Coscto

Mktg 640: Strategic Marketing in a Global Economy

[pic] [pic]

[pic]

1.0 Executive Summary

Costco Companies, Inc. is membership warehouse club, dedicated to bringing their members the best possible prices on quality brand-name merchandise. With hundreds of locations worldwide, Costco provides a wide selection of merchandise, plus the convenience of specialty departments and exclusive member services, all designed to make your shopping experience a pleasurable one. A total of 278 members-only warehouse clubs in 24 states, the U.K., Mexico, Canada and Asia are operated by Costco. Members include businesses, who paid $35 a year, and the general public who as “Gold Star” members, paid $40. In the 1997 fiscal year, Costco had a net income of $312 million on sales of $21.5 billion and earned $400 million in member fees.

Costco Warehouses were designed to operate efficiently and to communicate value to the member. Costco serves as a buying agent for its members by preselecting popular products in sizes that offered the best value. In Jim Sinegal’s (CEO of Costco, Inc.) words “Everything we do is to provide goods and services to the customer at a lower price.” By adhering to an operating philosophy that was simple, efficient and limited in assortment, Costco was able to implement razor-thin margins that grew the company into a market leader and control bargaining position with suppliers.

Looking to expand its market share further and in response to members’ requests, Costco developed a portfolio of services that would be available to holders of a new “Executive” membership, for a $100 annual fee. While these services were outside of its core mission, test markets showed that the services could be profitable. Current Costco Members tended to be affluent, upscale and thrifty. Offering services such as auto and home insurance, mortgage and real estate services, long distance phone service, check and forms printing, credit card processing and health...