CASE 3: COSTCO
WHOLESALE QUESTIONS &
ANSWERS
Costco requires the payment of membership fees to shop at its warehouse. -
ANSWERyes
Costco's business model focuses on high sales volumes and rapid inventory turnover by
offering members very low prices on a limited selection of nationally branded and
selected private-label products in a wide range of merchandise categories. -
ANSWERyes
The broad appeal of the company's low prices create average levels of store traffic and
produce average sales volumes on many items. - ANSWERno
Costco operates profitably at significantly lower gross margins than traditional
wholesalers, mass merchandisers, supermarkets, and supercenters. - ANSWERyes
Costco's high sales volume and rapid inventory turnover generally allow it to sell and
receive cash for inventory before it has to pay many of its merchandise vendors, even
when vendor payments were made in time to take advantage of early payment
discounts. - ANSWERyes
Costco allows customers to shop free for a month before requiring a membership. -
ANSWERno
Costco's business model focuses on purchasing last season's products and marking
them down for a rapid inventory turnover. - ANSWERno
Costco is beginning to copy the business model used at Sam's warehouse. -
ANSWERno
The cornerstones of Costco's strategy are low prices, a limited product line and limited
selection, a "treasure hunt" shopping environment, strong emphasis on low operating
costs, and ongoing expansion of its geographic network of store locations. -
ANSWERyes
Costco has steadfastly and successfully pursued a low-cost leader strategy. -
ANSWERyes
Costco was known for selling top quality national and regional brands at prices
consistently below traditional wholesale or retail outlets. - ANSWERYes
, Costco has steadfastly and successfully pursued a differentiation strategy. -
ANSWERno
A key element of Costco's strategy to keep prices low to members was to cap the
margins on brand name merchandise at 14 percent. - ANSWERyes
While Costco's product lines consisted of approximately 4000 active items, some 40
percent of its product offerings were constantly changing. Costco's merchandise buyers
were continuously making one-time purchases of items that would appeal to the
company's clientele and that would sell out quickly. - ANSWERno
Almost 100 million cardholders were entitled to shop at Costco as of June 2020; in fiscal
2019, membership fees generated $3.35 billion in revenues for the company. -
ANSWERyes
Costco's growth strategy was to increase sales at existing stores by 5 percent or more
annually and to open additional warehouses, both domestically and internationally. -
ANSWERyes
Average annual growth at stores open at least a year was 10 percent in fiscal 2011, 6
percent in both fiscal 2013 and 2014, 7 percent in fiscal 2015, and 4 percent in 2016
and 2017. - ANSWERyes
Costco has steadfastly and successfully pursued a best-cost strategy. - ANSWERno
Costco strategy are high-priced items, a limited product line, and a strong emphasis on
low operating costs. - ANSWERno
Sinegal had savvy merchandising skills and orchestrated the company's effective
strategy to create a "treasure hunt" atmosphere in the stores, to keep prices ultra-low,
and to build a high volume of store traffic that promotes rapid inventory turnover. -
ANSWERYes
Jim Sinegal has set forth a clear and well-defined strategic path for the company to
follow. - ANSWERYes
Craig Jelinek would receive a "B" for attempting to change Sinegal's existing strategy. -
ANSWERNo
Jim Sinegal would receive a grade of "A" for being the driving force behind the
company's ability to grow. - ANSWERYes
Jim Sinegal would receive a grade of "B" for his effectiveness as a CEO, his approach
was aggressive which made him intimidating to store managers. - ANSWERNo
WHOLESALE QUESTIONS &
ANSWERS
Costco requires the payment of membership fees to shop at its warehouse. -
ANSWERyes
Costco's business model focuses on high sales volumes and rapid inventory turnover by
offering members very low prices on a limited selection of nationally branded and
selected private-label products in a wide range of merchandise categories. -
ANSWERyes
The broad appeal of the company's low prices create average levels of store traffic and
produce average sales volumes on many items. - ANSWERno
Costco operates profitably at significantly lower gross margins than traditional
wholesalers, mass merchandisers, supermarkets, and supercenters. - ANSWERyes
Costco's high sales volume and rapid inventory turnover generally allow it to sell and
receive cash for inventory before it has to pay many of its merchandise vendors, even
when vendor payments were made in time to take advantage of early payment
discounts. - ANSWERyes
Costco allows customers to shop free for a month before requiring a membership. -
ANSWERno
Costco's business model focuses on purchasing last season's products and marking
them down for a rapid inventory turnover. - ANSWERno
Costco is beginning to copy the business model used at Sam's warehouse. -
ANSWERno
The cornerstones of Costco's strategy are low prices, a limited product line and limited
selection, a "treasure hunt" shopping environment, strong emphasis on low operating
costs, and ongoing expansion of its geographic network of store locations. -
ANSWERyes
Costco has steadfastly and successfully pursued a low-cost leader strategy. -
ANSWERyes
Costco was known for selling top quality national and regional brands at prices
consistently below traditional wholesale or retail outlets. - ANSWERYes
, Costco has steadfastly and successfully pursued a differentiation strategy. -
ANSWERno
A key element of Costco's strategy to keep prices low to members was to cap the
margins on brand name merchandise at 14 percent. - ANSWERyes
While Costco's product lines consisted of approximately 4000 active items, some 40
percent of its product offerings were constantly changing. Costco's merchandise buyers
were continuously making one-time purchases of items that would appeal to the
company's clientele and that would sell out quickly. - ANSWERno
Almost 100 million cardholders were entitled to shop at Costco as of June 2020; in fiscal
2019, membership fees generated $3.35 billion in revenues for the company. -
ANSWERyes
Costco's growth strategy was to increase sales at existing stores by 5 percent or more
annually and to open additional warehouses, both domestically and internationally. -
ANSWERyes
Average annual growth at stores open at least a year was 10 percent in fiscal 2011, 6
percent in both fiscal 2013 and 2014, 7 percent in fiscal 2015, and 4 percent in 2016
and 2017. - ANSWERyes
Costco has steadfastly and successfully pursued a best-cost strategy. - ANSWERno
Costco strategy are high-priced items, a limited product line, and a strong emphasis on
low operating costs. - ANSWERno
Sinegal had savvy merchandising skills and orchestrated the company's effective
strategy to create a "treasure hunt" atmosphere in the stores, to keep prices ultra-low,
and to build a high volume of store traffic that promotes rapid inventory turnover. -
ANSWERYes
Jim Sinegal has set forth a clear and well-defined strategic path for the company to
follow. - ANSWERYes
Craig Jelinek would receive a "B" for attempting to change Sinegal's existing strategy. -
ANSWERNo
Jim Sinegal would receive a grade of "A" for being the driving force behind the
company's ability to grow. - ANSWERYes
Jim Sinegal would receive a grade of "B" for his effectiveness as a CEO, his approach
was aggressive which made him intimidating to store managers. - ANSWERNo
