Costco: Internal/External Analysis Essay

From a financial perspective, Costco’s income statement shows it has increased its total revenue from its domestic and foreign stores every year. Operating income, total and net assets, and number of warehouses have increased steadily each year. However, long-term debt has sharply increased after 2006 and stockholder’s equity has been inconsistent for the past few years. Newer warehouses are being built to its maximum size and top volume warehouses would exceed $5 million in sales per week.

Costco Wholesale Corporation operates an international chain of membership warehouses, which carries quality, brand name

When it comes to outbound logistics Costco's task is delivery, invoicing, handling finished goods and orders. The way Costco handles all theses various tasks is mostly through assorted distribution and transporting methods. Costco can accomplish their outbound logistics by having a well thought out inventory method. This inventory method lets Costco markets hold up to two full weeks of supplies. Usually the supplies are

J.C. Penney is a retail outlet that operates in many locations globally. It deals with product lines such as clothing, footwear, beauty products, electronics, and jewelry. There are several changes that have taken place in the macro environment that promises to increase the fortunes of the company. The advertisement in technology is one single important factor that has increased the performance of the business (Ali, 2007). The company has an elaborate website through which it uses to tap the online market. In fact, thirty percent of the company’s revenue comes from the website.

Costco’s infrastructure skills and capabilities support operations for achieving low cost global leadership in warehouse retail sales and better than industry average. Costco’s culture strives to provide a limited variety of quality merchandise goods from private label and some well established brands.

Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve a niche consumers at a lower price. (Gamble, John and Thompson, Arthur (2009)

Moving onto the income statement portion of the common-size financial statements, an increase in cash and equivalents (3.20% of total assets in 1997 to 5.97% in 2001) and receivables (2.69% of total assets in 1997 to 3.22% in 2001) coupled with a decrease in inventory signify Costco’s improving efficiency over this five year period. It is important to mention two points. First, the decrease in inventory as a percentage of total assets from 30.8% in 1997 to 27.14% in 2001 signifies an increase in the turnover rate, perhaps due to

The US warehouse club and superstore industry includes about 20 companies; however the major competitors that Costco faces are Sam 's Club (owned by Wal-Mart), BJ’s Wholesale Club, and Meijer. The club superstore industry is so competitive that these four companies alone hold over 90 percent of sales. These superstores are able to offer competitive pricing because as large companies they can offer a wide selection of products and have purchasing, distribution, marketing, and financing advantages. Due to low margins, the profitability of these individual superstore companies depends on high volume sales and efficient operations. This is where Costco has been able to succeed and set itself aside from the competitors.

Costco Sale is one of the big box retail companies with the capabilities to render value to the customers and employees in North America and the rest of the world. Costco Wholesale has the potential of solid balance sheet, and with the strength of generating cash flow, in order to carry out its operations, i.e. over $900 million was returned to shareholders in the form of

Costco is among the leading global retailers which provide customers a wide range of merchandise, ranging from small to well-known brands. The company began operations in 1983. Over the years, Costco has been a retailer in low cost membership-only leader, in warehouse club of merchandise. Moreover, Costco does not offer frills warehouse business models as its competitors do.  Costco’s major competitors are BJ’s Wholesale Club and Sam Club (Costco, 2010).

According to Deloitte’s 2014 Global Powers of Retailing Report, it identifies the 250 largest retailers around the world based on publicly available data for fiscal 2012 encompassing companies’ fiscal years ended through to June 2013; however, here mainly focuses on the Top 10 retailers’ analysis.

The first of Porter’s Five Forces that impact Costco is the threat of new entrants. The threat of new entrants into the wholesale and membership retail space is low. There are several reasons why the threat of entrants into the market is low. The leading reason why the threat of entry is low is because an emerging company will struggle to have the volume necessary to compete with Costco. Costco is the sixth largest retailer in the U.S. As a major retailer, Costco has the highest discounts on a majority of its

What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Costco’s mission is, “To continually provide our members with quality goods and services at the lowest possible prices” (Costco.com, 2018). With the Costco mission in mind, their strategy was essentially simple in terms of marketing segmentation. Originally, Price Club started with a strategy of selling goods to the small business market, but branched off and began selling to selected non-business owners. As the world's first membership warehouse club, the strategy was simple and lucrative. After the two companies merged, Costco continued with the strategy of the membership warehouse club.

Potential new entrants into the market are a low threat for Costco. We have the advantage of economies of scale and having learned by doing. Our economies of scale come from better management coordination of processes, long term relationships with our suppliers, and enhanced employee performance with low turnover (Pearce et al., p. 100). The cost for a new entrant would be significant given the capital investment required to start up a warehouse business. Any