Competition Among N.A. Warehouse Clubs

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Case 4 Competition among North American Warehouse Clubs 1. What is competition in the North American wholesale club industry? In 2010, the nearly $125 billion discount warehouse and wholesale club industry consisted of three principal competitors: Costco, Sam’s and BJ’s. Which of the five competitive forces is strongest and why? From looking all five the threat of new entry is the strongest because of the extreme pricing and limited access to the distribution channels. 2. Do all three warehouse club rivals-Costco, Sam’s and BJ’s wholesale – have highly similar strategies? No; What differences in their strategies are apparent? Costco is providing items in bulk and at low prices; consumers gravitate toward discounting hoping to get the most out of their money. Sam’s is decreasing product costs by buying from low cost labor countries like China and Mexico. BJ’s is focusing on retail shoppers offering more grocery items and smaller quantities of packaged goods. Does one rival have a better strategy than the others? I think Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution. Cross docking allows the club has the ability to minimize inventory, improve product quality and increase responsiveness to any changes in the market conditions. Does one rival have a somewhat weaker strategy than the other two? Yes; BJ’s because they’re not as popular and they’re concentrated in the Eastern United States, which allows the company to streamline distribution and marketing. They’re also not benefiting from the economies of scales, because the margins are very thin and making low costs/high volumes are essential to profitability. 3. Which of the three warehouse club rivals has the strongest financial performer in recent years? See attached. Sam’s has a favorable Operating Profit Margin

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