Costco analysis - Case Study Example

Topic: COSTCO CASE STUDY ANALYSIS During the income period of 2000 to the profits of the Costco Company increased, which shows a positive change in the company operations. The mission of the company was offer customers goods and services that are of high quality and at the lowest prices possible. The main aim of the low prices was to wow customers into the shop (Arthur, p. 194). For years, Costco Company has been faced with a problem of capping its markup on brand name at fourteen percent. The markups most of the time was a maximum of fifteen percent while those of other companies was at twenty percent.

Because of the low prices, the company covered all the operating expenses and got low operating profits. The method focused more on impressing the customers and increased membership fees and in the financial income, the membership fees were higher than the company’s net income. For the above reasons, the company may fail in the long run (Arthur, p. 195). The problem of pricing can only be solved as explained below. As the membership fees caters for the operating expenses, the company should maintain the prices.

Since the goods and services are of high quality and underpriced, it may highly affect the company. To avoid the consequences, the company should use penetration-pricing model to solve the problem. In the model, goods are lowly priced and then are gradually increased to match the market value of the products. By using the penetration-pricing model, they will maintain sales, customers and most importantly increase organization profitability (Arthur, p.196)Works CitedArthur. A. Thompson. Costco Wholesale in 2012: Mission, Business Model, and Strategy.

The University of Albama.2012.Print.