Costco Feedback Management Paper Please, follow all the details attached in the word Doc MGT Readme.This question includes two parts. First is to write 7 p

Costco Feedback Management Paper Please, follow all the details attached in the word Doc MGT Readme.This question includes two parts. First is to write 7 pages report and second is 3 pages Essay.Let me know if you need anything. Running head: COSTCO WHOLESALE COMPANY
Costco Wholesale Company
Name
Institution
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COSTCO WHOLESALE COMPANY
Table of Contents
Introduction to Costco Wholesale Company ………………………………………………………………………. 3
Company Size …………………………………………………………………………………………………………….. 3
Age ……………………………………………………………………………………………………………………………. 3
Market Share ………………………………………………………………………………………………………………. 4
Company CEO ……………………………………………………………………………………………………………. 4
Costco Wholesale Company Financials ………………………………………………………………………….. 4
Costco’s Stock Prices …………………………………………………………………………………………………… 5
History of the Firm ………………………………………………………………………………………………………. 6
Mission and Vision Statements ……………………………………………………………………………………… 6
Costco Wholesale Company Global Position ………………………………………………………………….. 7
External Analysis ……………………………………………………………………………………………………………. 7
Industry Analysis ……………………………………………………………………………………………………………. 7
Porter’s Five Forces …………………………………………………………………………………………………….. 8
Macro environmental Trend affecting profitability in the Retail Industry……………………………. 9
Opportunities and Threats …………………………………………………………………………………………….. 9
Opportunities …………………………………………………………………………………………………………… 9
Threats ………………………………………………………………………………………………………………….. 10
Internal Analysis ……………………………………………………………………………………………………….. 11
Resources Capabilities and Competencies …………………………………………………………………. 11
Strengths and Weaknesses ………………………………………………………………………………………….. 11
Weaknesses ………………………………………………………………………………………………………………. 12
References ……………………………………………………………………………………………………………………. 13
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COSTCO WHOLESALE COMPANY
Costco Wholesale Company
Introduction to Costco Wholesale Company
Costco Wholesale Corporation is a company that runs an international chain of
membership warehouses. The company is associated with quality, brand name merchandise at
lower costs as compared to those offered at conventional retail and wholesale stores. The
company’s warehouses have been established in a bid to support the small to medium-sized
businesses to reduce the costs associated with purchasing for resale as well as the costs
associated with everyday business use.
Additionally, the company offers merchandise to individuals for personal uses. The
product category handled by the enterprise is quite broad under the same roof providing a wide
variety for selection by consumer thus boosting convenience in shopping. The range of products
stocked by the wholesale firm includes confectionary, groceries, appliances, televisions, tires,
toys, automotive supplies, hardware, jewelry, sporting goods, cameras, watches, apparel, books,
houseware among others. In general Costco Wholesale Corporation is known for its ability to
carry highest-quality regional and national brands at prices consistently lower than the traditional
retailers and wholesalers.
Company Size
Costco Wholesalers Company is a unique value chain firm. It allows members to shop for
private label products of higher or equal quality to national and regional brands in products such
as juices, houseware, coffee, luggage, clothing, and detergents. The company’s operations also
cover self-service gasoline stations across the United States, Australia, Canada, Japan, the United
Kingdom as well as Spain, Mexico, Taiwan, and Iceland. Costco Wholesale Corporation offers
its services to members categorized under various classes such as executive members, Business
and Gold members. Executive membership is associated with additional savings on a variety of
services as well as annual rewards on qualified company sales.
The company’s extensive operations are exhibited by the availability of warehouses
across geographical boundaries. The company has a total of 768 stores globally with a majority
of them located in the United States. The company’s 534 stores are located across the states in
the USA with other stores in Canada, United Kingdom, Taiwan, Korea, and Japan, Australia,
Mexico, Spain, Iceland, and France. The current membership of the company stands at a total of
95.4 million cardholders, 52.2 million householders, 41.3 million Gold star members, and 7.6
million business class members. The company’s annual revenues for the year ended 2nd
September 2018 has been recorded at $138.4 billion showing the enormity of operations of the
company globally. The company employs a workforce across its locations globally and is among
the leading enterprises in the region. The company employs a total of approximately 163,000 full
and part-time employees in the United States and an estimated 239,000 full and part-time
employees globally.
Age
Costco Wholesale Corporation has been in operation for 36 following the opening of its
first store in Seattle in 1983. The Company built on the idea of a wholesale club with the passion
for offering premium quality products to its members at the lowest costs possible. Although it
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started as a private firm, Costco Wholesale was converted into a public company in 1985 taking
various business expansion strategies in its operations to ensure the spread of its services to reach
out to as many members globally as possible. Since 1984, the company has increased
significantly in size and coverage as exhibited by the growth in sales and revenue over time. The
company has been able to create loyal customers throughout its operating locations as a result of
the convenience in shopping and product pricing for the benefit of the consumer.
