Costco Case Study: Business Model, Strategy, and Financial Performance

This case study provides an in-depth analysis of Costco's business model and strategic approach. It begins with an introduction to Costco as a multinational retail organization and then delves into its core business model, emphasizing its value proposition, pricing strategies, and the retailer business model. The study further examines Costco's overall strategy, including its focus on low prices, limited brand availability, and product selection. The analysis covers the company's pricing, product, promotion, and place strategies. The report also assesses Costco's financial performance, highlighting revenue generation through membership fees and warehouse operations. Finally, the case study evaluates Costco's strategies, challenges, and recommendations for sustained growth and improved financial outcomes, including considerations for competition in the retail industry and international market expansion.

Case Study

Contents
Case Study.......................................................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Costco business model and strategy.......................................................................................3
Analysis overall strategy of Costco........................................................................................6
Recommendation for Costco management to sustain company growth and improve financial
performance............................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
.

INTRODUCTION
Globalisation is an aspect that is leading all business organisation to perform their work
at a similar platform it impacts on all operations and functions of business. Leaders and manage
play an important role for managing business at an international level which assist organisation
to manage and perform its work in a competitive market with motive of achieving sustainability
in market. Costco is an American Multi-national organisation, which operates and manage its
business in retail industry and it is founded in the year 1976 and its headquarter is situated in
Issaquah, US (Zhang et al 24, 2015). This report highlights on business model and strategy that
is required by management to perform its work in proper manner. Along with this
recommendation for improving performance of financial performance of organisation and
sustainability in market is covered within this report. In the last, evaluation for working strategy
of Costco will be included in this report.
MAIN BODY
Costco business model and strategy
A business model can be defined as an organisational plan for making better profits that it
is used for identifying products and services. This results in making plan for using and managing
expenses that anticipate longer results to manage expenses as per proper manner. Business
development attract investment for recruit talent and motivate staff to visit and update business
to make longer results. Investors also review and evaluate business companies to generate better
interest among of employee’s organisation by designing model as per employment needs and
customer wants. In context of Costco primary component for business and its model relates with
value proposition. Moreover, with description of goods and services which is related with
organisational offering helps to produce better products as compare to its products and services.
Retailer business model is adopted by Costco which is leading business organisation for
completion of work in proper manner (Wu, Chongqi, Kunpeng Li, and Tianqin Shi, 2017).
Along with this management of Costco is focused to increase their business through pursue and
offering good quality of products that leads management to enhance their market area. In order to
gain regular support from market it is identified that company is offering all of its products at
low prices in order to offer better customer experience to all of its customers.

From the past several years it is identified that management is facing regular challenges to
manage and operates its business in proper manner because of low financial performance. It
creates issue for company against business model of company. With regular down off financial
aspects it is consider that by management that Costco must adopt new business model for
completing their work in proper manner (Wadham, Ben, and Deborah Morris, 2019). Some
aspects which are related with monetary challenges and it is impacting due to change in
management model are considered as follow:
 Low cost for the limited edition of nationally brand and it raise due to Costco’s
ineffective of business model that impact on work aspects through reducing its overall
complexity. So the financial is effected because company offers premium products at
low rate due to which it is common for all. This results sale of products is also not
increased that is a negative point for business model.
 High end quality products according to retail model of business enterprise such as
Costco it is identified that all variety of products which is excellent. But in context of
its prices they are low due to which profits earned by management are limited. So it is
essential for organisation that management adopt new business model for satisfying
needs of their employees. It also defines various aspects that merchandise business for
completion of work through completing task as per right sales volume.
 Model of Costco offering its products through two different methods that are to sale
products for everyday purchase and other is on-going special purchase selection. This
refers management of organisation is leading business market or environment through
offering large merchandise. This result it is difficult for management to manage and
control huge variety of products quality.
Strategy refers to a method that is used by an organisation to gain competitive advantage in the
market. It refers that there are various task performed by management that manage and enhances
better results by completing all work in an organised manner (Teeter, Adam 2015). According to
the Costco’s strategy minimum price, limited brand availability, management between all
products, large variety of products and effective arrangement of products is leading management
to make changes as per special and strong emphasis for products. With this aspect it is also
analysed that geographic conditions for each country is different. Some aspect of cost and

