Costco Wholesale Corp

1. What are the chief elements of Costco’s strategy?

Answer:

Costco main element is the success in both the production and the operation

As for production Costco offers cheap prices as a result of low mark-up, they work with the manufacture to create unique bulk packing. On the other hand the efficiency of operating the business was the key of success. Expenses are minimized through stores were run in no-frill warehouse facilities , reducing capital expenditures, lesser number of employees (fork lifts) and also a cross-docking procedure to reduce transportation costs

2. What is Costco’s business model?

Answer:

Costco business model is based on that of sol price sell a limited number of items, keep costs down, rely on high volume, pay workers well , have customers buy membership, and aim for wealthy clientele of small business owners and middle class shoppers. A typical Costco store stocks 4000 types of items. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze bulk discounts from suppliers.

3. How well is Costco performing from a financial perspective?

a. Use the financial ratios presented in Exhibits 10 and 11 to help you diagnose Costco’s financial performance

* Margarita Torres Return on equity ratio (ROE) & Return on assets ratio (ROA) is misleading because she used the net income for 2001 and divided it by the equity in 2000and the same in ROA income of 2001 divided by assets in 2000 however the ROE in 2001 is less than year 1998 by 3.18% but in all cases 12.33% as return on the investment is quite good specially at those days (September 11)

* Costco has a problem in 2001 (current ratio 0.94) so it means that it will not be able to meet its current obligations

* Net income for fiscal year 2001 decreased 5% to $602 million from $631million in 2000

* Net Sales increase 8% to $34 billion in fiscal 2001 from $31 billion in fiscal 2000.

* Membership fees and...