2. 470 Team Organizational Chart Beth Carmickle CEO Bob Abbott CFO Esra’a Al- Shawafi Organizational Finance Ester Cova COO Fitore Rama CMO Kurt Robinson Human Resource Derrick Yarbough Development Beth

3. Costco Wholesales Organizational Chart Click: http://www.theofficialboard.com/org-chart/costco-wholesale Beth

4. About Costco Wholesale A membership warehouse club, dedicated to bringing members the best possible prices on quality brand-name merchandise. With hundreds of locations worldwide, Costco provides a wide selection of merchandise, plus the convenience of specialty departments and exclusive member services, all designed to create a pleasurable shopping experience. Fitore

5. History of Company The company's first location, opened in 1976 under the Price Club name on Morena Boulevard in San Diego. Originally serving only small businesses, the company found it could achieve far greater buying clout by also serving a selected audience of non- business members. -In 1983, the first Costco warehouse location was opened by Jim Sinegal and Jeffrey Brotman in Seattle, Washington -Costco became the first company ever to grow from zero to $3 billion in sales in less than six years. -Costco and Price Club merged in 1993, operated under the name PriceCostco, had 206 locations, and generated $16 billion in annual sales. -By 1997 the company officially changes it's name from PriceCostco to Costco Companies, Inc. Fitore

6. Mission Statement "Costco's mission is to continually provide our members with quality goods and services at the lowest possible prices. In order to achieve our mission we will conduct our business with the following Code of Ethics in mind: Obey the law Take care of our members Take care of our employees Respect our vendors If we do these four things throughout our organization, then we will realize our ultimate goal, which is to reward our shareholders." Beth

7. A tour through Costco https://www.youtube.com/watch?v=6iDM_6PWnEE Ester

8. How Company Makes Money Bob

9. Structure of Company Three Divisions ●US ●Canada ●International Bob

10. Description of the Industry Competitors- Wal-Mart, Bj’s, Amazon Size- 3,142 Billion Dollars! Growth Rate- 3.5% Esra’a

11. Driving Forces ●Advances in technology to cut cost ●Greater Ethnic diversity ●Environmental concerns ●Internet technology ●International discount stores Esra’a

12. Industry Life Cycle Esra’a

13. Critical Success Factors ●Brand awareness ●Customer loyalty ●Efficient cost controlling methods ●Entrusted employees and corporate culture ●Differentiations ●Strong distribution channels Esra’a

14. External Analysis Industry Map Five Forces - The Industry P.E.S.T Analysis Competitive Market Benchmark Analysis S.W.O.T. External Opportunities and Threats EFE - External Factor Evaluation Derrick

15. Industry Map Derrick

16. Five Forces Threat of Entry : LOW Threat of Substitutes: MED-HIGH intensity of Rivalry: MED-HIGH Bargaining Power of Buyers: LOW Bargaining Power of Suppliers: LOW Derrick

17. Porter’s 5 Forces Threat of Entry ●Few Competitors ●Government regulations ●Established brands ●Growing market ●Capital requirements Derrick

18. Porter’s 5 Forces Substitutes ●Switching costs ●Brand loyalty ●Comparable product diversity ●Price sensitivity ●Alternative options (ie retailers that offer comparable services Derrick

19. Porter’s 5 Forces Rivalry- Medium-High ●Low switching costs ●Weak product differentiation ●Industry reaching maturity stage ●Existing well established brand loyalty Fitore

20. Porter’s 5 forces Powers of Buyers- Low ●Switching costs ●High value ●High membership base ●Most members purchase in small amounts Fitore

21. Porter’s 5 Forces Power of Suppliers- Low ●Buy in large quantities ●Low switching costs ●Many suppliers ●Ability to buy suppliers ●Ability to cut current suppliers Fitore

22. P.E.S.T. Analysis Ester

23. P.E.S.T. Analysis Political ●Affordable Care Act ●OSHA ●Import fees, duties, restrictions ●Political instabilities ●Varying state laws Ester

