Costco Wholesale in 2012

Topics: Costco, Strategic management, James Sinegal Pages: 4 (892 words) Published: September 13, 2013
Costco Wholesale in 2012

Costco Wholesale in 2012

Problem Statement
Costco exhibits several strategic weaknesses in comparison with its competitors.

Analysis and Evaluation
Since the inception of Costco in 1983, one of its drawbacks is, they have 4,000 selections of merchandise compared to their competitors. In addition, customers can only purchase merchandises in bulk. Consumers who shop at Costco do not have the choice to pick up one single item, for instance a can of soup. Although Costco prices are low and the consumers get more for their money, more consumers are wasting food because they no longer have the big families. Costco needs to look at the demographics and re-evaluate their business model, as this could be detrimental to the company. In today’s society, more families are getting divorce and are becoming single parents. The big families are almost none existent; therefore, most consumers do not need to purchase in bulk. Many consumers want to have choices when it comes to the amount of food they purchase. One may say there are other shopping establishments a consumer may visit to get exactly what they want; however, that is beside the point. Giving consumers the choice to purchase individual merchandise will not only bring in more business but also an increase in cash flow, which will also increase profits for Costco. On the other hand, Costco competitors such as Wal-Mart stocked up 40,000 to 150, 000 items for shoppers to choose from and Sam’s Club have over 16,000 items. Sam’s Club have the treasure-hunt items but tend to be less upscale and carry lower price tags than those of Costco. Both Wal-Mart and Sam’s Club give shoppers more choices than Costco even though Costco offers a cheaper price on their merchandise.

Costco spends very little in advertisements and they totally rely on their name and word of mouth by their customers. Compared to Sam’s Club they spent about $50 million annually advertising and direct mail...

References: Thomspson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. (2012). Crafting & Executing Strategy (19th ed.). New York, New York: McGraw-Hill/Irvin.
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