Costco Warehouse Clubs Costco Wholesale vs Sam's Case Study

  • Length: 5 pages
  • Sources: 5
  • Subject: Business
  • Type: Case Study
  • Paper: #27117278

Excerpt from Case Study :

Costco Warehouse Clubs

Costco Wholesale vs. Sam's Club vs. BJ's Wholesale

The main strategic issue that is faced by Costco (and by Sam's Club to a lesser extent) is the fact that it is having trouble competing with BJ's Wholesale on some key factors of customer service. Costco is a warehouse-style retailer, just like the other two companies. Typically, these companies offer lower prices, but consumers who shop there also need to buy their items in bulk (Thompson, et al., 2011). They get fewer perks, such as fixtures and decor, but that saves them money in the long run. It is a very "no frills" shopping experience which suits many people who prefer to buy their items in bulk and not have to shop as often as they otherwise would (Barrett, 2003; Thompson, et al., 2011). Mostly affluent and middle-class people shop at these kinds of stores, as well as many small business owners. People who have less money typically stay away from Costco and other, similar stores because there is a membership fee and buying in bulk can result in larger outlays of money at one time - something many people with lower incomes simply do not have.

While Costco is doing well, its strategy of providing that no frills experience for buying bulk goods has been recently called into question to some extent, mostly because Sam's Club and BJ's Wholesale are doing more than they used to in order to provide customers with a better and more well-rounded experience (Thompson, et al., 2011). That does not mean they are getting rid of their warehouse-style atmosphere in favor of something much more like a standard retail store, but only that they are offering more perks and benefits that Costco does not have. Costco's current strategy is still highly valuable in the marketplace, but the company may want to think about adding to that strategy as opposed to working too hard to change it. Recently, Costco was addressing the possibility of providing some services to customers by partnering with other companies. This could be one of the ways in which Costco can move forward and remain relevant as a warehouse-style retailer.

When companies such as Costco create a strategy around something specific and it proves to be very effective in the marketplace, that strategy is soon adopted by other companies. Then, those other companies take that strategy and see how they can improve upon it and make it even better (Barrett, 2003; Drucker, 2004). If the first company does not keep up with the changes that competitors are making, that company could find that it is getting pushed from the market (Gomez-Mejia, Balkin, & Cardy, 2008; Kleiman, 2010). Costco is not currently having this problem, but there are difficulties in site for it if it does not focus on giving more than warehouse-style buying to its customers. Currently, customers can get the same experience at Sam's Club or BJ's Wholesale, but they can also get significantly more from BJ's, because that company has started offering the kinds of perks that retailers have while keeping the low prices and bulk buying that it had in the past.

Adding things like express lanes and self-checkout lanes may not seem like much, but to people who are in a hurry and want to have a pleasant shopping experience, those options can make a big difference (Thompson, et al., 2011). Sam's Club has some market advantage because of its affiliation with Wal-Mart. BJ's Wholesale has the express lanes and other perks for customers who are in a hurry. What does Costco have? Well, Costco still has the same things it had before - but its competitors are moving on and providing other perks and benefits for their customers (Thompson, et al., 2011). That is going to become a big problem for Costco from a financial perspective and from the perspective of customer satisfaction. Because that is the case, Costco must begin to reconsider its strategy and start making changes sooner, rather than later. If it does that, there is a good chance it can still remain very competitive with the other stores in the future.

Costco may be wondering what it should do. It could try to imitate what others are doing, but that does not always work to a company's advantage. Unless Costco can provide what other companies like it already have plus something more, there is little benefit to copying other stores. In short, Costco must catch up to what its competitors are doing, but then must move ahead by providing something that the other stores do not offer. This could be lower prices, a fancier store, more checkout lanes or personnel to help with purchases, or even something that is not related specifically to the store but that would be a benefit of membership. A sustainable strategy is one that can be used for an extended period of time to affect change in a positive direction (Thompson, et al., 2011). Any company can create a sustainable strategy, but these kinds of changes need to be made correctly in order to be affective. Change for the sake of change is not always good.

In order for Costco to move ahead, it must implement concepts of strategic planning and use those to create ways in which it can stay relevant and remain competitive. Strategic planning is much more than just picking a direction to take because others are doing it or because the company leaders think it will be helpful or effective. Coming up with a strategy takes time, and both long-range and short-range planning should go into any strategy on which a company is working. What Costco should do has to be the main question, followed by whom they are doing it for (customers), and how the company can excel (Thompson, et al., 2011). The key components of strategic planning involve the creation and implementation of a mission, vision, and strategy, along with values that are held by the company (Thompson, et al., 2011). Fortunately, there are many different approaches when it comes to strategic planning. That allows the company to make choices about the kinds of things it wants to do and what direction would be best for it in the current marketplace.

Most companies use either a See-Think-Draw, Draw-See-Think-Plan, or Situation-Target-Proposal approach to strategic planning (Thompson, et al., 2011). The latter of these three would be recommended for Costco. In order to carry about this approach to strategic planning successfully, the company will first need to perform a situational analysis. Where is the company now, and how does that relate to the market, customers, competitors, suppliers, the economy, and other factors that affect the company as a whole?. Looking at all of those angles instead of just focusing on one area will allow a company like Costco to determine the true situation in which it finds itself (Thompson, et al., 2011). It is only when that situation is clearly understood that the company will be able to look for solutions. In other words, Costco will have knowledge of the true problem and be able to get to the heart of it, which will allow the company to find ways to correct the problem instead of only looking for quick ways in which the symptoms of the problem can be masked.

From that point, a target (or goal) can be established (Thompson, et al., 2011). This should be done as rationally as possible. If one sets goals too high, they are unattainable and failure is virtually guaranteed. However, if one sets goals too low, there is no growth or development of the company or individual (Thompson, et al., 2011). Both of these scenarios can be problematic, and they both should be avoided (Barrett, 2003). How best to do that comes down to the individual company and the people who operate it, as they are the only ones who can accurately assess where they truly and where they want to go. Setting goals or a target is not the final step, however, because after realistic, attainable goals have been created the real work begins - how will those goals be reached?

A possible route to those goals should be mapped out (Thompson, et al., 2011). Costco must keep in mind, however, that this is a possible route, which may change along the way. Not every plan comes to fruition, and not every plan ends up taking the person to his or her goals exactly as expected. Costco needs a plan, but it also needs a contingency (or backup) plan. Plan B. is important when it comes to any kind of business, because Plan A does not always go the way one would like. Certainly Costco has been around as a company long enough to recognize that this is the case. However, now that BJ's Wholesale is changing the game and Sam's Club is following suit, Costco's original goals have to be revisited in order to determine what direction the company should take…

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