Market Share
Costco Wholesale Corporation is the leader in the wholesale industry being far ahead of
its competition in the United States. An analysis of the firm alongside its competitors indicate
that the company controls an average market share of 13.1% with its competitors far below that.
Similar companies in the same industry include Berkshire Hathaway Inc. with a market share of
4.49%, Home Depot at 9.9%, Lowes Company Inc. at 6.35% and Target Corp at 6.38% among
other small players. The high market share in the United States market is associated with
Costco’s ability to stock a wide variety of consumer goods at the most affordable prices as well
as the availability of its numerous stores across the various states in the United States. It is worth
noting that from its membership operations, the company offers shopping convenience for its
members and hence its ability to maintain a competitive edge in the wholesale industry
(Ramakrishnan, 2010).
Company CEO
Craig Jelinek is the President and Chief Executive Officer of Costco Wholesale Company
since 2012. Jelinek succeeded the company’s founder, James Sinegal in 2012 and has been
responsible for running the operations of the company effectively and efficiently since then. The
CEO is committed to continuing with the company’s legacy of offering the lowest possible
prices to its members (Davis & Sinegal, 2008). Jelinek believes that Costco is still able to
provide lower product prices for its members as a result of the firm’s ability to eliminate all the
frills and costs that have been historically associated with the conventional retailers and
wholesalers such as salespeople, delivery, fancy buildings as well as other expenses such as
billing and accounts receivables. The CEO leads the company in running tight operations
associated with extremely low overheads allowing the firm to pass significant savings on a
variety of its products to the members.
Costco Wholesale Company Financials
Costco Wholesale Company has posted positive improvements in its sales for the five
years between 2014 and 2018. For the financial year ended 2nd September 2014, the company’s
aggregate sales were $110,212 million with progressive improvement to $113,666 million in
2015, $116,073 million in 2016, $126,172 million in 2017 and a significant increase in the
revenue to $138,434 million for the year ended 2nd September 2018.The membership fees for the
five year period also increased significantly starting with $2,428 million in 2014, $2,523 million
in 2015, $2,646 million in 2016, $2,853 million in 2017 and $3,142 million in 2018. It is an
indication that the company is continuously expanding its operations and consequently enrolling
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COSTCO WHOLESALE COMPANY
new members to the club. An analysis of the gross profit margins as a percentage of the sales
over the five years shows significant changes with a rate of 10.66% in 2014 and 11.04% in 2018
with significant fluctuation in between. The stability of the ratio is an indication that the
company is at its stage of maturity and can ensure stability in its operations over the entire period
under analysis. Progress has also been recorded in the firm’s acquisition of assets in the property,
plant and equipment category. Between the financial year 2014 and 2018, the net property plant
and equipment of the company has risen significantly from a net of @14,830 million in 2014 to
$19,681 million in 2018. The increase in the property plant and equipment over the period is
associated with the expansion of operations of the firm as well as the opening up of more stores
and warehouses to reach out to increase membership in the locations within which the company
carries out its operations. It is worth noting that the improvement of operations of the firm
between 2017 and 2018 has been associated with an increase in the firm’s overall profitability.
The net income attributable to Costco in 2014 was $3,220 million with a significant increase to
$2,377 million in 2015. For the fiscal year 2016, the company recorded a slight reduction of the
net income to $2,350 million with recovery and an improvement in the following year to a net
profit of $2,679 million. Further increase in profits was recorded in 2018 with the company’s net
income at $3,134 million.
The company’s profitability is driven by the annual increase in sales over time. The
company defines it comparable sales as the transactions recorded in warehouses that are
operational for periods of more than one year as well as the revenue obtained from online sales
of its product through the company’s established e-commerce platform. The company seeks to
ensure an increase in comparable sales through an increase in the shopping frequency for both
existing and new members as well as the amount spent by members on each of the visits. The
company’s sales are a factor to various elements that may not be under the control of the
company including the fluctuation in the exchange rates of currencies, changes in the cost of
gasoline as well as the current competition in the industry. The ability of the company to
generate more comparable sales is a crucial element for the firm allowing the company to move
closer towards the achievement of reduced costs of goods in comparison to the competitors. The
profitability resulting from an increase in the sales revenue is critical for the company to make
available the right merchandise at the right time for the benefit of the members. The health of the
economies in which the company carries out its operations is also critical to the firm’s business.
The factors affecting the economy include inflation especially in the firm’s primary market, the
United States.
It is worth noting that the growth in the firm’s sales over time is a factor of the current
competition in the market. Stiff competition is exhibited in the wholesale and retail industries as
a result of the availability of a variety of products as well as numerous players both small and
well-established firms. The growth in e-commerce platforms also affects the performance of
Costco due to the need for the company to differentiate its operations and hence gain and keep
customers. Although stiff competition exists in the industry, Costco has been successful in the
historical adaptation of its business to the changes in the economy and competitive environment
through adjustments to the prices of its products as well as the penetration of the firm’s private
label items and online offerings through the e-commerce platform.
