S. Just like people, corporations can have biases and even forms of ethnocentrism inherent in their cultures, a prime example of this being WalMart (Hammond, Axelrod, 2006). Clearly further analysis is necessary to understand why Costco struggles in other regions of the world, yet the company's financial performance on a global level continues to be exceptional due to the factors cited earlier.
What is needed is for the company to concentrate on how to better understand the cultural dimensions of the nations they are operating in today and planning to sell into in the future. The Cultural Dimensions Model (Hofstede, 1998) would be an invaluable framework for the company to use in defining market entrance, market growth, and market strategy maintenance strategies throughout the individual country and region markets they hope to succeed in. The need for more of a focus on how their supply chains can scale into these other regions is also vitally important as well, as today the majority of their suppliers are more oriented towards supplying the U.S. And Canadian markets over being able to scale globally themselves (Boyle, 2008). In conclusion, the Costco is being profitable with their expansion strategies into foreign countries, yet they are not achieving the level of growth they are capable of based on the success of their business models' potential as shown in the U.S. The company will need to confront the issues mentioned here in order to successfully grow over the long-term.
5. Are Costco's prices too low? Why or why not?
No, Costco's prices are not too low, and there is financial proof of that in Table 1: Costco Wholesale Corp Ratio Analysis. Notice that EBITDA Margin % is consistent over the time period of the case study. Costco competes with WalMart in the areas of consumer electronics, an industry WalMart is attempting to dominate specifically in the area of flat screen televisions. Costco is attempting to rely on the supply chain efficiencies it has been able to attain to this point to deliver greater cost reduction to its customers and therefore build a strong value proposition in response to WalMart as well (Boyle, 2008). Second, Costco has been successful in significantly reducing its Cost of Goods Sold (CGS) by integrating private label merchandise into its merchandise mix over the last several years (Steverman, 2008). Third, Costco has been one of the few companies to continually refine their adoption of Radio Frequency Identification (RFID) in their logistics and supply chain processes (Boyle, 2008). All of these factors taken together have significantly reduced the operating expenses of Costco and therefore made it possible for them to charge lower prices.
Appendix
Table 1: Costco Wholesale Corp Ratio Analysis
Profitability Ratios
9/3/2006
8/28/2005
8/29/2004
8/31/2003
9/1/2002
ROA % (Net)
6.38
6.75
6.26
5.83
6.47
ROE % (Net)
12.04
12.92
12.48
11.8
13.27
ROI % (Operating)
16.61
15.97
16.57
15.73
17.94
EBITDA Margin %
3.6
3.74
3.84
3.73
3.89
Calculated Tax Rate %
37.01
31.37
37
37.75
38.5
Revenue per Employee
465,972
449,836
426,895
414,198
422,489
Liquidity Indicators
Quick Ratio
0.27
0.37
0.51
0.42
0.29
Current Ratio
1.05
1.22
1.18
1.14
1.04
Net Current Assets % TA
2.36
8.95
7.28
5.31
1.56
Debt Management
LT Debt to Equity
0.02
0.08
0.13
0.2
0.21
Total Debt to Equity
0.06
0.08
0.17
0.2
0.21
Interest Coverage
31.33
38.89
Asset Management
Total Asset Turnover
3.48
3.36
3.41
3.44
3.58
Receivables Turnover
82.76
97.22
Inventory Turnover
13.79
13.86
13.82
13.19
13.25
Accounts Payable Turnover
13.46
13.59
14.33
14.18
13.85
Accrued Expenses Turnover
43.94
43.94
46.63
50.34
55.95
Property Plant & Equip Turnover
7.24
7.05
6.78
6.33
6.29
Cash & Equivalents Turnover
33.12
21.73
22.08
36.29
55.21
Per Share
Cash Flow per Share
3.83
3.77
4.58
3.31
2.25
Book…
Sample Source(s) Used
References
Boyle, D.. (2008, December). Costco Wholesale Corporation. Better Investing, 58(4), 31.
Costco, Investor Relations (2009, May 29). Costco Investor Relations. Retrieved July 28, 2009, from Costco Investor Relations SEC Filings Web site: http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-sec
Chu, J., & Rockwood, K.. (2008, November). Thinking Outside The Big Box. Fast Company,(130), 128-130,132.
Alan M. Field (2006, February 20). Store brands take over. Journal of Commerce, p. 1.
Related Documents
Study Document
Costco Business Model
Business Model The company is Costco. Costco Wholesale Connections is the largest membership warehouse club chain in the United States. A warehouse club chain is a retail store that sells a wide variety of merchandise where clients are required to buy products in quantities, reducing its price markup on products up to 15%. The cheap prices, kept down by the no-frills atmosphere to the store makes the store attractive to people
Study Document
Costco's Business Model Is to Undertake a
Costco's business model is to undertake a cost leadership strategy. The company operates with a warehouse store concept. The warehouse store concept focuses on offering large volumes of goods at low prices. A typical Costco warehouse has a relatively low number of SKUs available, and any given product is usually only available in a single SKU. Consumers are attracted to the low prices associated with volume buying. Each store has
Study Document
Costco Is a Mass Market Retailer, Focusing
Costco is a mass market retailer, focusing on a "warehouse club" business model. The company has a cost leadership strategy and this helps to characterize the firm's financial statements In terms of the critical ratios, the following table outlines the results for Costco for the 2012 and 2011 fiscal years: Costco Financial Metrics Liquidity Ratios Formula Current Ratio current assets / current liabilities Quick Ratio (current assets - inventory) / current liabilities Activity Ratios Receivables turnover Sales / Avg Accounts
Study Document
International Strategic Management Costco Business
The strategy outlines clearly the ethical position of the organization in relation to interactions between consumers and various stakeholders. This is essential in the enhancement of service and products provisions. The organization focuses on the adherence to the law through development and implementation this marketing strategy. This enhances effectiveness and efficiency of the legal interaction between consumers, shareholders, and stakeholders. The organization also pledges to take quality care of
Study Document
Costco Strategy
Costco The case notes that Costco's mission is "bringing the highest quality goods at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethics…" and then the mission outlines the code of ethics. The company's operations clearly stick to this mission statement. This is possible because the mission statement is clear, and it specifically relates to what the company does. It hits upon a
Study Document
Costco Wholesale Corporation Is One of the
Costco Wholesale Corporation is one of the membership warehouse chain operators across the globe. Costco Wholesale Corporation operates under the influence of the standards and regulations of the Wholesale Club Industry. The organization focuses on the distribution of the products with reference to fresh food, soft-lines, and ancillary as well as hard-line products. Costco implements various elements of marketing model with the aim of addressing the needs and preferences of