Running Head: Expansion 1

Costco

by [Name of Student]

Course

Professor

[Name of Institution]

August 14, 2018.

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1 Executive Summary

This report deals with the analysis of strategic approaches for expansion of E-commerce

service of Costco. This report includes the market analysis, competitors, target market analysis,

consumer’s preferences, required team, market strategies for the new services, implementation

strategy, organizational structure, financial analysis and recommendations for the launch of

delivery services in the E-commerce of Costco. The initial part of the report consists of company’s

background, history and the initiation of delivery services under E-commerce. After the

background the report explains about the management structure of the company about how the

vision and mission statement supports the expansion of E-commerce service. Business objectives

of the company explain the parts about importance of knowing the preferences of customers and

providing high quality and low price products. In addition, market and industry analysis is very

much important in knowing about the environment for releasing the product and this also

demonstrate the present and future retail market conditions. The implementation strategy explains

about the plans or ideas being implemented in order to provide the customers with smooth delivery.

The financial analysis of the company provides present insights of sales and revenue and also

discusses the future growth and sales that the company will achieve. The threats the company faces

regarding expansion of E-commerce possess great importance and should be dealt with high

priority. The end of this report consists of recommendations regarding introduction and promotion

of delivery service in the market.

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Table of Contents
1 Executive Summary................................................................................................................. 2
2 Company Summary ................................................................................................................. 5
2.1 Costco Today.................................................................................................................... 6
2.2 Mission statement............................................................................................................. 8
3 Management structure ........................................................................................................... 10
3.1 Business Goals and Objectives ...................................................................................... 12
4 Market Analysis ..................................................................................................................... 13
4.1 Target Market ................................................................................................................. 13
4.2 Industry Analysis............................................................................................................ 14
4.3 Competitive Analysis ..................................................................................................... 15
4.3.1 Strength of the competitor ...................................................................................... 15
4.3.2 Weakness of the competitor .................................................................................... 15
5 Implementation of the product .............................................................................................. 16
5.1 Marketing and Sales Strategy......................................................................................... 16
5.2 Sales Strategy ................................................................................................................. 16
Sales Forecast: .............................................................................................................................. 17
5.3 Forecasts of market conditions:...................................................................................... 17
5.4 Dangers/threats ............................................................................................................... 19
6 Implementation Strategy........................................................................................................ 20
6.1 Control Plan.................................................................................................................... 21
6.2 Risk Management plan ................................................................................................... 22
6.3 Price difference .............................................................................................................. 22
6.4 Return of goods .............................................................................................................. 22
7 Key Performance Indicators and Measures: .......................................................................... 23
7.1 Average order size .......................................................................................................... 23
7.2 Product Affinity.............................................................................................................. 23
8 Organizational Structure ........................................................................................................ 24
8.1 Management Team ......................................................................................................... 24
8.2 Employees Needed ......................................................................................................... 24
8.3 Job Descriptions ............................................................................................................. 25
9 Financial Analysis ................................................................................................................. 25
9.1 Capital Investment.......................................................................................................... 25
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9.2 Forecasted income statement ......................................................................................... 25

9.3 Forecasted Balance sheet ............................................................................................... 27
10 Recommend course of actions for the expansion or new product/service ......................... 29
10.1 Market Research ............................................................................................................. 29
10.2 Timing ............................................................................................................................ 29
10.3 Limit ............................................................................................................................... 29
10.4 Testing ............................................................................................................................ 29
10.5 Distribution..................................................................................................................... 30
10.6 Training .......................................................................................................................... 30
10.7 Promotion ....................................................................................................................... 30
11 Conclusion ......................................................................................................................... 30

12 References.............................................................................................................................. 32
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2 Company Overview
Costco is a warehouse club for people or businesses with memberships and is devoted to

bring their membership holders the minimum cost on quality and branded stock. With several

locations among different countries, the company provides a very vast category of stock, with the

ease of claim and selected benefits; this is processes in order to make the shopping pleasurable

and easy.

The organization's initial warehouse was inaugurated in 1976 named as Price club and it

initially was formed on a plane hang in the Morena Boulevard situated in the San Diego. Initially

attending just the corporations that were small, organization discovered that it can accomplish

more prominent role in the market by likewise serving a specified category of the consumers. The

fluctuation in growth, the initiation of warehouse club industry took its first step in the

competition. 1983 was the year in which the main Costco initiated its first ever warehouse business

in the Seattle. Costco was developed into the institution that developed from zero to $3 billion in

deals within 6 years (Costco, 2017). When the two companies Price Club and Costco had merged

in 1993, the joint company, operating under the nametag of PriceCostco, consisted 206 specified

locations generating $16 billion in yearly sales (Costco, 2017).

