegal had ingrained five simple and realistic
business principles into Costcos corporate culture and
operation manner. The following are excerpts of these
principles and operating approaches:
Obey The Law
Take Care Of Our Members
Take Care Of Our Employees
Respect Our Suppliers
Reward Our Shareholders
Business Philosophy, Values &
Code of Ethics Continued
Revenue Generation
Obey The Law
*Comply with all laws and other legal
requirements.
* Respect all public officials and their
positions.
* Comply with safety and security
standards.
* Exceed ecological standards required in
every community.
* Comply with all applicable wage and
hour laws.
*Comply with all laws and other legal
requirements.
* Respect all public officials and their
positions.
* Comply with safety and security
standards.
* Exceed ecological standards required in
every community.
* Comply with all applicable wage and
hour laws.
* Conduct business in legal and
proper manner in and with foreign
countries.
* Not offer, give, ask for or
receive any form of bribe or
kickback.
* Promote fair, accurate, timely
and understandable disclosure in
reports filed.
* Conduct business in legal and
proper manner in and with foreign
countries.
* Not offer, give, ask for or
receive any form of bribe or
kickback.
* Promote fair, accurate, timely
and understandable disclosure in
reports filed.
Business Philosophy, Values &
Code of Ethics Continued
Revenue Generation
Take Care Of Our Members
* Provide top-quality product at
best prices.
* Provide high quality, safe and
wholesome food products.
* Provide their members with a
100% satisfaction guaranteed
warranty on every product and
service.
* Assure to sell authentic product
which represents the performance.
* Provide top-quality product at
best prices.
* Provide high quality, safe and
wholesome food products.
* Provide their members with a
100% satisfaction guaranteed
warranty on every product and
service.
* Assure to sell authentic product
which represents the performance.
* Make their shopping
environment a pleasant
experience.
* Provide product that will be
ecologically sensitive.
* Provide best customer service.
* Give back to their communities
through employee volunteerism
and employee Contribution.
* Make their shopping
environment a pleasant
experience.
* Provide product that will be
ecologically sensitive.
* Provide best customer service.
* Give back to their communities
through employee volunteerism
and employee Contribution.
Business Philosophy, Values &
Code of Ethics Continued
Revenue Generation
Take Care Of Our Employees
* Competitive wages.
* Great benefits.
* Safe and healthy work environment.
* Challenging and fun work.
* Career opportunities.
* Harassment or discrimination free
atmosphere.
* An open door policy to resolve issues.
* Opportunities to give back to their
communities through volunteerism and fund
raising.
* Competitive wages.
* Great benefits.
* Safe and healthy work environment.
* Challenging and fun work.
* Career opportunities.
* Harassment or discrimination free
atmosphere.
* An open door policy to resolve issues.
* Opportunities to give back to their
communities through volunteerism and fund
raising.
Business Philosophy, Values &
Code of Ethics Continued
Revenue Generation
Respect Our Suppliers
* Treat all supplier as they would
expect to be treated.
* Honor all commitments.
* Protect all supplier assigned property.
* Not accept any kind of gratuities from
a supplier.
* Avoid actual or apparent conflicts of
interest.
* Treat all supplier as they would
expect to be treated.
* Honor all commitments.
* Protect all supplier assigned property.
* Not accept any kind of gratuities from
a supplier.
* Avoid actual or apparent conflicts of
interest.
Business Philosophy, Values &
Code of Ethics Continued
Revenue Generation
Reward Our Shareholders
Costco believes that their shareholders are their
business partners. They can only be successful
so long as they are providing them a good return
of their investment. They pledge to operate their
company in such a way that their present and
future stockholders, as well as their employees
will be rewarded for their efforts.
Costco believes that their shareholders are their
business partners. They can only be successful
so long as they are providing them a good return
of their investment. They pledge to operate their
company in such a way that their present and
future stockholders, as well as their employees
will be rewarded for their efforts.
Competition
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Costco's main competitor is Wal-Mart's Sam's Club.
BJs, a smaller retail warehouse chain, also competes
with Costco and Sam's Club.
The three companies share a similar business model,
selling high volumes of merchandise at low prices in a
membership-only warehouse club.
Each company sells a similar array of general
merchandise, including food, apparel, and gasoline.
Competition Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Competition Continued
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Sam's Club operates 591 warehouse clubs nationwide
and earned $44.4 billion in revenue in 2007.
BJ's operates 177 warehouse clubs across 16 states in
the eastern U.S. In 2007, the company earned $9.0
billion in revenue.
Market Positions of Rivals
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
O
p
e
r
a
t
i
n
g

M
a
r
g
i
n
Number of Locations
Higher
Lower
Few Many
BJs
P
Costco
Sams
Club
Pricesmart Inc.
Note: Circles are drawn roughly proportional to the sizes of the club chains based on revenue
Ask Your Queries
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin
Revenue Generation
Profit & Value Generation At a Very Low Gross Margin