Costco Company Essay

2151 words - 9 pages

Costco Company is a wholesale corporation that runs an international chain of membership warehouses, designed to help the small and medium sized businesses to reduce costs in purchasing for resale. Apart from reducing costs, these warehouses present one of the largest exclusive product category selections under one roof. Costco is known for profit making, and has grown from a zero to nearly over a three billion-dollar seller in less than six years span. The secret behind its success is its strategy of selling products at low prices but at high volumes. This paper analyses Costco annual reports for the year ended August 31, 2010 and gives reasons why an investor should make this firm his choice.
Summary of the CEO letter to shareholders
In this letter, the top officials are very optimistic about the year 2010, having been disappointed by the past two years. Though the year 2010 was characterized by fragile economic conditions in most of their markets, the year produced a record in terms of sales and earnings. This record sale is seen by Costco’s achievement of $7.63 billion sales in 2010 up from $69.9 billion sales in 2009, a net earning of $1.3 billion, and an eighteen percent increase in earning per share.
Despite the uncertainty in the economy in 2010, members who shopped in the Costco warehouses increased by four percent spending three percent more than they did in 2009. Most of the members shop in their fifty-six stores, which recorded over two hundred million dollars in sales in 2010 with two of them giving more than three hundred million dollars. In terms of expenditures, the letter estimates Costco’s costs to be nearly one billion dollars on capital expenditures. This big capital expenditure is justified in Costco’s plan to open nearly five hundred and eighty two warehouses in operation around the world to meet the increasing strong demand.
Costco management is among the most experience in warehouse retail business, as they compose of people who have worked with the company for a number of years. This experience makes them at a proper position to accomplish the firm’s objectives. This pool of professionals enables Costco to remain a dominant warehouse club operator with over six hundred million loyal members and ninety percent of them renewing their membership annually. The renewal has enabled Costco raise nearly $1.7 billion in renewal fees.
The CEO affirms that Costco continuously adjusts its product mix to meet the various needs of the unique customers they continue to serve. This adjustment is achieved partly by their efficient merchant and operator services that facilitate efficient sourcing, shipping and selling of their quality goods and services. Apart from these, their sales have been increased by the e-commerce business option which realized two billion dollars in sales.
The top officials promised to work harder to keep up the pace of success, with a major focus on expanding operations, increasing sales,...

Find Another Essay On Costco Company

CostCo Wholesale: Competitive Advantage and Sustainability Analysis

2894 words - 12 pages hub-and-spoke warehouse-store system and pioneered the implementation of "cross-docking" in the early 1990s. Wal-Mart also developed IT systems allowing the company to track the movement of merchandise at all times in its network. Costco successfully copied Wal-Mart and implemented "cross-docking", transporting merchandise from the supplier to a consolidation point or directly to the warehouse. By reducing the number of steps in the distribution

why costco Essay

766 words - 3 pages the 2% range, some companies are investing their gross margins and lowering prices even further, such as Wal-Mart Stores (NYSE: WMT ) .The big exception here is Costco (NASDAQ: COST ) . This year has been outstanding for the retailer, and with more than $100 billion in annual revenue, Costco keeps growing its top-line and making profits consistently. In the fourth quarter of 2013, the company saw 5% growth in U.S. same-store sales and 7% growth in

Costco-Market Segmentation Overview

1880 words - 8 pages Costco-Market Segmentation Overview: Every company and/or organization starts and operates to achieve a single major goal, which is normally included in the company’s mission statement. Setting a goal, however, does not translate into success on its own; it is only the fist step. Understanding market segmentation is the second most important aspect of doing business. “Sellers and advertisers want to be able to determine what the potential

Costco A must buy in year 2014

1582 words - 7 pages products of, with by Costco wholesale corp. stock analysis includes gasoline, which is manifested in the fact that an average gas station can never beat the Costco’s gas station in term of revenue. According to cost estimates of Costco wholesale corp. stock new the stocks of the company are high compared to its competitors. Debt Analysis: Costco wholesale corp. currently has cash holdings of around $6.5 billion with $3.3 billion of positive cash

