IN 2012: MISSION,

BUSINESS MODEL, AND

STRATEGY
Presented by Group 6
Group 6
Members
NGUYỄN HÀ NGUYỄN VŨ
LÊ NGỌC ANH
KHÁNH THY DUY BẢO

NGUYỄN NGỌC PHAN THỊ DOÃN HOÀNG

NHÃ UYÊN ANH THƯ BẢO QUANG

NGUYỄN THỊ ĐẶNG NGUYÊN

HỒNG HUỆ KHOA

CC01
I. INTRODUCTION
1. The history, development, and growth of the company over time

1.1. History
Founded by Sol Price in 1976, Costco pioneered the membership warehouse
concept.
Jim Sinegal's leadership propelled Price Club's success in the retailing industry.
1. The history, development, and growth of the company over time

1.2. Development

In 1983, Jim Sinegal and Jeff Brotman

founded Costco in Seattle
By 1984, Costco expanded to nine stores
across five states.
Costco went public in 1985, surpassing $1
billion in sales within six years.
The merger with Price Club in 1993
strengthened Costco's position.
1. The history, development, and growth of the company over time

1.3. Growth

Rebranding in 1997 and 1999 as Costco

Wholesale Corporation reflected its
commitment to wholesale
merchandising.
Craig Jelinek's CEO appointment in 2012
marked a new era of operational
efficiency.
Costco's dedication to value and
innovation remains steadfast.
II. BACKGROUND ANALYSIS
 1. Mission - Vision - Core Value

1. Mission

“To continually provide our members with quality

goods and services at the lowest possible prices.”

Growing in the retailing sector

Quality goods and services
Reasonable prices
 1. Mission - Vision - Core Value

2. Vision

“A place where efficient buying and operating practices

give members access to unmatched savings.”

Focus on customer satisfaction and convenience.

 1. Mission - Vision - Core Value

3. Core value
 2. Competitors

Sam’s Club BJ’s Wholesale Club

III. INTERNAL ENVIRONMENT ANALYSIS
Financial
Costco utilizes financial performance for decision-making and strategy.
However, it can be readily supplanted due to the abundance of wealthier
companies.
=> The common occurrence and susceptible to replication.

Physical
Costco utilizes equipment such as forklifts and pallets for merchandise
transportation.
It's challenging to categorize Costco into a specific group.

Reputation + Service + Culture + HR

These three aspects are intangible for Costco's achievements.
By leveraging positive word-of-mouth promotion and offering exceptional
refund services, Costco has established a commendable reputation, which
forms Costco's sustainable competitive advantage.
Expansion

Facing competition from established players.

We don't believe Costco's ability to expand holds much value and can be easily
replicated and replaced by competitors.

Training

Costco owes its success to the robust HR infrastructure and the ingrained
company culture -> A sustainable competitive advantage.
 2. Value Chain Analysis
2.1. Inbound Logistics

Partnership with vendors

Costco is extremely good at negotiating and gaining the diversity of
resources, thereby getting the lower prices with high quality.

Supply Chain
Direct procurement from manufacturers
Adopting the cross-docking strategy, Costco consolidates at a single
logistics center, direct distribution to stores -> reducing storage costs
Supplier diversification strategy
Streamlined approach involves fewer steps, directly to stores via trucks
-> minimizing costs associated with intermediary processes
 2. Value Chain Analysis
2.1. Inbound Logistics

Inventory
Costco utilizes (LIFO) inventory accounting system -> fairer and more
reflective of current costs in operations.

Enhances the alignment of operational outcomes with present costs

and enables faster inventory turnover

Products can be swiftly stocked on the sales floor upon arrival from
the distribution center.
 2. Value Chain Analysis
2.2. Operations
Management - Managing the operating equipment
Warehouse-style management approach for retail operations.
-> Reduces the necessity for extensive decorations, lowering maintenance
expenses.

Operating Management
Membership fees represent a substantial portion of Costco's revenue to
finance the expansion of more branches.
Increased number of branches attracts more customers to enroll in their
membership system. -> Instrumental in driving the company's growth and
success.
 2. Value Chain Analysis
2.2. Operations

Efficiency - Big volume + Simple-packaged big volume

Enhances its operational efficiency by minimizing stock volume and avoiding
overstocking.
Repackages the same products into larger packages to reduce inventory costs,
lowering the price per unit of the product.

Membership System
Focuses on providing its members with the best prices for quality goods.
Membership perks go beyond offering competitive pricing and premium item.
Exclusive member services: a variety of services within their retail locations
and comprehensive after-sales support.
 2. Value Chain Analysis
2.2. Operations

Private brand strategy - Kirkland

Develop their own brand names

through subcontractors.

Kirkland, their private label brand, is

fundamental to profitability and
forms an essential part of their
operational strategy.
 2. Value Chain Analysis
2.2. Operations

Co-branding

Use co-branding strategy to let their members see the familiar

brands in their retail, like Starbucks and Pampers
 2. Value Chain Analysis
2.3. Outbound Logistics

Forklift and Pallet

Use forklift and pallet can save their labor cost and time.
 2. Value Chain Analysis
2.3. Outbound Logistics

Marketing and Sales

Chooses not to utilize TV channels or billboards for advertising, relies

on word-of-mouth advertising.

Maintains low advertising expenses.

Employs bulk discounts to attract consumers to its

warehouses/stores
 2. Value Chain Analysis
2.3. Outbound Logistics

Marketing and Sales

Engages in direct marketing through monthly emails to its members.