24. P.E.S.T. Analysis Economics ●Economic slowdown ●Rising interest rates ●Rising inflation ●Import restrictions ●Discretionary spending by consumers Bob

25. P.E.S.T. Analysis Social ●Disposal of hazardous materials ●Treatment of female employees ●Social media policy ambiguity ●Changing demographics ●Environmental violations Beth

26. P.E.S.T. Analysis Technical ●Younger generation is shopping online ●Shoppers expect same day delivery for online purchases ●Web format unattractive to Millennials Kurt

27. Competitive Market Benchmark Analysis ●Financial ●Sales ●Products Kurt

28. Competitive Market Benchmark Analysis Financial Esra’a

29. Competitive Market Benchmark Analysis Beth

30. Competitive Market Benchmark Analysis Products Bob

31. SWOT Kurt

32. External Analysis EFE Score = 2.31 Kurt

33. SWOT Opportunities EFE Score = 2.31 1.Opening more stores in new (more populated, urban) areas 2.Web sales 3.Upgrade memberships for loyal customers (yearly reward) 4.Open in more countries throughout the industrial world 5.Improve relationships with suppliers to further improve pricing Beth

34. SWOT Threats EFE Score = 2.31 1.Sensitive to economic conditions (especially membership fees may be eliminated in tough times) 2.Aging baby boomers downsize and moves closer to cities and away from Costco locations 3.Showrooming 4.Online shopping with convenient delivery 5.Powerful competition -especially Sam's Club and Amazon Beth

35. Costco Wholesale’s Financial Performance Bob

36. Key Financial Ratios Choose 2-3 ratios from each category in book Costco Wholesale’s Financial Performance Bob

37. Current Ratio/Revenue Increase Bob

38. Growth Esra’a

39. Direct Competitor Comparison Esra’a

40. Stock Price Esra’a

41. Bob

42. What the CEO wants you to know Ram Charan’s “What the CEO Wants You to Know” teaches us about the importance of having complete buy-in and understanding of the business. “If we take care of the business and keep our eye on the goal line, the stock price will take care of itself.” “We want to turn our inventory faster than our people,” Costco’s founder, Jim Sinegal. Sinegal’s words and actions, combined with Costco’s priorities clearly show that he lives and breathes the basics of business and is clear about how Costco’s money is made and his employees are bought in to his concept. CEO Book Issues: talk to them Ester

43. BCG Matrix Esra’a

44. GE Matrix (canada?) Derrick

45. We Are Here Company Life Cycle Kurt

46. Corporate Culture Analysis “This shirt that I'm wearing, which is a Kirkland Signature shirt, is fantastic.” -Sinegal “...of every dollar that we spend on our business, $0.70 is on people.”- Sinegal “Due to an internal hiring policy, stockers and callers on its floors can seriously aspire to a lifelong career at the company.” Need to go deeper on culture. Use catagories in the 2015 version of the text book. Ester

47. Internal Analysis IFE Score = 3.105 Kurt

48. SWOT Strengths 1.Members only 2.Limited locations 3.Low overhead 4.Only 10% of members do not renew their membership on an annual basis 5.Low margins, even compared to others in industry IFE Score = 3.105 Ester

49. SWOT Weakness 1.Lack of web sales 2.No targeted advertising/brand marketing 3.Store appearance is low priced 4.Do not accept manufacturer's coupons 5.Accept limited credit cards IFE Score = 3.105 Ester

50. Key Strategic Issues: Economics ●Aging baby boomer ●Economic slowdown ●Financial bubbles Kurt

51. Key Strategic Issues: Industry ●Logistical complications (suppliers/distribution channel) ●Limited locations compared to competition Fitore

