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Coscto Wholesale Corporation - Case Study Example

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Coscto Wholesale Corporation

Consumers want new products, which often result from sizable expenditures on research and development that can be undertaken only by large enterprise. In reality, it seems that a market of partial monopolies has provided the greatest measure of abundance (Global Marketing Principles 2008). Competition occurs not only in markets of many small firms but also in markets of relatively few large ones. However, in markets with few large firms, competitive action can be countered, and price competition may not serve as an effective method of competition. Therefore, products and services also become competitive weapons, and nonprice competition assumes importance. This fact has not yet been sufficiently recognized and integrated into theoretical models (Costco Home Page 2008).
Costco spends no on advertising following "the no-frills concept". Costco has no public relations and advertising department trying to prove that the main principle of business is to sell products "as inexpensively as possible" (DiCarlo 2004). Costco does not rely on advertising proposing customers unique services and wide assortment, low prices and customer support. Technological improvements facilitate the type of centralized management that characterizes these organizations. The economies of scale that result from increasing store count and the ability to divide tasks between store operations and central merchandising put them in very powerful positions vis--vis both their customers and their suppliers. Costco was founded in 1976 as Cash-and Carry Company. The owner of Costco, sol Price, opened the Price Club store in San Diego as a discount store.
INTRODUCTION
The sales model of Costco is to sell products at low prices but at high volumes. During the 1980s, economic turmoil opened the door to retailing innovators who cut the cost out of distribution and drove conventional department stores or discounters to their knees or to bankruptcy court. Of the top twenty discount department stores in 1980, fewer than half remain in operation today, while the doomed still stick to business as usual. The seeds of "creative destruction" were sown in the 1980s but will be harvested in the 1990s. As many as 20 percent of the regional shopping centers currently operating in the United States will close by the year 2000 (Costco Home Page 2008; Bearden et al p. 54).
In order to remain competititve, Costco changed its strategy and introduce Costco membership. Goldstar and Business Memberships costs about $50 a year and the Executive membership is about $100 a year. Only Costco members can purchase main products except drugs, drinks and gasoline similar to other retailers of this type, Costco continues to rattle around within overstored retail square footage that outstripped both population growth and consumer spending over the past decade (Costco Home Page 2008). The coming shakeout in retailing has been preordained by a copycat, follow-the-leader mentality, a quiet conspiracy toward "sameness" in retailing--in layout, location, presentation, products, and service. Diversity in products, in consumers, in employees, and in the environment will demand diversity and dexterity among retailers. "Costco sells very large volumes of merchandise and achieving high inventory turnover In addition to ...Show more

Summary

Costco is one of the large wholesale club chains working on the market since 1976. Costco customers belong to different social groups but the core of customer audience is low and middle income working families and small businesses. Price reductions and discounts are the main benefit low income consumers…
Author : yrolfson
Coscto Wholesale Corporation essay example
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