Tutorial Case Study 1 - Costco's Winning Formula

Focused on reduced prices, created brand image based around this idea.

Warehouses are designed to operate efficiently

5 Porter Forces Analysis

strategies used by costco to lower prices

negotiate deals with suppliers

decor of warehouse

only offer 3600 unique products at a time

expansion plans into asian markets. reason is that customer spending and growth is higher

main advantage: workforce

employee compensation is above the industry

lots of benefits and good wages

workforces morale is boosted as a result

due to good treatment of workers, average turnover per worker is $530000

expansion in international markets has been a successful venture

despite only 25% of sales coming from international markets, growth is 400 percent faster than those in the US and Canada markets.

huge success in 2016 in melbourne and sydney

Buyer Power:

Supplier Power:

Threat of Entry

Rivalry

Substitutes:

customers can switch to other companies easily

in the retail industry there are many giants costco needs to compete with

few are: walmart, carrefour, spinneys

Rivalry is a important factor for CostCo

To ensure customer loyalty, costco offers prices lower than competitors

lots of competitors which customers can buy groceries from

there are a lot of suppliers

supply received is large in quantity

so supplier power is reduced, because there are alternative suppliers for costco

The market is already saturated in terms of grocery stores and retail stores.

This is a medium priority force

But if the new retail store offers lower prices then customers can switch easily

this is a high priority force

this is a low priority force

substitutes are many in number, and easily accessible

some substitutes offer online delivery so customers will feel more inclined to switch

swot analysis must be done of competitors and substitutes for costco to compete effectively

this is a high priority force