Five Key Factors Influencing Service Market of Costco Wholesale - Case Study Example

Costco Wholesale of Background Service is intangible. Service marketing involves different activities related to business to business and business to consumers. This type of marketing deals with the process of providing services to its targeted customers. Service is associated with various types of marketing activities. Marketing of different goods is one of the major parts of service marketing. Service marketing is highly involved in selling of fast moving consumer goods and durables. In this case service marketing of Costco Wholesale is mentioned. There are different factors related to service which influences the function and performance of this company. This retail wholesaler company also faces many problems for its service related issues. The main service provider of this company is its workforce who handles the entire business process and the customers. With time the service industry have developed itself and improved its quality of services. Target Service Company Costco wholesale is an American multinational company. In US it is the second largest retailer. The organization was established in 1976 in California. The firm established its first warehouse in Seattle and named it as Costco. The founders of Costco wholesale are Sol Price, James Sinegal and Jeffrey Brotman. The company opened its first warehouse and named as Price Club. It was then converted to airplane hangar in San Diego. The company was initially operating in a small scale business. Slowly the company expanded its business by serving its targeted audience. This change helped the company to grow its business. It is the first company which started its business operations from zero and reached its revenue to $3 billion within six years. . In 1993 Price club and Costco merged its business and became a single company. The company opened its retail shop in 206 locations and increased its annual sales. This merger benefited its customers and the business in different ways. The customers having membership cards can shop at Costco and Price club easily. From its very beginning the company operates its business process in a very simple way. In this case study service part of Costco Wholesale is described in details. Five key factors influencing service market Bargaining power of buyer: The service market of Costco is characterized by weak bargaining power of buyer. The company has a large customer base. It provides best service to its customers at a low price. Moreover the customers have to switching cost if they purchases products from other company. So there are very rare instance when buyers changes company. Bargaining power of suppliers: Costco and the retail wholesaler industry have many suppliers who provide products and workforce to this industry. These suppliers have weak bargaining power. The company requires huge number of workforce to provide service. Workforce is easily available from different sources. Threat to new entries: service market of retail industry experiences a low threat of new entries. Big players are present in the market that provides a good quality of services to the customers. They act as a high barrier for entering into the market. Existing competition: Service market of retail wholesaler industry faces a strong competition. Costco Wholesale is presently at the top position but the demand of the customers related to service is growing day by day. So the companies are improving their service quality for attracting more customers. Substitute: All most all the companies in this industry provide same kinds of service to its customers. Therefore the threat of substitute is high. Service is differentiated on the bases of its quality. Companies in this industry use different technologies for improving its service quality. People those who make up the organization Employees of Costco contribute a lot in developing and growing the organization. The company selects efficient employees for performing its different services and functions. The management of this company distributes work among all employees on basis of their skills and capacities. Costco has both online and offline business. In its online business the company provides the service of shopping in a very easy way. A large number of employees look after this online business. They provide the customers various facilities of easy shopping. The customer service department of Costco’s online stores deals with different issues and problem of its customer that they have faced during shopping. Employees of offline stores of Costco assist the customers during their shopping. Employees of this company are highly trained to facilitate the customers. Managers of this Costco Wholesale provide the service of training and grooming all the employees for satisfying its customers by delivering high quality of services with different products. Costco Wholesaler also provides business phone services, water delivery, processing of merchant credit card etc. Different employees of this company are associated with these types of services. Reason for organizing and working together Costco performs all of its functions in a very organized and simple way. The goal of this company is to provide quality services and goods to its customers at low prices. For this reason Costco organized its business process very effectively which motivates its employees to deliver high quality of services. The company believes that by working together it would be able to satisfy its customers easily. Costco divide its employees into different teams. For organizing the team and its member the company maintains an ethical code which helps the organization to deliver and develop smooth work flow. Costco operates its business operation in a large scale. It deals with a huge number of customers. Therefore organized business process is required for dealing customers and its different business process. Teamwork helps the company to implement its various functions within a short span of time. Teamwork of Costco helps the company to understand its customers and their needs more effectively. So by working together the employees of Costco are able to improve their service quality. Organized process helps the company to handle its different business departments is a successful way. It also facilitate Costco to solve major business and service related problem efficient way. Activities to fulfill purpose Employees of Costco Wholesaler are selected on the bases of their talent and capabilities. They are provided with high quality of training by the company. It helps to increase and improve their potentialities and skills. The employees are trained according to the rules and regulation of the company for achieving goals and objectives of the company. For delivering high quality of services the company takes care of its member in a very satisfying way. Costco believes that the success of its company lies in making their organizational members happy. The organization provides a large range of products and services to its members. As a result they get many options to fulfill their needs and wants. The company implements different measures to increase trust of its members (Assael, 2005). The company sells top quality of product and services at a low price which attracts a huge number of customers. The employees of Costco develop a shopping environment where customers