1. Costco’s business model is called a subscription business model which entails rapid inventory turnover and large sale volumes. Costco implemented this model by offering its customers with national and private label brands at affordable prices. Notably, Costco’s business model is quite appealing as it offers its clients with products at low prices thereby facilitating rapid inventory turnover(Cascio, 2016). Based on its rapid inventory turnover, Costco can sell inventory even before that inventory payment is due to the manufacturers. This strategy allows Costco to save money based on manufacturer discounts with regards to early payment.

Costco’s business model is focused on generating high sales volumes through quick inventory turnover. This is achieved by offering its customers with low prices on a limited number of nationally branded products and selected private product from a wide range of merchandise. This business model is based on customer membership and loyalty which is renewed on an annual basis. The effectiveness of the model is reviewed by the number of customers who renew their membership. Costco’s business model is effective as customers get quality bargains for products and this keeps them coming back.

2. Costco’s fundamental strategy is based on its capability of providing clients with a wide range of products at the best price. Notably, Costco sells almost all house and office appliances as it allows for clients with nearly everything they want.Compared to other warehouses and retail outlets, Costco is known to offer about more than 3,000 items that a typical Wal-Mart can offer(Cascio, 2016). Costco’s strategy is based on providing quality products at low prices, providing clients with a limited selection, and an excellent shopping environment. Notably, Costco markets their Kirkland brand, which is designed to give the customer with products that match the standards of the national brands. Besides, Costco has capped its profit margins at 13 % for the branded products, and for its Kirkland Signature brand, and it has capped its profits margins at 14%.(Thompson et al., 2017). This is done to ensure that the Kirkland Signature brand is selling at a 15 % lower rate than other brand name products that are at Costco retails stores.

Furthermore, Costco pricing strategy plays a crucial part in their success.  Costco offers large quantity count of items, and this makes them more efficient and manages their store effectively. Costco’s offer treasure-hunt is merchandising in which they continuously change the selection of luxury items on sale so that they can entice shoppers to spend more by offering irresistible deals. Costco’s clients can make more purchases which enable them to get discounts(Thompson et al., 2017).Indeed, Costco offers personalized services within the stores in a bid to attract customers. These services include photo studios, pharmacies, and medical consultancy, food courts, and banking services.

3. Costco effective strategy that is made up of five sub-strategies has enabled it to invest in all market opportunities. This organization has found a way of successfully implementing these strategies which contribute to the overall goal of generating high sales and having a rapid inventory turnover. The five sub-strategies include a limited section of national brands and private labeled product, low operational costs,“treasure hunt” shopping experience, geographical expansion and ultra-low prices of their products (Stone, 2013). Costco has been able to maintain its competitive advantage with regards to its product offerings. They offer products that meet the needs of their customers. Costco has managed to provide that create a one-stop shopping experience for their clients. Costco maintains its competitive advantage based on its geographical expansion.

References

Cascio, W. F. (2016). Decency means more than “always low prices”: A comparison of Costco to Wal-Mart’s Sam’s club. Academy of Management Perspectives, 20(3), 26-37.

Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2017). Crafting and executing strategy. The quest for competitive advantage.Concepts and cases.15th edition, New York, NY.

Stone, B. (2013). Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World. Bloomberg News

 
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