operating of business as per location decided strategy is used by management by managing each
aspect for warehouse and opportunities that are open for warehouses.
 Pricing- According to the Costco’s philosophy management focus to generate loyal and
repetitive customer base by offering products as per low prices. So for generating more
volume company consider that quality of its products is also good that attract more
number of customers to perform work in effective manner. Example- within the year
2015 it is identified that al products which offered with low prices make sale of meat and
wine product within billion.
 Product- Supermarket, retail stores and mobile chains are most important aspects for
organisation to complete work in proper manner. With this tool it is identified that 40,000
items and Walmart Supercentre and make a super target area that satisfies needs of all
customers in proper manner (Sykes, Kenneth, 2019). Similarly, management also
implement cost saving strategy for organisation through providing 3,800 items in order to
price them as per low market area that helps management to save its cost structure.
 Promotion strategy- Costco’s low offering and to use its reputation for develop of
market shopping leads to make availability of products as a treasure-hunt. Example- to
ask question from customers in order to engage them for product quality. Along with this
as per promotion strategy all activities for organisation is generating direct marketing for
making effective programs. Marketing and promotional activities are limited towards
some aspects that is impacting on products through developing employee association
which manage business area through promoting products with help of mouth publicity.
 Place- one of the most important aspects for organisation in making strategy is to decide
the place from where management is able to target its customers. Costco management
decided two methods to approach its customers which are through websites and retail
outlets. With use of place perspective it is identified that management leads to complete
work that is used for providing better market base that enable management to commit for
provide exceptional services that expand continuously market area.
With above strategy it is identified that Costco is increasing product sale for making better
products that offers various food in which three years expansion leads to complete work as per
area that make 35% sales for each year (Shen et al 2015). Warehouse of Costco are enrich in
product variety that is offering good quality of products and match them with needs of

customers. Revenues which is earned by customers relates with fees, cost and income that
consider to enhance number of warehouse and leads through which income for organisation is
used in making strategy as per operating areas that is increases number of warehouse. This refers
with right location of warehouse it is used for making longer results through which work areas
are making revenue for organisation. This also leads management to complete task through
designing locations as per company goals. On other side, capital expenditure is also managed by
business through using warehouse that is offering better operating income areas to engage better
results. In the present scenario, individual projects areas with improve of organisational
perspective in proper manner (Schlenker et al 2015). To manage this management make contract
through offering areas which list association for obtaining longer results.
Analysis overall strategy of Costco
In the present scenario, it is important for organisation to make better strategy that leads
organisation to complete their work in proper manner. It refers that with current situation of
business this is analysed Costco strategy is leading companies to earn better large profits. In
context of organisation strategy it is analysed that management is earning profits that leads to
earn more amount of profits. As per performance of year 2005 it is analysed operating income
and capital expenditure is increasing with rapid speed. These concern warehouse also boost
market area to focus on operating income for management. So it is easy for management to
complete their work by managing better goals that leads to include those goals and accomplish
them to design better profitability of business. It results revenue earned by management is
$43,064 that is not better than its competitors such as Walmart and Tesco. So some challenges
are faced by management to gain longer results. After five years in 2010, operating income was
less than last year but number of warehouse is more as Costco increase them with a 4% in each
quarter. It leads business aspects to offer more number of products that is leading business area
to complete work as per decided areas and strategy. So income of products is increased and this
results total revenue for year 2010 is $ 59,624. With provided data and case study it is analysed
that business organisation to complete work in selecting those areas that are suitable for
implement of business strategy (Samli, Coskun, 2015). Moreover, the figure and information
also support organisation strategy through slowing improving sale of Costco retail products in
market.

With analysis of managing and completing all work as per needs and wants of customers
Costco business aspects concern that sale of its products must be increase with more speed
because of intense competition in retail industry. On the other side, it is also analysed by
management that model and business strategy must be completed in proper manner. The sale of
products and services is impacted because management and top authorities is not performing
their work with right strategies due to which its sales is directly impacted. Example- Sale
strategy of business was developed with motive of increasing its sales with 3% on annual bases.
It is a too small constant for business to manage their work that is offering their products within
an international market (Phillips, Jack and Patricia, 2015). This refers that management is not
able to gain more success due to small targets as per there sales strategy. It results that Costco
perform its business to complete task for a small areas whereas, its competitors are increasing its
market area that deals in domestic as well as international market area. Along with this growth
strategy for business is also designed that is more beneficial for improving business area.
Moreover, there are various actions and activities are managed by business which leads to select
those aspects in which market area is increased with 5% at international level. Growth aspects
work as most effective strategy for business that is beneficial for all years to complete work as
per areas that earlier increases market area by selling products at large place.
Supply and distribution, Costco purchased most of its product legitimately from producers,
steering it either to its outlet center or to one of the organization's cross-docking stops that filled
in as circulation focuses for close by stores and for delivery requests to individuals making on
the web buys. In mid 2018, Costco had 24 cross-docking stops with a joined space of around 11
million square feet in the US, Canada, and different other global areas. Terminals got
compartment based shipments from makers, moved the products to beds, and afterward delivered
full-bed amounts of a few kinds to products to singular distribution centers through rail or semi-
trailer trucks, by and large in under 24 hours (Pelfrey William 2015). This amplified cargo
volume and dealing with efficiencies. Stops were likewise used to deliver massive product to
individuals that had been requested on the web; individuals regularly got online requests that
would fit in their vehicles at close by stockrooms.
At the point when product showed up at a stockroom, forklifts moved the full beds directly
to the business floor what's more, onto racks and retires (without the requirement for different
workers to contact the individual bundles/containers on the beds)— the first run through most

