Case 1: Costco The first Price Club Warehouse was opened in San Diego in 1975 by...

       

Transcribed Image Text:

Case 1: Costco The first Price Club Warehouse was opened in San Diego in 1975 by Sol Price, Robert Price (Sol's son), Rick Liben- son, and Giles Bateman. The firm originally sought to sell merchandise in volume at deep discounts only to small businesses, but later expanded the concept to include gov- ernment, utility, and hospital employees. By 1980, the company had four stores in Arizona and California and went public. During the 1980s, the company expanded to the eastern United States and Canada. In 1988, Price Club acquired grocery distributor A. M. Lewis and launched Price Club Furnishings. In the early 1990s, however, competition intensified from Sam's Club and Pace. In 1992 and 1993, Price Club's joint venture with retailer Controladora Com- ercial Mexicana led to the opening of two Price Clubs in Mexico City. Later in 1993, Price Club merged with Costco Whole- sale. During the 1990s, the firm expanded its international interests, launching outlets in Great Britain, Japan, and South Korea. Price Club changed its corporate name to Costco Companies in 1997 and again to Costco Wholesale in 1999. Today, Costco is the largest wholesale club operator in the United States, operating 672 membership ware- houses each amassing about $150 million in sales and serving about 65 million members. Most of its outlets are located in the United States and Canada, but additional stores can be found in Mexico, Japan, Australia, South Korea, Taiwan, Puerto Rico, and the United Kingdom. Membership costs about $50 per year and is available to businesses and individuals. Costco's business model emphasizes rock-bottom prices on a limited selection of mostly name-brand prod- ucts in a wide range of merchandise categories. A typical outlet carries about 4,000 products, ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Costco also offers its members insurance, finan- cial, and travel services. Its subsidiary, Costco Wholesale Industries, is an operating manufacturing business in food packaging, meat processing, and jewelry to support the retail efforts. Much of Costco's success can be attributed to its ability to minimize costs by negotiating fiercely with suppliers. The company never requires its members to pay more than 14 percent above the firm's cost for goods. Jim Sinegal stepped down as CEO in 2012 and was suc- ceeded by COO Craig Jelinek. Case Challenges 1. How does Costco differ from other warehouse clubs like Sam's Club? 2. Does Costco compete with nonmembership retailers, such as Walmart and Target? Why or why not? 3. Can Costco compete successfully on a large scale outside of the United States and Canada? Why or why not? Suggested Sources A. Campos, "Why Costco Is Beating Walmart," USA Today, 2 December 2013, http://www.usatoday.com/story/ money/markets/2013/12/02/why-costco-is-beating-wal- mart/3691555/ CNBC, "The Costco Craze: Inside the Warehouse Giant, 9 April 2012, http://www.cnbc.com/the-costco-craze-inside- the-warehouse-giant/. B. Stone, "Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World," Bloomberg Business, 6 June 2013, http://www.bloomberg.com/bw/ articles/2013-06-06/costco-ceo-craig-jelinek-leads-the- cheapest-happiest-company-in-the-world. B. Tuttle, "Why Costco May Never Raise Prices on $4.99 Chickens, $1.50 Hot Dogs," Money, 29 May 2015, http:// time.com/money/3901655/costco-rotisserie-chickens-hot- dogs/. Case 1: Costco The first Price Club Warehouse was opened in San Diego in 1975 by Sol Price, Robert Price (Sol's son), Rick Liben- son, and Giles Bateman. The firm originally sought to sell merchandise in volume at deep discounts only to small businesses, but later expanded the concept to include gov- ernment, utility, and hospital employees. By 1980, the company had four stores in Arizona and California and went public. During the 1980s, the company expanded to the eastern United States and Canada. In 1988, Price Club acquired grocery distributor A. M. Lewis and launched Price Club Furnishings. In the early 1990s, however, competition intensified from Sam's Club and Pace. In 1992 and 1993, Price Club's joint venture with retailer Controladora Com- ercial Mexicana led to the opening of two Price Clubs in Mexico City. Later in 1993, Price Club merged with Costco Whole- sale. During the 1990s, the firm expanded its international interests, launching outlets in Great Britain, Japan, and South Korea. Price Club changed its corporate name to Costco Companies in 1997 and again to Costco Wholesale in 1999. Today, Costco is the largest wholesale club operator in the United States, operating 672 membership ware- houses each amassing about $150 million in sales and serving about 65 million members. Most of its outlets are located in the United States and Canada, but additional stores can be found in Mexico, Japan, Australia, South Korea, Taiwan, Puerto Rico, and the United Kingdom. Membership costs about $50 per year and is available to businesses and individuals. Costco's business model emphasizes rock-bottom prices on a limited selection of mostly name-brand prod- ucts in a wide range of merchandise categories. A typical outlet carries about 4,000 products, ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Costco also offers its members insurance, finan- cial, and travel services. Its subsidiary, Costco Wholesale Industries, is an operating manufacturing business in food packaging, meat processing, and jewelry to support the retail efforts. Much of Costco's success can be attributed to its ability to minimize costs by negotiating fiercely with suppliers. The company never requires its members to pay more than 14 percent above the firm's cost for goods. Jim Sinegal stepped down as CEO in 2012 and was suc- ceeded by COO Craig Jelinek. Case Challenges 1. How does Costco differ from other warehouse clubs like Sam's Club? 2. Does Costco compete with nonmembership retailers, such as Walmart and Target? Why or why not? 3. Can Costco compete successfully on a large scale outside of the United States and Canada? Why or why not? Suggested Sources A. Campos, "Why Costco Is Beating Walmart," USA Today, 2 December 2013, http://www.usatoday.com/story/ money/markets/2013/12/02/why-costco-is-beating-wal- mart/3691555/ CNBC, "The Costco Craze: Inside the Warehouse Giant, 9 April 2012, http://www.cnbc.com/the-costco-craze-inside- the-warehouse-giant/. B. Stone, "Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World," Bloomberg Business, 6 June 2013, http://www.bloomberg.com/bw/ articles/2013-06-06/costco-ceo-craig-jelinek-leads-the- cheapest-happiest-company-in-the-world. B. Tuttle, "Why Costco May Never Raise Prices on $4.99 Chickens, $1.50 Hot Dogs," Money, 29 May 2015, http:// time.com/money/3901655/costco-rotisserie-chickens-hot- dogs/.

Answer rating: 100% (QA)

1 Membership cost 50 per year and it is open to businesses and individuals In addition Costco provid... View the full answer