Costco Wholesale Corp. Case Analysis
Introduction:
The following is a situation analysis for Costco Wholesale Corp. Key issues are noted, and recommendation is provided.
Current Situation:
The discount membership concept was pioneered by Sol Price, who opened the Price Club in 1976. Jim Senegal got his start in retail working at Price Club at the early age of 18 loading mattresses. By age 26 Senegal was the manager for the Price Club in San Diego. Senegal was able to turn quickly the unprofitable store into a profitable store by improving store operations, keeping operating costs and overhead low, stocking items that moved quickly, and charging ultra-low prices.
Senegal decided to leave Price Club and build his own warehouse club operation. In 1983 Jim Senegal and Jeff
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The key element to Costco overall strategy is to keep costs low. Costco’s competitors charge 20 to 50 percent markup. An alternative would be, marking up prices slightly on their private label brand items will still be significantly less than competitors’ comparable brands.
Recommendations:
Continue the Costco’s mission, business model, and strategy. However, increase profitability by raising prices slightly.
Continue opening new stores and grow existing stores. Opening new stores will increase profitability. Existing stores should produce better profits since there are no startup cost and sales volume will continue to grow.
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