Impact of Environmental Factors on Marketing Decisions of Costco

2014 words - 8 pages enhance its core competencies and make sound strategies (Staff, 2009). There are various factors which would have deep impact on these new services offered by the firm. The firm should make a strategy after considering these factors.David Jobber describes in his book that with the help of this analysis, the company becomes more competitive and effective to implement the various strategies (Jobber, 2001).Costco Wholesale Corporation is one of the

Warehouse Wars

834 words - 4 pages markup cap of fourteen percent on all of its products. They are also extremely competitive when it comes to their vendors. Their vendor selection process is rigorous, disqualifying many products yearly that the company doesn’t feel are a value to its members. Vendors who are reported to sell an item elsewhere at a cheaper price are pulled from their shelves immediately. This ensures Costco members are receiving the best possible price on all items

Thinking about Benevolence Goverment

1259 words - 6 pages its shareholders' best interests first. Costco always offers good quality products at discounted prices. At the same time, the company pays the highest wages for their general staff. At Costco, its average hourly wage is $17 an hour, but the average pay of a full-time worker at Wal-Mart is $10.11 an hour. Labor costs at Costco are more expensive than other companies. However, Costco is not suffering a loss, because pay a lot wages for employees

Social Media Policies

1111 words - 5 pages or not. This will help the NLRB determine if proper disciplinary procedures have been taken. According to Belicove (2012) in article, NLRB Slams Costco On Social Media Usage Policy: What It Means For your Business, “A ruling by the National Labor Relations Board (NLRB) in a case involving Costco earlier this month makes it clear that employers who want to avoid labor disputes would be well served to schedule a sit-down with their legal counsel

Managers and Leaders in an Organization MGT 330 January 2011

1813 words - 7 pages foster management skills in a positive way is Costco. Businesses should consist of an equal balance of managing, and leading. Differences between leading a company and managing a company are endless.The definition of managing is the act or manner of managing; handling, direction, or control (NA, 2008). Managers are problem solvers who use resources to find a solution and always ask what problem needs to be solved or what is the best way to

Recommendation for Walmart, Inc and its Online Presence

732 words - 3 pages To: CEO of Wal-Mart Stores, Inc. From: Gaylord Paul Garcia Date: February 16, 2014 Re: The future of Wal-Mart. I. Bottom Line Recommendation Expanding Wal-Mart’s online presence is the most important opportunity that will help position the company more strongly for 2014 and beyond. Online retail and shopping sales has been growing consistently every year, not just in the US but worldwide. Not only does online shopping give customers more

The Family Corner: Marketing Plan Assignment

6800 words - 27 pages competitive.CostCoIn 1976, Costco started business under the name of Price Club. Initially Costco's target market consisted of only small businesses. In 1983 Costco changed its direction and opened up its target market to the general public by offering membership levels, each with its own advantages but cost savings to all. This strategy to offer membership to the public helped Costco in becoming the first company to ever grow from zero dollars

Similar Essays

Costco's Unorthodox Management Essay

1369 words - 5 pages The success of a company all falls on the shoulders of good management. If you have great management the company will run very smoothly. There are so many things that take place when you have good management. It encourages initiative, encourages innovation, helps with growth and expansion, improves the life of workers, motivates employees and much more. Without good management there would be no success. Costco is the company that I have chosen

Analysis Of Costco

1820 words - 7 pages History Costco was founded on September 15th, 1983 by Jeffery Brotman and James Sinegal (Chesley). It became renowned for its warehouse club retail model, pioneered by former competitor Price Club. After a major merger in 1993 with Price Club, Costco expanded to 206 locations, doubling the size of the company (“Costco Wholesale Historical Highlights”). The decision was based on the fact Costco and Price Club shared similar business philosophies

Analysis Of An International Organization: Costco

1842 words - 8 pages do not advertise or markup items more than 15% in order to save their customer’s money. These practices lowers the overhead costs and continues passing the savings to the customer. Costco is an international company and has (Costco Wholesale Corporation, n.d.) “462 locations in 43 U.S. States & Puerto Rico; 87 locations in nine Canadian provinces; 25 locations in the United Kingdom; 10 locations in Taiwan; 9 locations in Korea; 18 locations in

Case Study 1: Costco Wholesale In 2012

1389 words - 6 pages Key Issues: At the end of 2012, Costco was a successful business; however there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor