Costco Case Essay

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Gabe Eiger MGMT 162 Professor Mank Costco Case 4/29/2014 Competition Among the North American Warehouse Clubs 1. Three primary players compete within the North American wholesale club industry: Costco, Sam’s Club, and BJ’s Wholesale. The three companies combined market share is nearly 100%, with several small warehouse clubs making up the rest. Below is a full five-forces analysis of competition in the North American wholesale club industry. The five forces are ranked in descending order based on strength. 1. Competitive Rivalry Within an Industry Competitive rivalry within an industry is clearly the strongest force influencing the North American wholesale club industry. Even though only three notable players compete in the industry, they are all engaged in a fierce competition to secure the highest revenue growth; expanding customer base, while retaining current customers. All three retailers employ the same macro strategy of searching for the lowest prices to pass along to consumers. Because of this companies are constantly looking for subtle advantages over their competitors, looking to differentiate themselves through unique traits or product offerings that will appeal to consumers. Unique traits could include the famous Costco hot dog and drink combo that has sold for $1.50 for the past 27 years. This is especially important as switching costs for consumers to move from one club to another are relatively low, and wholesale clubs are clustered together in many areas throughout the country. All three companies have also begun operating websites, allowing them to expand their product offerings and allow customers to purchase their products from the convenience of their own homes. Costco and Sam’s club have also looked internationally for growth, with Sam’s Club operating stores in China and Costco opening stores throughout Asia. Costco has

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