The company’s theory has always been very simple regarding the operations. Cut the

expenses and permit the reserve money to the members. The company’s expansive memberships

and huge parity of purchasing power, linked with the constant mission for efficiency, resulted in

the perfect costs for the membership holders. Subsequently going with the Costco as the new name

in 1997, the company became global with large addition to sales in the previous year’s exceeding

the line of $64 billion (Costco, 2017).

Costco revolutionized the retail market. To the fact when Sol Price offered a significant

idea regarding retail in San Diego, California. The price club got the name as the one of the world's
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first center club of warehouses based on membership, a company where the efficient purchase and

the operational practice provided the membership holders a chance to save money unlike any

other.

During the initial level, Price Club remained limited solely to the customers that were non-

consumer, who were able to purchase a high amount of items. The official vice president of the

promotions, Jim Sinegal, was very much keen in adjusting the storage of items and showcasing

procedures, which as a result transformed the Price club to an example for the world’s retail

industry that the revolution this company brought to retailing(Costco, 2017).

After 7 years, the company’s VP of promotions Jim Sinegal directed his work into

assisting initiate Costco Wholesale, and the company situated the initiated distribution center in

Seattle, Washington in the year 1983.

The next decade, both the companies Price Club and Costco Wholesale were on the path

of development and the year 1993, both of the retailers initiated a successful merger, forming a

skilful group which shortly made Costco best warehouse center club of the world.

12.1 Costco Today

Costco Wholesale is now a global retailer operating with stockroom club activities in eight

nations and possessing multibillion dollar worth. This company is known to be the alleged

forerunner in retail market, being loyal to the quality in every region of business and also is

considered for the extraordinary business morals. Regardless of the huge size, unstable universal

development, this company keeps on providing a family environment where the workers’

productivity and efficiency increases.

Today, as the organization advances, it remains consistent with the merits and holds a large

number of faithful individuals around the world:

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This company remains consistent in providing commitment to the quality of the products.

The warehouses of Costco have around 4,000 stock keeping units in comparison to the 30,000

stock keeping units at general grocery stores. The precisely picking of the items keeping view of

the value, price, brand and quality, the company offers one of the best incentives to its membership

holders.

This company has an entrepreneurial soul within its whole structure. Continuously, the

pioneering for achieving the greatness has been increasing the company’s staff’s quality at every

level. From the administration of the company to the employees on the warehouses, everyone is

united with the concept of prioritizing the development.

The company today’s holds great interest of their members and their employees. The

company Costco is being renowned for becoming substantially centered to its employees than any

other Fortune 500 organizations. Providing reasonable wages to the employees and first rate

benefits, the company has formed a working environment which draws in positivity, high-vitality

and skilled employees.

Costco started its website Costco.com on 17th April, 2001 with the goal to implement the

B2B business concept on its marketing and sales. The website developed provided a great comfort

to the businesses dealing with Costco in knowing updated news, events, prices, discounts. This

provided a great efficiency in allocating rightful resources to the specified geographical

preferences. Firstly gaining control over the website marketing the company moved to the delivery

services. For this purpose the company signed with Instacart in providing delivery services. This

included the delivery of goods in some specified areas but it failed due to difference in prices of

Instacart and Costco. The company possessing excellence in operations and the sales was
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diminishing due to the change in shopping preferences. This shift in shopping preferences was

from purchasing physically to the online shopping (Thompson, 2017).

12.2 Mission statement

“The mission of Costco is to provide its customers with lower price and higher quality of

goods and services. To achieve this goal the company centers its code of ethics on the following:

 Obeying law

 Taking good care of the members

 Taking good care of the employees

 Respecting the vendors

All of the four above listed things should be executed in order to be efficient and provide

more benefits to the shareholders of the company. "(Farfan, 2017).

