The company's suppliers are one of the most important aspects of the microenvironment of any company, and Costco makes no exception. The company's suppliers can create a series of negative situations if they do not deliver the goods in time. This creates a chain of complaints that the company cannot resolve. Also, a good relationship between the company and its suppliers on the long-term can bring a series of benefits for the company.
Another important principle that Costco used when developing its general strategy is represented by the company's shareholders and their reward. Certain theories sustain that the shareholders are the most important part of the company and that the company's objectives must be oriented towards increasing the profits for these shareholders.
Costco Financial Position
The strategy was very successful for Costco, given the increased sales that followed. The company's sales evolution over the past five years was the following: $31,621 in 2000, $37,993 in 2002, $47,146 in 2004, $51,862 in 2005, and $58,963 in 2006.
Other examples that prove this strategy was right for Costco are represented by the record sales registered by the company, like: 96,000 carats of diamonds in 2006, 1.5 million TVs, $300 million worth of digital cameras, 28 million rotisserie chickens, 40% of the Tuscan olive oil in the U.S., $3 billion worth of gasoline, and others.
As one may observe, the company is in full expansion and development process. Costco's financial situation is following an ascending trend. And all these in spite of the low prices practiced by Costco. The impressive financial figures reported by Costco were achieved due to the large number of customers shopping at Costco.
In addition to the low prices practiced by Costco, the company is also trying to attract customers by providing an extremely wide range of products and services. In other words, the customers should be able to find in the Costco stores all the items and brands they need, so that they will not search them in competitors' stores. Also, the items that cannot be found in some of Costco's stores can be found online, on the company's website that also provides assistance for the company's customers.
Costco Generic Strategy
The elements that support the implementation of Costco's general strategy include:
Marketing and advertising
Web site sales
As mentioned above, one of the key elements of Costco's general strategy is representing by low prices. Even more, the prices in Costco stores are so low that some of the company's competitors cannot compete in the areas in which Costco activates. This strategy will allow the company to attract a significant number of loyal customers. A large and constant number of customers means significant income from sales. This will allow Costco to continue implementing a low price-based strategy.
Another important aspect is represented by the product selection process and its results. As mentioned in the case study, the strategy regarding the products range is very interesting in the case of Costco. Large supermarkets present ranges of products between 40,000 and 150,000 items. But Costco decided to commercialize only 4,000 items. But the selected items are high quality professional items. Basically, Costco eliminated low quality items.
The case study presents the general strategy behind Costco's success, the key elements on which it was based on, and the effects of this strategy. The company's strategy was very simple in the beginning, as the strategy was based on providing a range of quality products and services at low prices.
As mentioned in the case study, the strategy proved to be very successful for Costco. The company's financial performance makes proof of this. Costco has reported a series of record sales for many types of items, detailed in the case study.
Thompson, Arthur (2009). Costco Wholesale Corporation: Mission, Business Model, and Strategy. The University of Alabama. Retrieved February 27, 2009.
Annual Report (2008). Costco. Retrieved February 27, 2009 at http://media.corporate-ir.net/media_files/irol/83/83830/2008_AR_Cost.pdf.
Malone, Thomas (2006). Do Some Business Models Perform Better than Others? MIT Sloan School of Management. Retrieved February 27, 2009 at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=920667.
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Gans, Joshua (2005). Operationalizing Value-Based Business Strategy. Melbourne Business School, University of Melbourne. Retrieved February 27,…