Costco Furniture Limited

8/12/2019 Costco Furniture Limited

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Welcome To Our

Presentation


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Group: B

Name ID

Sobrata Halder ### 05-005

Abu Syed ### 05-006

Priyanka Tarafdar Bristi ### 05-007Rifat Tanmoy ### 05-008


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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


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Organizations Basic

Information Costco Wholesale Corporation is a membership-

only warehouse club that provides a wide selectionof merchandise.

Founded:September 15, 1983, Seattle, Washington,

United States

Founders: Jeffrey H Brotman, James Sinegal


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Organizations Basic

InformationContinued. Headquarters: Issaquah, WA

Main Feature: Membership

Based Wholesale Business


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Organizations Basic

InformationContinued.

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 hadmembership card.


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Vision


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Vision

Our business is to give the

customer the best value we can.Jim Sinegal, Founder of Costco

Were going to be a companythats on a first-name basis with

everyone.


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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 WarehouseOperating Efficiencies

Operating Efficiencies



Profit & Value Generation At a Very Low Gross Margin


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Mission

Costcos mission statement is

To continually provide our members with qualitygoods and services at the lowest possible prices.

Boundary Boundary

Present Offerings, Types of Customers Served, Geographic Coverage


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Mission - Application Of

Abells Model

Revenue Generation



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Who?

Revenue Generation


Costco targets independent small business

owners and large rich familiesCustomers are both national and

international

Target customers are mostly Asian &Hispanic.

Typically customer visits 8-11 times per

year


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What?

Revenue Generation


Moderate & High Quality Products

Relatively Low PricesProduct Variety

Efficiency

ConvenienceTrust & Loyalty

Good Service Level


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How? -Strategy

Revenue Generation


The cornerstones of Costcos strategyare low prices, a limited product line and

limited selection, and a treasure hunt

shopping environment.


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Strategy?- Membership

Revenue Generation


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


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Strategy?- Pricing

Revenue Generation


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.


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Strategy? PricingContinued

Revenue Generation


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.


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Strategy?

Product Selection

Revenue Generation


Provide members with a selection of only 4000

items.

About one-fourth of Costcos line of 4000proucts 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.


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Strategy? Marketing

Revenue Generation


Low prices, membership and treasure

hunt strategies makes it unnecessary toengage in extensive advertising or sale

campaigns.


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Strategy? MarketingContinued

Revenue Generation


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.


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Strategy? MarketingContinued

Revenue Generation


Promotes selected merchandises toexisting members using direct mail

program (The Crostco Connection- a

multipage mailout containing selected

merchandise saving coupons).


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Strategy? Growth

Revenue Generation


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.


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Strategy? GrowthContinued

Revenue Generation


Financial Growth


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Strategy? Growth

Continued

Revenue Generation


Membership Growth


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Strategy? Growth

Continued

Revenue Generation


Warehouse Growth


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Online Sales

Revenue Generation


Web Sites:www.costco.com (for US)

www.costco.ca (for Canada)


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WarehouseOperations

Revenue Generation


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


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WarehouseOperations

Continued

Revenue Generation


For transactions, Costco

accepts cash, most debit

cards, American Express, and

a private-lebel Costco creditcard.

Accepts merchandise returns.


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SWOT nalysis

Low price

Strong brand

Excellent merchandise

Exceptional employees

54 million members

Economies of scale

Efficiency

S

Strentghs


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Revenue Generation


SWOT nalysis ontinued

OpportunitiesExpand into more foreign stable markets

Mergers & Acquisitions

Massive supplier pool

Barriers

Opportunity

New Markets

New Suppliers

Mergers &

Acquisitions


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SWOT nalysis ontinued

Threats

Aggressive price competition by rivalsPolitical complications in foreign marketsCannibalization


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Compensation

Revenue Generation


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


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Workforce Practices

Revenue Generation


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.


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Business Philosophy,Values & Code of Ethics

Revenue Generation


Jim Sinegal had ingrained five simple and realistic

business principles into Costcos corporate culture and

operation manner. The following are excerpts of theseprinciples and operating approaches:

Obey The Law

Take Care Of Our Members Take Care Of Our Employees

Respect Our Suppliers

Reward Our Shareholders


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Business Philosophy, Values &Code of EthicsContinued

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.

* Conduct business in legal and

proper manner in and with foreigncountries.

* Not offer, give, ask for or

receive any form of bribe or

kickback.

* Promote fair, accurate, timelyand understandable disclosure in

reports filed.


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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 andservice.

* Assure to sell authentic product

which represents the performance.

* Make their shopping

environment a pleasantexperience.

* Provide product that will be

ecologically sensitive.

* Provide best customer service.

* Give back to their communities

through employee volunteerism

and employee Contribution.


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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.


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Revenue Generation

Reward Our Shareholders

Costco believes that their shareholders are their

business partners. They can only be successfulso 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.


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Competition

Revenue Generation


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.


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CompetitionContinued

Revenue Generation



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CompetitionContinued

Revenue Generation


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.


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Market Positions of Rivals

Revenue Generation


OperatingMargin

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


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Revenue Generation



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Revenue Generation


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Costco Furniture Limited