The mission statement states that they are committed to provide the best quality of the

goods and services to its customers. With the dotcom boom in the early 21st century revolutionized

the world. It changed the preferences of consumers and businesses. The new digital arena not only

revolutionized the businesses dealings but also its counterparts. The world became boundary less

with the readily availability of the information from one corner of the global to another. The people

began to switch to the internet and this is where the Costco comes in. Costco started its website on

17th April, 2001 to cope with the changing environment and preferences of the people. As the time

changed dotcom boom was replaced by the internet boom. This is when the people started to make

online orders and purchasing and it not only involved the consumers but also the businesses. After

the emergence of Amazon as one of the most popular retail online market, the Costco remained

with the wind and made partnership with Instacart.

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The Instacart failed miserably because if the divergence in prices, non-availability of goods

and geographical limitations. The prices in the warehouses of Costco were different with Instacart.

The quality of goods was also compromised.

The company needs cope with the market and choose competent delivery service where

the quality and price of the good would not be compromised. For this purpose the company needs

to make a deal with Ship which can easily help the company in gaining a control over the market

and have a valuable name among competitors (Burrows, 2017).

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13 Management structure
The company’s management objectives are simple and clear. As the company’s

vision statement states that the Costco is a company which will provide its customers with

unmatched saving through the process of efficient buying and the best operating

practices.(Lambardo, 2015). The management structure will be settled considering the

expansion and targets points of organization.

Figure 1: Organizational Structure

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The proposal of partnership with an efficient online delivery service will affect the

Costco’s management structure vastly. However, the company divided its management into

many groups but the most important ones are Human resources, Task management and the

operations. The online delivery of the goods to the consumers will affect these three

categories. As the online delivery will provide a great efficiency in the delivery and sale of

the goods so the operational management of the company will face many difficulties in

managing the tasks. The task management force of the company will be charged with the

responsibility of carrying out online orders and management. That’s why there is a need for

a revolution in all the departments of the company especially the above three mentioned.

The geographical departments of the company will become boundary less due to the online
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activity of purchasing. This will also end the geographical constraints of the products and

services.

The company definitely needs to cope with the changing preferences of the

consumers and businesses and viability of the products. This company needs to provide

online delivery of the products in an efficient manner. The emergence of the online retail

sites and change in consumers shopping preferences possess a great threat to the companies

following the traditional ways of buying and selling along with that the management

structure would be aligned accordingly.

13.1 Business Goals and Objectives

Costco has both the mission and vision statement more centered to the feasibility of the

consumers. As the company’s vision statement states that the Costco is a company which will

provide its customers with unmatched saving through the process of efficient buying and the

best operating practices. (Lambardo, 2015). This clearly states that the company is mainly

focusing on increasing the viability for the customers in purchasing the high quality goods. With

the emergence of Internet the online shopping replaced the traditional way of buying. The online

shopping service provides the consumer a one place shopping arena on their PC’s and phones.

The three objectives of the company that states the implementation of online services are the

1- Knowing your customers

2- To provide the members with Efficient buying

3- To provide Unmatched savings to the members

In the past it was much difficult for the companies to get to know their target market,

their customers and their preferences. The researchers conducted in the previous era had to be
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really extensive and based on the surveys with the interaction of people. With extended online

services and partner ships with right parties can bring this change and provide efficiency in

research and knowing the target markets and consumers. This would help in providing quality

services according to the preferences of the people (An evaluation model of new product launch

strategy, 2006).

The entry of smart phones and high speed internet into the lives of people has changed

their preferences in buying the goods and services. The online service launched by the company

would provide a platform for the customers to choose by sitting in their offices/homes for

buying. The company will be able to efficiently compete in the revolutionizing retail market.

The customers of the company will also get the best deals and discounts on the online

services being provided. This will create a huge impact in increasing the loyalty of the

customers. As the company buys bulk amount of the goods with high quality which will make

this company competitive in the online and traditional consumer markets.

14 Market Analysis

14.1 Target Market

The target markets of the company will not only keep the company within the boundaries

of 8 nations in which these warehouses are situated. This will also include those locations where

the company was unable to situate the warehouse due to geographical limitations. The online

delivery service will make this company’s products availability boundary less. The target market

of the company will expand to those location and customers too that were initially unable to reach

the warehouses physically. The online services will have a huge impact on not only the market

share but also the financials of the company (Lambardo, 2015).

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Recently the retail outlets have been situating essentially in the city - warehouses,

assortment stores, and accommodation stores. Regardless the shopping centers or huge outlets or

the vending machines, the consumer products were normally obtained nearby with some kind of

in-person shopping knowledge. Also, to be reasonable, the retail business is as yet ruled by

physical stores.

