Explore BrainMass
Share

Evaluation of Costco's Pricing, Product & Marketing Strategy

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Discuss and evaluate Costco's strategy in terms of pricing, product selection and marketing and advertising strategy.

Discuss whether or not Costco can achieve a sustained competitive advantage with this strategy.

Discuss the alignment of Costco's mission and strategy. Evaluate whether or not the strategy supports the mission.

Discuss the company's business philosophy, values and code of ethics. Evaluate how these might give Costco a competitive advantage.

© BrainMass Inc. brainmass.com October 17, 2018, 2:41 am ad1c9bdddf
https://brainmass.com/business/competitive-advantage/evaluation-costco-pricing-product-marketing-strategy-392155

Solution Preview

Costco's strategy for pricing was to originally sell all product at cost plus a set markup ( I believe it was 10%). In order to negotiate better with suppliers who did not want to offend other retailers Costco and suppliers formulated and offered special "club packs". This enabled the supplier to offer lower prices to Costco and Costco to offer special value to consumers. It also made it difficult for the consumer to calculate their savings but once they did they found savings. Costco attempts to offer supreme value to the consumer on staples, while also having enough novelty/luxury/extra items to intrigue consumers to add more to their cart. For instance, a family can shop at Costco for their groceries but be lured in by the special seasonal patio furniture and floral offers. These items add plus sales to Costco's bottom line. More and more Costco is trying to capture more of the consumer's spending dollar: insurance, tickets, coffins, 6.77 caret diamond rings, wedding flowers, cakes, etc. They pride themselves on quality, selection, and price. The keys to their success are rapid inventory turnover and high sales volume. They drive consumers in with national brands but offer competing private label products at lower prices and equal quality (often manufactured by same vendor). Margins are now calculated at 14% of cost for branded items, 15% of cost for private label. In this manner they are able to increase profit margins. The product is stacked warehouse style, with limited effort in order to further control costs. Although the warehouses are huge one will ...

Solution Summary

This detailed solution discusses and evaluates Costco's strategy in terms of pricing, product selection, marketing and advertising strategy. It also evaluates whether Costco can achieve a sustained competitive advantage with this strategy, the alignment of Costco's mission and strategy, and the company's business philosophy, values, and code of ethics. It includes links and examples.

$2.19
Similar Posting

A SWOTT analysis is a comprehensive evaluation of an organizations internal and external environment. SWOTT is an acronym for Strengths, Weaknesses, Opportunities, Threats and Trends. In some cases, the SWOTT analysis has been reduced to eliminate the "threat" portion of the analysis, however, I feel that the"threat" portion is highly relevant to examining an organizations external environment. Sun Tzu mentions in the Art of War that (paraphrase) it is crucial to know our enemies and to develop a strategy to defeat the enemy. In an organization, it is imperative to identify the threats within the marketplace if we are ever going to maintain a competitive advantage.

A SWOTT analysis is a comprehensive evaluation of an organizations internal and external environment. SWOTT is an acronym for Strengths, Weaknesses, Opportunities, Threats and Trends. In some cases, the SWOTT analysis has been reduced to eliminate the "threat" portion of the analysis, however, I feel that the"threat" portion is highly relevant to examining an organizations external environment. Sun Tzu mentions in the Art of War that (paraphrase) it is crucial to know our enemies and to develop a strategy to defeat the enemy. In an organization, it is imperative to identify the threats within the marketplace if we are ever going to maintain a competitive advantage.

The purpose of strategic planning is to actively compete in the marketplace. Strategic planning is the core foundation of competitive alignment. Organizations must evaluate their positioning within the industry. Strategic planning takes into account previous business practices and benchmarks the best known practices that enabled the organization to be successful. This methodology of planning enables the organization to be prepared for the future. An organization who have a strategy implemented have already established a set of objectives that must be acquired. An effective plan will also allow an organization to predict where the company will end up five to 10 years from now.

"There are a variety of perspectives, models and approaches used in strategic planning. The way that a strategic plan is developed depends on the nature of the organization's leadership, culture of the organization, complexity of the organization's environment, size of the organization, expertise of planners, etc."(McNamara, 2010)

A SWOTT analysis must be conducted in order to have an effective strategic plan. One of the components utilized in the strategic planning process will include conducting an environmental scan. As previously mentioned before a SWOTT analysis thoroughly analysis all aspects within the organizations external environment. An organization would be at a disadvantage if they did not integrate SWOTT during their strategic competitive alignment process.

View Full Posting Details