feel comfortable to purchase different products and services. The organization treats its employees as an important asset. So it provides great career opportunities to all of its staffs. Many benefits are provided to them to increase their motivation. Physical Resources Physical resources of Costco mean all its property and assets. Its assets include Costco shop, its capital used in the business, employees of the company and its customers. All of these resources contribute a lot in the growth and development of the company. It large store of Costco accommodate large number of customers which help the company to generate huge revenue. The company has large warehouses. It is a vital asset for the firm. Costco is one of the major players in the retail industry. It earns a huge amount of profit every year by its vast range of operational activities. This profit turns into assts of the company which is used to improve its business process and services. Employees of the firm are also perceived as an important asset of it. They have a huge contribution in delivering business function and enhance company’s operational activities (Tehrani, 2008). Different technologies used in the company are considered as its resources. Technologies and machines used by the Costco help to deliver smooth business operational process. Customers Major customers of Costco are big families and different companies. Costco is a wholesale retail company. Therefore different small and large companies purchase product and different services from Costco. Big families also shop from Costco in a large scale. The company sells products and services at a low price (Keller, 2006). Therefore it has a huge number of customer bases. Costco have both high income and low income level customers. Big small traders are also the customers of this company. They prefer in purchasing product at a bulk amount. SWOT Analysis Strength: Costco sells its product and services at a very low price in the market. The company is into the business for a long period of time. Therefore it has a strong brand presence in the market. The workforce of the organization is very efficient which helps it to deliver quality service. The company has a large and strong customer base. Weakness: The Company pays high wages to its employees which become a burden for it. Costco operates in a low price margin which sometimes lowers its profit. Compared to different discounts offered the company has a small marketing budget which hampers its different marketing activities. Opportunities: Costco has a huge opportunity to expand into foreign market. For expanding its business the firm has the opportunity to acquire more shoppers. There are many suppliers who are ready to supply different product and services to the company. Huge revenue generated by Costco helps it to do different merger and acquisitions. Threat: Competitors of Costco are implementing aggressive pricing strategy to increase their sales and revenue. Foreign markets have many political complication related to retail wholesale industry. Costco business operational process can get hampered for this reason. Domestic market of Costco has become saturated (Cheverton, 2005). The growth of the company has become very limited. It threatens its profit and lowers its business opportunities. 7Ps Product: The Company deals with a huge variety of retail product and different types of services. All types of FMCD and FMCG products are sold by this company. The Costco wide variety of product range attracts a huge number of customers. The company also provides many services to its customers like different health plans, travel packages etc. Price: Costco sells its product at a low price compared to other retail companies. Its low price strategy helps to capture a large amount of market. The company operates cost leadership strategies for developing competitive advantages. Place: Costco mainly operates its business operations in different parts of America. The company has around 200 warehouses all over the world. The company is also operating in UK, Australia, Japan, Korea, Spain etc. Costco is also trying to enter in different new markets of many other countries of the world. Promotion: the company performs small scale of advertizing activities. It mainly advertize about its product and services in different malls. Costco has chosen word of mouth as an effective way to advertize its product a services. Positive feedback from the customers or word of mouth helps the company to get more potential customers. Presentation: Costco operates its business activities with the help of its warehouse settings. Big warehouses of the company are organized in a very attractive and organized way which facilitates the customers in their shopping. The warehouses of Costco are designed is a very attractive way. Process: Costco operates its retail wholesale business through online and offline model. In online business process the company implements various new technologies to benefit is customers by giving different facilities (Baker and Hart, 2008). Its offline business process deals with operations of Costco’s various stores. Physical environment: Company’s physical environment means the environment within the stores which influence the customers to purchase various product and services of Costco. People: The firm has a huge number of people who are involved in the business process of the company. This large organization has many talented and efficient employees. Problem identification Major problem Costco is facing is related to market saturation of domestic country. Huge competition in its operation market narrows down the growth of Costco. Many big companies are capturing the market share by introducing high quality of services. As a result the profit of Costco has decreased a lot in the recent years. The company deals with a vast number of products. So the organization performs its business operation under high risk. New entrance in the retail market creates a major problem for Costco. These companies decrease the customer base of the Costco. Stock price of Costco is also decreasing for this. Conclusion and suggestions This case study deals with the American company Costco. The company is into the business of large number of products and services. It has a large customer base. Costco is one of the major players in retail wholesaler industry. This organization is into this business for a long period of time. Its business operations are influenced by various factors of the market. Costco’s suppliers, buyers play a major role in business operation of the company. Initially the company was operating its business in a small scale. But within a short span of time Costco have gained a huge profit which helped the firm to expand its business operations. Costco’s huge numbers of employees have contributed a lot growth and development of the company. The employees provide high quality of services which attract more customers to Costco. References Assael, H. (2005). Consumer behaviour. New Delhi: Dreamtech Press Baker, M., and Hart, S. (2008). The marketing book. Great Britain: Routledge. Cheverton, P. (2005). Key marketing skills: strategies, tools and techniques for marketing success. Great Britain: Kogan Page Publishers Keller, K. L. (2006). Marketing management. UK: Pearson Prentice Hall. Tehrani, N. (2008). Contemporary marketing mix for the digital era. USA: Author House Read More