Reference no: EM132273008

1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Select the best responses from the options provided.

a. Part of Costco’s business model includes requiring the payment of membership fees to shop at Costco.

b. Costco offers membership discounts in order to attract more members.

c. Costco focuses on generating high sales volumes and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories.

d. Costco carries over 40,000 items, of which 50 percent are quality brand-name products.

e. Costco appeals to customers through low prices, creating high levels of store traffic and producing big sales volumes on many items.

f. Costco profitability is due to their operating efficiencies, which include efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities.

g. In order to purchase in large volumes from suppliers, Costco cuts costs in other areas such as employee wages, benefits, and contracting.

h. Costco’s high sales volume & rapid inventory turnover generally allowed it to sell & receive cash for inventory before it had to pay many of its merchandise vendors, even when vendor payments were made in time to take advantage of early payment discounts.

i. Costco must maintain a high working capital in order to finance a large percentage of its merchandise.