Jeffrey H. Brotman and James Sinegal founded Costco in 1983, in Seattle, Washington. There are 641 global chain membership warehouses operating throughout United States, Mexico, the United Kingdom, Puerto Rico, Korea, Canada, Japan, Australia, and Taiwan. Costco strive to carry quality, brand name products at a noticeably lower price than their competitors. The company’s strengths consist of it capability to focus on its strategy and mission.
According to Farfan (n.d.), “Costco's mission is to continually provide our members with quality goods and services at the lowest possible prices.” “In order to achieve our mission we will conduct our business with the following Code of Ethics in mind: obey the law; take care of their members, take care of their employees and respect their vendors” (Farfan, n.d.). By doing these four thing throughout their organization, they will achieve their ultimate goal to reward their shareholders (Farfan, n.d.).
The company’s price position leads to an increased customer loyalty. As a price leader to acquire market share Costco’s position themselves as a price leaders. They maintains a maximum of 15% markup on brand and private label products. Costco’s markup is even lower for their online retail. The company’s price positioning helps motivate customers to return and creates membership renewals.
Costco offers a limited selection of national known products and private labels across its wide merchandise range. The inventory turnover is very rapid, which reduces the inventory costs because prices are lower. Costco motivates it customers to purchase in volume, the sales volume is kept high despite their low prices.
Limited product choice is one of Costco’s weakness. Costco, normally offers about 3,300 to 3,800 products to be sold at one time. Their biggest competitor offers a vast selection of products. The overdependence of the United States and Canadian markets, Costco dependents on revenue generated. According to the FY2012, the United States and Canadian markets contributed 72.4% to the total sales for the company. California operations represented 24% of the net sales in FY2012.
Customers are preferring to shop online over what is known as traditional