Personal selling occurs when sales personnel convince customers to

buy specific products at the warehouses.

Public relations to enhance its corporate and brand image.

With big ordering quantity, provide members in lower price.

 2. Value Chain Analysis

2.3. Outbound Logistics

After-sales Service

Provides a diversity of services.

Convenient for customers to return

the dissatisfied products.
 3. Functional Issues

3.1. Marketing

76% of Costco shoppers are individuals,

24%, are corporates and businesses

The target customer of Costco is equal

to and above 30 years old. In North
America, Asians and Latinos come
after Caucasians.
 3. Functional Issues

3.2. Financial

Profit margin from the company's

merchandise sales is relatively low,
averaging only 10.5%.

Membership fees generate almost

pure profit for the company.

Half of Costco's profits come from

membership fees.
 3. Functional Issues

3.3. Human Resources Management

Offering competitive wages and benefits across their operations.

Retaining top-notch employees is a pivotal aspect of Costco's

business model.

In 2016, boosting base wages, hourly pay rising from $11.50 to $13.

Employs 205,000 people, with 117,000 in full-time roles and 88,000 in

part-time positions.
 3. Functional Issues

3.3. Human Resources Management

Encompassing superior health benefits and employee well-being

initiatives.

Hiring employees equally, no matter gender or race.

Show their employee information report to everyone.

 3. Functional Issues

3.4. Operations

Directly ordering and negotiating prices with local suppliers or

manufacturers.

Utilizing the cross-docking method, minimizing storage duration and

facilitating centralized distribution from logistic centers.

This approach obviates the necessity for suppliers to distribute

products across multiple logistic centers, thereby improving
inventory control.
 3. Functional Issues

3.4. Operations

Minimize staffing costs through various means.

Employs pallets and forklifts for product handling and placement on

shelves; showcase goods directly on their shipping pallets rather
than arranging individual items on shelves.

Maintains a limited inventory of around 4,000 distinct items per

location. This curated selection enables access high-quality products
across various categories while avoiding subpar or unbranded goods.
 3. Functional Issues

3.4. Operations

With the limitation of merchandise, Costco cannot compete with

other rivalries because other stores sell a variety of goods than
Costco.

Even though Costco has expanded globally, it still carefully evaluates

opening new stores in various locations.

Many stores in certain areas might not yield additional profits from
other countries, especially when competitors have more extensive
global coverage than Costco.
 3. Functional Issues
3.5. Organizational Culture

Happier employees are always more focused and deliver with dedication.

Sustain its strategy then its organizational culture has played a very
important role.

Commitment to employee satisfaction has proven beneficial in the long

term.

Further reinforced this commitment by raising wages in 2016.

Emphasis is on fostering collaboration rather than pushing employees

beyond their capabilities.
 3. Functional Issues

3.6. Management Information System

Leverages MIS to optimize its supply chain operations.

Efficient Includes inventory management systems that track stock levels
Supply Chain in real-time.
Management Integrates with suppliers' systems for seamless ordering and
delivery processes.

Customer
Manages its vast membership base.
Relationship
Tailors marketing strategies and promotions to individual
Management
members, enhancing customer satisfaction and loyalty.
(CRM)
 3. Functional Issues
3.6. Management Information System

Data Relies on MIS for data-driven decision-making across various

Analytics for business functions.
Decision Identifies opportunities for cost savings, product assortment
Making optimization, and expansion strategies.

Integrates its online and brick-and-mortar operations.

E-commerce
Provides a seamless shopping experience for customers across
Integreation
platforms.

Encompasses systems for managing employee information,

Employee scheduling, and performance tracking.
Management Efficiently allocates workforce resources, ensure compliance
System with labor regulations, foster employee satisfaction and
productivity.
 4. Internal Factor Analysis (IFAS)
Weighted
Internal Factors Weight Rating Comments
Score

Supply Chain
Management

Annual Membership
fees

Kirkland Signature
Strengths

Benefits for
Employees

Marketing through
Word Mouth
IV. EXTERNAL ENVIRONMENT ANALYSIS
V. COSTCO’S STRATEGY FORMULATION
1. SWOT Analysis
 2. The kind of corporate-level strategy that Costco is pursuing

2.1. Directional Strategy

Growth Strategy
Vertical:
Costco keeps fixed price chicken with just $4.99

Costco invested capital to $350 millions to build the chicken

manufacturing on the south side of the eastern Nebraska city of
Fremont, thereby being able to produce 2 million chicken per week,
saving 35 cents per chicken.

The activities of the factory from breeding chicken to delivering the

finished goods to Costco.
 2. The kind of corporate-level strategy that Costco is pursuing

2.1. Directional Strategy

Growth Strategy
Vertical:
Costco also has established the hot dog factories in Tracy California
in order to reduce supply chain costs in 2004

Costco has a private label called KirkLand Signature means that

Costco applies outsourcing from the big name brand with long -
term contracts
 2. The kind of corporate-level strategy that Costco is pursuing

2.1. Directional Strategy

Growth Strategy
Vertical:
The purpose of private labels is to offer products with brand name
quality at discounted prices thereby maintaining the customer
services and loyalty’s customers, increasing the number of members.
 2. The kind of corporate-level strategy that Costco is pursuing

2.1. Directional Strategy

Growth Strategy
Horizontal:
Costco takes part in the diversity of foreign markets

Costco expand ranged from 14 to 34 location in US and 5 location in

foreign countries every year, up to 770 warehouse until now.
VI. STRATEGY SUGGESTION
Thank You
For Listening
- Group 6 -