1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?
Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve a niche consumers at a lower price. (Gamble, John and Thompson, Arthur (2009).
Costco’s business model is appealing because they are able to continually sell to a niche market. This niche market has annual income which ranges from $75,000 to …show more content…
Force three, the bargaining power of buyers, is the strongest force working in the favor of the industry. This is so because buyers cannot negotiate the price. The main reason customers come to wholesale clubs is they are attracted by the already low prices and value of buying in bulk. Force four, the bargaining power of suppliers could come into play if a more favorable opportunity presents itself in the general retail industry. Wholesale clubs offer only a percentage of the products that a general retailer does. A key strategy of Costco is aimed squarely at selling top-quality merchandise at prices consistently below what other wholesalers or retailers charge. Force fifth, rivalry among existing players, is not a major factor. Costco, the runaway leader presently, offers the “treasure hunt” deals where extreme bargains are offered for short, unannounced periods of time. This creates buzz amongst customers by enticing them to return on a consistent basis to explore what “treasures” are available. BJ’s sets itself apart by being the only club among the three to accept manufacturer’s coupons. They also are the only club to accept all four major credit cards, MasterCard, Visa, Discover, and American Express, at all locations. They also offer a broader assortment of items as compared to Sam’s and Costco.
6. Base on the data in case Exhibits 1 and 4, is Costco’s