Costco’s Stock Prices
The stock prices of Costco Wholesale have been rising steadily over the last decade as
shown in the chart below. The general trend has always been on the rise. The current stock prices
for the firm’s shares is at $212.28 with an expectation that the firm’s share prices are going to be
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stable over the foreseeable future. The company is recording steady growth in its share prices as
a result of the steadiness in the business operations of the company. Additionally, the company is
continuously expanding its services through the establishment of more stores in various locations
globally and consequently increasing its members globally.
History of the Firm
Costco Wholesale Corporation traces its history back to 1976 when the company
established its operations under the name the Price Club in a converted hangar in San Diego. The
company initially served small businesses. Costco found its operations in 1983 in Seattle
becoming the first firm to grow its sales from 0 to $3 billion in less than six years. Costco and
price club merged its operations in 1993 and operated under the name PriceCostco with 206
locations globally and generation an approximated $16 billion in annual sales.
The company’s operating philosophy over the years has been keeping the costs low and
passing the savings to the members. The larger membership base and the tremendous purchasing
power of the members and the company’s quest for efficiency in operations has been a
significant factor for its growth over the years. The company has grown globally concerning
sales with the current sales recorded at over $138,000 million.
Mission and Vision Statements
Costco Wholesale Company is among the leading companies in the retailing industry
globally. This position has been achieved as a result of the company’s commitment to following
through its mission and vision statements. The vision statement of a company guides the overall
direction that should be taken by the company regarding organizational development. For the
case of Costco Wholesale Corporation, the vision statement sheds light on the company’s
commitment to customer satisfaction and experience. The mission statement, on the other hand,
determines the strategies and tactics that must be put in place to ensure theta the company
delivers on its vision. The mission of Costco Wholesale Company emphasizes on the importance
of value creation for customers through pricing.
Vision Statement: The corporate Vision statement of Costco states that the firm should be “a
place where efficient buying and operating practices give members access to unmatched
savings.” The vision statements show the firm’s commitment to ensuring efficiency in its
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operations to minimize the costs and prices of its products to members. Cost minimization leads
to unmatched savings to members who can purchase the company’s wide variety of merchandise
at the lowest prices possible. Members access such savings through discounts based on the
membership status as well as the company’s cash cards. The company, based on the vision
statement establishes strategic financial objectives that seek to minimize costs as the company
offers various discounts to attract and retain customers.
Mission Statement: The Company’s mission statement states that the firm seeks “to continually
provide our members with quality goods and services at the lowest possible prices.” The mission
statement shows that the firm is committed to quality as a selling point for its products. This is
critical in ensuring a competitive edge in the industry characterized by the existence of numerous
players sine Costco can offer its products at relatively lower prices. The mission statement also
emphasizes the firm’s commitment to the lowest possible prices for its products to its members.
The mission statement has supported the firm’s move to develop an effective supply chain that
supports the minimization of costs as well as the provision of high-quality products.
Costco Wholesale Company Global Position
Costco Wholesale Company operates its 768 warehouses across various geographic
locations globally. The company’s presence is most significant in the United States where the
company runs a total of 534 warehouses across the different states in the country. The country’s
operations have also spread across various regions globally to ensure shopping convenience for
members in areas such as Canada, United Kingdom, Taiwan, Korea, and Japan, Australia,
Mexico, Spain, Iceland, and France.
External Analysis
Industry Analysis
Costco wholesale company operates in the retail industry made up of a variety of players
both small and well-established players. The availability of well-established distribution
channels for all types of retail companies in the United States has been the primary cause of
competition in the industry. The retail services industry provides an openly competitive
environment for the players in the industry that enforces strong business operations in the
industry and resulting in innovations and creativity that consequently result in efficiency and
reliability of services in the industry. The industry sales have been more than $2.6 trillion
starting from 2016 with the figures expected to rise as the competition drives business in the
industry. The retailing industry is the major employer in the United States employing more than
29 million individuals and supporting more than 42 million jobs in the US. It is estimated that
retail sales are going to grow further by 3.4% with the development of the e-commerce platforms
expected to drive the growth further.
Given the unique manner of operations of Costco Wholesale Company, it can be
adequately categorized under the warehouse clubs and supercenters industry. The industry is
made up of stores that retail discount groceries with other products such as appliance to achieve
an overall cost saving through leverage of the economies of scale and offering products in bulk
to members while charging membership fees. The products offered in the industry are of high-
COSTCO WHOLESALE COMPANY
value, and of low cost hence the industry is doing well in the market despite the prevailing
macroeconomic climate (Fox & Sethuraman, 2010).
The major competitor of Costco in the warehouse clubs and supe…
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