Business Analysis on Costo Wholesale Corporation

Essay by ataf78A+, February 2006

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Key Facts

Costco Wholesale celebrated its 25th anniversary in 2001, tracing its history from the 1976 founding of San Diego-based Price Club, with which Costco merged in 1993, to today's company, the leader in membership-based wholesale warehouse sales.

Costco has positioned its stores to not only attract a higher-end customer but also to offer high-quality, high-value products at very attractive prices. It does this through strong vendor relationships and an item-focused strategy that gives it economies of scale in purchasing.

Costco Wholesale Corporation operates exclusively in the retail sector, through its more than 300 warehouse-shopping clubs. The company grew dramatically over the review period thanks to both a healthy economy and the expanding popularity and availability of the hypermarket retail format, of which Costco was one of the founding members. With nearly all of its outlets the size of a small football stadium (averaging 12,542 sq m in 2001) Costco represents the prototypical warehouse retail chain.

In recent years Costco has begun to expand its operations overseas, to both the UK and several Southeast Asian markets. In many cases these expansions represent those markets' first exposure to the broad hypermarket format and to date, results have proven favourable, leading Costco to assess further opportunities in other markets.

Costco Wholesale operates 401 warehouse stores, 295 of them in 36 US states, 60 in Canada, and the rest in Korea, Japan, Taiwan, the UK and Mexico. In Mexico, Costco operates a 50% joint venture with a local partner. In 2005, the company acquired the 20% equity interest in Costco Wholesale UK Limited that was held by Carrefour Nederland BV.

On the Fortune 500, Costco sits at number 44 overall. It is listed at number two behind Home Depot on the speciality retailers list and trails only Wal-Mart Stores, Sears and...