Costco Wholesale in 2012

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According to Exhibit 1 and Exhibit 4 from Crafting and Executing Strategy (Thompson, Peteraf, Gamble, Strickland) Table 1.1 below shows the items selected from Costco’s income statement. Table 1.2 is from Sam’s Club. (It was challenging to get all of the necessary information for Sam’s Club because it is a segment of Wal-Mart, Inc. and they don’t release all of the items normally found in a company’s income statement, so we can use Net Sales in our analysis.) BJ’s Wholesale is shown in Table 1.3.

Table 1.1 Selected items from Costco Income Statement

(In Millions $)

2011

2010

2009

2008

2005

Gross Profit

$9,309

$8,260

$7,554

$7,474

$5,515

Operating

Income

$2,439

$2,077

$1,777

$1,969

$1,474

Net Income

$1,462

$1,303

$1,086

$1,283

$1,063

Net Sales

$87,048

$76.255

$69,889

$70,977

$51,862

Table 1.2 Selected items from Sam’s Club Income Statement

(In Millions $)

2011

2010

2009

2008

2005

Net Sales

$49,459

$46,710

$46,854

$44,357

$37,119

Operating

Income

$1,711

$1,512

$1,610

$1,618

$1,280

Table 1.3 Selected items from BJ’s Wholesale Income Statement

(In Millions Net Sales$)

2011

2010

2009

2008

2007

Gross Profit

$935,933

$870,138

$795,503

$699,036

$677,923

Operating

Income

$208,130

$227,639

$225,504

$199,859

$150,521

Net Income

$95,036

$131,271

$133,901

$122,447

$71,505

Net Sales

$10,633

$9,821

$9,662

$8,667

$8,150

With the information provided in tables 1.1 to 1.3, we can see that Costco has superior financial performance than Sam’s Club and BJ’s Wholesale in regards to fundamental aspects of business operations. Costco has higher gross profit than BJ’s Wholesale and higher operative income than both of their competitors throughout various years. In 2011 Costco also had 56% higher net sales than their direct market rival Sam’s Club and 88% higher net sales than BJ’s Wholesale. The financial superiority of Costco has been built within the corporate strategy of pricing, product selection, treasure-hunt merchandising, low-cost emphasis and supply chain efficiencies. All of these important aspects of business strategy are being implemented from the core up. Along with very successful business strategies, Costco also has very generous and friendly customer service policies which consumers appreciate. As a result of implementation of business strategy and stellar customer satisfaction policies Costco has made itself financially superior to Sam’s Club and BJ’s Wholesale.

4. Does Costco enjoy a competitive advantage over Sam’s Club? Over BJ’s Wholesale? If so, what is the nature of its competitive advantage?

Costco’s competitive advantage lies within their mission statement, “The company will continue to pursue its mission of bringing the highest quality goods and services to market at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethics that includes taking care of our employees and members, respecting our suppliers, rewarding our shareholders, and seeking to be responsible corporate citizens and environmental stewards in our operations around the world (Thompson, Peteraf, Gamble, Strickland.)”

While all three wholesalers share a similar philosophy