The strategy of Costco was low prices, a limited product line and limited selection, and a “treasure hunt” shopping environment. In terms of pricing, Costco was known for selling top quality brands products at prices below other wholesale or retail outlets. Costco kept prices low to members and capped margins on brand-name products at 14 percent and 15 percent as well as on private label Kirkland signature items. However, unlike Wal-Mart or Target that provide wide ranges of product selections, Costco provided members with a selection of only about 4000 items. The product range did cover a broad spectrum of categories but each category had a limited selection and products were usually packaged in bulk and targeted to large families and businesses.
Yes, the company’s business model is appealing because the company’s increased inventory turnover and low operating costs allowed it to maintain a profit, despite their significantly lower gross margins compared to the industry (traditional wholesalers, mass merchandisers, supermarkets and supercenters). What are the chief elements of Costco’s strategy? How good is the strategy? The chief elements are pricing, product selection, maintaining low operating costs and expansion. Pricing/Product Selection-The company philosophy was to provide high end quality product and/or services to club members but maintain low prices.
What is Wal-Mart’s distinctive capability? Wal-Mart has the goal of providing "quality goods at low prices, responsible manufacturing, and opportunities for growth. Due to their expansive nature and broad customer base, they are able to provide a large discount on many of their products. They are also the leading employer in the United States of African Americans, Hispanics, women and senior citizens. What business are they In?
Thirteen major banks contracted in 1981 with Anacomp to participate as advisory banks in the CIS project for a non-refundable fee. All those banks paid 150.000 dollar to participate. Describe the contractual arrangements between the economic entities involved in the CIS development. Who bears the majority of the risk of failure of the development effort? Who stands to gain most if the development effort succeeds?
Costco Wholesale Corporation was founded on September 15th, 1983 by James Sinegal and Jeffrey Brotman. The two founded Costco to allow small businesses and families to purchase a variety of high quality, brand name items for a better value, and significantly lower price. The idea is, that businesses can purchase items in bulk, and then resell them for an individual price per item, thus bringing in a quantitatively larger profit. According to Jim Sinegal, the Company's Co-Founder and Director, "Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery,
However this is primarily due to the reinvestment of profits into the purchasing of Property, Plant and Equipment and paying down long term debt. Dawson has a solid track record of increasing revenue, profitability and improving return on assets while at the same time improving control of operating expenses. Small companies like Dawson can compete against larger retail chains by providing specialty products and superior service. Dawson is also very efficient at collecting its receivables within the first 30 days (92%), resulting in strong cash generation. Analysis Assumptions: The case indicates that Dawson is a small retail chain that sells hard and soft goods.
There was not one dominant player within the industry; they were more equally balanced thus increasing rivalry. The High fixed cost for running a discount store resulted in an economies of scale effect, this can be seen when Wal-Mart decided to gain economies of scale by building their own distribution centres to add value. Going public in order to finance the extra storage was important for Wal-Mart to utilise capacity as efficiently as possible, they did this by creating distribution hub around 15-20 stores. The increased rivalry continues, this was due to the low levels of product differentiation and little in the way of own branding, products were standard in nature through all discount stores. Also the low switching cost and consumer awareness of shopping around to find the best bargains increased competition around stores to capture customers.
Vertical integration helped reduce the bullwhip effect. Zara was able to originate the design and have finished goods in stores much faster than average retailers. The short cycle time and
Planning it strategically, Tyco seems to have chosen to enter businesses that are unglamorous but provide an opportunity for profitability and growth. Further, Tyco choice of products which compete in stable, low-tech and standardized products requiring limited R&D spending is also a part of its strategy. This has helped the company to control costs and reap the benefits of standardizations and consolidation of processes and systems adding to the corporate advantage. To further elaborate this, with acquisition as its major strategy early on, in the days of Mr. Gaziano, Tyco earned a reputation as a „corporate raider‟. Later on, however, under Fort and Koslowski, things operated under more diligent control.
QUEST SOLUTION The biggest challenge to Barilla Spa was to implement a constant inventory control leading to overstock and stockouts. SOLUTION 1 Promoting JITD for everyone of it retail customers a quality and implementing market for JITD. PROS Having a higher profit by saving on warehouse space. Time to delivery helps with fresh stock and variation. The last part that helps is lower transportation cost by having one time delivery instead of multiple deliveries.