52. Key Strategic Issues: Competitors ●Sams ●BJ’s ●Amazon ●Others (Target, Walmart, Grocery Stores, Etc.) Esra’a

53. Directional Indicators I/E Matrix SPACE Matrix Grand Strategy Matrix Fitore

54. Scores: EFE- 2.31 IFE- 3.105 I/E Matrix Fitore

55. SPACE Strategy Matrix Internal Strategic Position External Strategic Position Financial Strength (FS) Environmental Stability (ES) EPS growthHR management Liquidity growthRising interest rates ROA increaseExchange rates ROI increaseConsumer discretionary spending Efficiency Ration stability Rising inflation Internal Strategic Position External Strategic Position Financial Strength (FS) Environmental Stability (ES) Market shareGrowth potential Sale forceBarriers to entry Customer loyaltyStability during economic fluctuations Cost/price strategies Price elasticity DistributionProduct diversity Beth

56. Grand Strategy Matrix Bob

57. Identification of Strategic Alternatives Ansoff Matrix TOWS Strategy Development Grouping/Overarching Strategies Beth

58. Ansoff Matrix: New Markets Products Developed Beth

59. Ansoff Matrix: Existing Markets Products Developed Beth

60. TOWS Strategy Development 1. Offer discounted membership fees to new consumers in order to capture and expand further into current market. (S-4/ O-1) 2. Offer new packaging method and pricing options to capture younger consumers by taking advantages of our low prices. (S-3/ O-5) 3. Expand into international market using our current strategy of providing high quality products and offering low prices. (S-5/ O-4) 4. Expand our signature line of Kirkland brand products offered in stores. (S-7/ O-8) 5. Attempt to capture more of the E- market. (S-3/ O-3) 1. Increase the number of stores in all existing locations (w2, w4/o1) 2. Increase the number of private store labeled goods like Kirkland (w13, w9/o8) 3. Have stronger presence in the social media and better e-commerce sales promotions (w12, w12/o3) 4. Increase number of stores internationally in existing countries and expand to other countries as well (w2, w1, and w6/o4) 5. Expand into new markets, like the retail market or organic market (w5, w7/o6, o5) S/OO/W Esra’a

61. TOWS Strategy Development 1. Make products different by using a high quality product proposition (S2/ T1) 2. Reduce threat of untimely responses to consumer trends by using advanced technology/up to date products (S1, S7, and S9/T7) 3. Settle lawsuits (if any) and account for altered demand for products without sacrificing environmental standards. Offer “natural” products and combine the socially responsible image. (S12/ T5) 4. Give proper warnings of the dangers and risks of products (S12/ T8, T9) 1. Expand to the retail market (w2, w5/T1) 2. Expand in countries with similar mix to Canada and the USA (w2/T6) 3. Develop better customers’ service model and marketing model (w6, w12/T7) 4. Invest in less vulnerable markets (w10/T2, T4) 5. Have better model for consuming space and renewable energy models (w3/T5) S/T T/W Esra’a

62. Grouping/ Overarching Strategies 1.E-market Expansion 2.Product Development Expansion 3.International Expansion 4.Membership Development 5.Market Development/ Expansion Kurt

63. Analysis of Alternatives QSPM Matrix Strategic Fit Assessment Financial Fit 3 Year Financial Projection Kurt

64. QSPM Matrix/ Strategic Fit E-market Expansion Product Development Expansion International Expansion Membership Development Market Development/ Expansion #4#5#1#3#2 3.743.176.155.735.95 Rank TAS Beth

65. Financial Fit Bob

66. Chosen Strategies 1.International Expansion 2.Membership Development 3.E-Market Expansion Beth

67. 3 Year Financial Projection Esra’a

68. 3 Year Financial Projection Esra’a

69. Implementation Plan ●Establish structure for new products ●Develop requirements ●Stick to a budget ●Keep doing what we do best ●Acquire feedback Beth

70. Triggers & Contingency Plans Trigger 1: International markets slow to embrace Costco Wholesale Trigger 2: Membership is not increasing fast enough to justify the new programs Trigger 3: Consumers are not responding well to new online and mobile platforms Plan 1: Slow expansion; work to better understand market Plan 2: Cut these programs Plan 3: Reevaluate expectations Beth

71. Revised Mission Statement Use format in the book for mission statement Costco Wholesale provides excellent value for its shareholders by doing right by its customers, employees, and other stakeholders. Beth

72. Questions ?