Issues: Upon completion of the in depth analysis of Costco and the industry in which it operates, two major issues were identified. These issues relate to the long term sustainable growth of Costco and needs to be addressed by management. One issue that that was evident throughout the analysis was the stagnating profitability. One aspect that is causing this issue is the above-average employee compensation (relative to industry standards) offered by Costco. Being accumulated into the selling and administrative expense line on the income statement, it places a downward pressure on profitability. Much of the manual work accomplished within the store environment (cashier, stocking clerk) is not skilled and therefore does not require a…show more content… does, however, have a couple of issues that warrant management consideration and a slight shift in those areas would enhance profitability and sustain growth into the future
APPENDIX A – Company’s External Environment (External)
Key Economic and Industry Variables: * Industry size: $125 billion, 1250 warehouse locations in North America, ≈ 1500 worldwide * Geographic segmentation: * Industry origins can be traced to the United States and its subsequent expansion into the Canadian and Mexican markets; some expansion into the international markets * Product Segmentation: * ‘discount warehouse and wholesale club’ segment of the retail industry * Product categories range from food and household supplies to electronics, furniture and appliances to office supplies clothing and books * Industry Concentration: * Concentrated industry with 3 main players and smaller competitors; top 2 make up 92% * Industry lifecycle: * Within North America (especially the US), the industry has entered maturity stage; the years rapid store openings have slowed, still some store openings * “Most every major metropolitan had one if not several warehouse club operations” * new store openings target states and cities where one does not exist or areas capable of handling two or more (potential for some cannibalization) * Decline in the capital expenditure in 2009 in the US for the first time; also
