Costco's Competitors

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MGMT 4020 June 24, 2013 Homework Assignment #2 Competition is very high in the North American wholesale club industry. Every wholesale club wants to sell top-quality products at prices less than others in order to attract draw customers. And they all want to display low prices on pallets or inexpensive shelving, therefore, they have very low costs for store decor and fixtures, have comparatively low labor costs, and spent minimally on advertising and customer service. Five Forces Analysis 1. Bargaining Power of Buyers is moderate. Costumers are always looking for better prices, best deals (membership fees, merchant credit, etc..) The wholesale market is the buyer’s market. 2. Bargaining Power of Supplies is weak. The product…show more content…
Threat of New Entrants is weak. Entry barriers are high because of the economy, significant experience-based cost advantages, other cost advantages held by industry members (e.g., access to inputs, favorable location), brand loyalty (which comes from membership and other services), strong network effects and high capital requirements. 5. Substitute Products or Services is moderate. Warehouse clubs like a magnet for customers and pulling them away from other traditional retail channels such as supermarkets, department stores, drugstores, office supply stores, consumer electronics etc… All three warehoused club rivals - Costco, Sam’s and BJ’s – have similar strategies: Low prices, low operating costs, geographic expansion – Costco; Sam’s Club concept is to sell merchandise at low profit margins, which means at low prices to members; and BJ’s offers brand-name merchandise at prices that were significantly lower than the prices found at retail, supermarkets, dept. store etc… Costco and Sam’s have similar strategies: * provide items in bulk and at low prices * Most of the items are supplied by…show more content…
Coupons. Financial performance: By taking an average of 3 years, the operating profit of 3 clubs shows that – Sam’s is on the top with 3.36%, followed by Costco with 2.68%; and BJ’s is in the 3rd place with 2.15% . Liquidity ratios show the best performance for BJ’s in year of 2011, Costco stayed about the same. But at BJ’s cash flow is down while Sales and expenses have increased (long-term debt has been eliminated). Costco’s Expansion outside US – a very positive tactic. You can see a significant increase in the operating income 2010 – 47% and 2011 – 92%! Capital expenditures rose considerably to achieve those results. Costco’s competitive advantage is sustainable and company has proved it: annual growth, low operating cost, low prices, high customer loyalty plan, continuing profitability, and satisfied employees. Five years from now Costco will be standing as the industry leader if they will continue with the same philosophy, goals, strategy and mission. Sam’s Club needs some brand shift (maybe) and BJ’s should look into expanding to

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