Costco Wholesale In 2012 Essay Example | Topics and Well Written Essays - 750 words

Costco Wholesale In 2012 - Essay Example The philosophy of the Costco is to be concerned with customers and employees and meeting their needs which in the long-run results to rewarding of their shareholders. Stakeholders have invested a lot of their money in the company. They have faith that Costco will invest wisely and despite the ups and downs, the business has operated in profitable ways. Costco has inventories traded publicly on the NASDAQ stock exchange market. The stakeholders therefore get good returns from the company. Porters Five Forces Model has five forces which include: The threat of substitute products. This can be a strong threat especially considering there is e- retailing and websites like costo.com in Canada. It therefore limits the profits that a company could actualize and the amount of sales. The bargaining power of suppliers is moderate to low competitive force. Costco has many warehouses and therefore it requires many suppliers. However there is no supplier who can singly influence the pricing of raw materials or even striking due to financial instability. Instead, the suppliers compete for the supply orders despite the poor terms and conditions of trade. This reduces their bargaining power. Bargaining power of customers is a weak threat because Costco is a large retailer which even sells its products in bulk. Most of the members purchase products in small amounts as compared to the whole stock. One member has very little or even none influence on the quality and prices of products sold by the company. Even if the member results to quit the company and go to the competitor of Costco will have no effect on the sales volume of the company. Threats of new entrants are low considering that Costco has already established itself and it offers low prices of its products. This discourages any new entrant because it cannot reduce prices below the ones existing in the market.