Costco Inventory Control:
Costco Wholesale Corporation has continued to use its entrepreneurial ability to constantly reinvent itself. The constant reinvention and ability has made Costco to gain a powerful global competitive advantage. Actually, the company is currently considered as a warehouse king who success continues to be a major threat to Wal-Mart, the largest retailer across the world. Similar to Wal-Mart, Costco's global competitive advantage is attributed to the firm's efficiency in managing inventory and working capital. The company usually reinvents its inventory control and management approximately 13.8 times annually. Given the nature of its business model, Costco tends to sell in bulk quantities because of discounts on certain merchandise and ability to attract bulk buyers like small businesses.
Inventory Management:
Generally, inventory turnaround is a factor that indicates the effectiveness and efficiency of a business or company. Similar to the major companies within its industry, Costco's inventory turnaround shows the effectiveness of the company in managing working capital. This is primarily because inventory represents a huge portion of the firm's working capital. Inventory control usually involves the use of inventory management systems that enable managing and/or locating products through cost-effective means (Gilbert, p.6). While inventory management is a driving force for many companies, some firms struggle with the philosophy since their operations are characterized with high levels of inventory record inaccuracies. This contributes to significant loss of sales, sub-optimal retail performance, and inability to achieve the targeted service levels. During inventory management, policies and strategies used by companies differ depending on the type of product and the anticipated...
Costco Programs, Budgets and Procedures Costco's approach to financial improvement will come in the form of a two-pronged strategy. The first is to increase inventory turnover, and the second will come in the form of increasing market share. Inventory turnover is a standard ratio that refers to "how many times a company's inventory is sold and replaced over a period of time," ("Inventory Turnover," (n.d.). Increasing market share usually depends on 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
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
Buyer power is high. Consumers are well informed and have a number of discount and warehouse options from which to choose. As such, there is a high risk of substitution or switching, lending the buyer high power on aggregate. There are high barriers to entry. Tremendous economies of scale are required in order to adequately compete in the low cost sector. Infrastructure buildout costs are high for any firm
Costco has become a familiar name in homes across the country. Costco is a membership-based discount warehouse with a range of products including; food, clothing and electronics. Costco was created in 1983 by James D. Sinegal and Jeffrey H. Brotman. The main benefits associated with shopping at Costco include discount shopping and having the ability to buy in bulk. At Costco's members and their guest can purchase products that cost
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
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