things were truly contacted at a distribution center was when customers came to onto the
rack/rack to select it of a container and put it into their shopping basket. Very small approaching
product was put away in areas off the business floor so as to limit getting and dealing with costs.
Recommendation for Costco management to sustain company growth and improve financial
performance
Costco is increasing its market area with rapid speed that demonstrate it is essential for
management to gain longer results. Retail industry is increasing its size but similarly,
competition among firms is also increased so management of business is directly impacted. This
also increases business area as per international market conditions but Costco is not updated their
activities few years ago to manage business (Narotzki, Doron, 2017). This results all
departments are impacted whether it is sales, finance, marketing and many more as international
competition market is directly impacting on business. It also refers due to complexity in business
area and management face complexity in managing business. The further scope to provide
recommendation is used in managing work to gain sustainability in market as well as to improve
performance of company. So it is recommend to organisation for formulation of strategy that is
increasing its business size at global level. The average growth rate must be 20% that is just
twice from compare of last year decade. Reason behind implement of just double rate is to
compete with rivals that exist in domestic as well as international market. Moreover, another
purpose for focusing more on overseas market because developing countries is providing more
opportunity to manage business in their countries. For Costco it is recommend that by entering
into new growing market management is able to gain first mover advantage that provides
competitive advantage as compare to other rivals. Along with this management also defines
warehouse for business is increasing with rapid speed and it is impacting on goals due to concern
of business and its growth. Already organisation, develop and establish too many warehouses for
organisation that is increasing their better supply of products easily with in the market. But on
the other side, Costco management must focus on needs and wants of customers for completion
of their work and then engage them to gain top position in market. With understand of this aspect
it is identified that with right warehouse management techniques this is more effective for sales
department to supply demanded products in market (Mao, Kuan-Hsiun, 2017). Most of the retail
food items are perishable so it is essential for management keep check the amount or quantity of
raw-materials in order to save or minimise the waste of products. This result due to low waste of

inventory operation cost for organisation is controlled which is used by management in CSR
activities to improve company goodwill. It is used by management to sustain in market for longer
period by developing position perception of organisation products and brand among mind of
customers.
Business model are most crucial part for organisation to control and complete project in
minimum period. This refers business houses are performing its work with help of understanding
model and then follow them or implement within all locations as well as departments that leads
organisation to complete work properly. With aspects of understanding business model of Costco
it is identified that management three phase and all of them are related with low-cost pricing
strategy (Liu and et al, 2019). Therefore, price factors to manage business for organisation is
recommend in completing and managing model for business so all task for business are operated
properly. Price is crucial aspects for business and it is impacting on actions for organisation. This
concern model which are utilised to complete work as per organisational goal must be improved
to achieve right market area for increasing business size and completionof task as per future
strategy. With adopting and implementing model related recommendation Costco is able to
complete their task and operations in minimum time period. Further, to improve efficiency for
model it is analysed price must be decided as per quality of products for enhancing profits of
organisation. On other side, sale strategy which is decided by Costco supervisor is too low so it
is mandatory for organisation to improve them properly by adopting new market area. With
improvement in model and sales through adopting recommendation profits for organisation is
increased which helps to improve financial performance for organisation (Knox, Malcolm,
2015). In the last, by adopting defined recommendation it is easy for management to gain
numerous benefits that leads for completion of project by managing overall performance and
productivity in order to market and advertise products as per retail operations and their strategy.
CONCLUSION
With the analysis of above detail and with imperative study of case study it is identified
that management is completing work as per enhancing its market area and completing task in
proper manner for improving financial performance of organisation. With understand of different
study it is analysed by management to complete work in proper manner for leading longer results
such as sustainability in market area. In the last, business model and strategy is included for
managing all projects in proper manner that leads to gain success in proper manner. With right

recommendation it is also used by management increase their work as per enhance efficiency of
retail operations to gain competitive edge in market.
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