Progressively, online business is picking up share of the overall retail industry. As per the

US Census Bureau, internet business, characterized generally as "shopping on the web,"

represented more than 8% of aggregate retail deals in the second quarter of 2016 - development

from just 3% from the year 2006(Franchise, 2017). While Amazon is accounted to claim 26% of

all web retail deals, most retail tasks are in the operations of building up an online facility, and

many are a long way behind (Franchise, 2017). The competitive retailers are attempting to

revolutionize on the web and physical shopping, making it consistent for customers to shop the

way they're generally at ease.

Most retail organizations are private companies – 99% of them employs 50 individuals or

less, and 95% of retailers have only one outlet (Franchise, 2017). The enormous chain retailers

represent significant numbers of the industry sales than that show. Costco, for instance, isn't just

the biggest worldwide warehouse retailer, yet one of the biggest organizations on the planet. Other

real brands commanding sections of the retail showcase incorporate Wal-Mart, Home Depot,

Target, CVS, and Lowe's.

14.2 Industry Analysis

The company operates in the retail market but with a new concept of providing warehouses

instead of outlets by purchasing in bulk quantities of some specified products providing their

members with a low price. The main competition that Costco faces is from Wal-Mart and Target
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retail outlets. The difference between them and Costco is that the Costco buys only some specific

products but those two provide the customers with more products. The Costco deals only with the

customers who possess a membership with their company and the other stores are open for all.

The retail market is highly competitive because of the presence of highly competitive firms and an

open market for the entry of new actors.

The retail business is occasional, with about 20% of offers in the US occurring over the

December Christmas season (Franchise, 2017). The condition of the economy is noteworthy –

individuals spend increasingly when their dispensable wages are higher and confidence is high.

14.3 Competitive Analysis

the direct competitor of Costco is Wal-Mart that is working worldwide through the primary

segments such as Sam Club, Wal-Mart International and Wal-Mart U.S. the sales format of Wal-

Mart resembles Costco therefore the both have direct competition in the wholesale market.

Another competitor of Costco is The Target Corporation but this competitor has the lowest

inventory turnover. So Costco is not threatened by this rival. But still the competition of Costco

with Wal-Mart is tough enough so a careful strategy is needed.

14.3.1 Strength of the competitor

 The competitor is having wider market base.

 Competitors are adapting the latest technology.

 Advanced research regarding better ways of expansion is held on continuous

basis.

14.3.2 Weakness of the competitor

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 Some competitors does not meet the requirements

 Over dependence on some items

 Lack of good marketing and promotions

15 Implementation of the product

15.1 Marketing and Sales Strategy
The Costco needs to compete in the retail then the introduction of a competent Ecommerce

service and delivery services should be provided to the customers. The introduction of the

Ecommerce will not have an impact on price of the products. However, it will provide the members

with a platform where they can search for the desired products and compare it with the other

Ecommerce companies. The Costco will have comparative advantage over those products only

that it purchases in bulk quantities and provide to its members. There will be no effect on price but

only the growth of the company.

15.2 Sales Strategy

Past the staples of Facebook and Twitter, the company needs to join other key social

networking websites (Whalley, 2010). Some social network sites would work preferred for the

business over others. The company should look for what works best for their products and

services.

In the event that if the company possess a complex collection of items that commends

a specific way of leading a life, then the photograph driven systems like the Instagram and

Pinterest is suitable for the company. If the company intends to create video contents then the

company needs assert it on YouTube (Whalley, 2010).

Marketing mix
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Marketing mix consists of 4Ps named as Price, Product, Promotion and Place. These 4ps

explain the fact that the product that is going to be launched, at what price will it be, how the

product developed, at which places it will be launched and lastly what type of advertising will

it need. The product launched by Costco is the online delivery service.

Price: The online delivery service will have an impact on the prices of products being

demanded. The price would mainly depend on the weight of products being delivered and it

can range from $5/kg- $15/kg. Alongside the weight the delivery charges will also depend on

the sensitivity of the products.

Product: The product of delivery service will be launched with the partnership of another

company. The main party to this is “Shypt”.

Place: The service will be initially launched in USA and after gaining results and the potential

the service will expand to all 7 continents.

Promotion: For the promotion of the delivery service the social media marketing is the best

solution. The reason is because the social media is imp active and low cost ways of marketing.

Sales Forecast:

15.3 Forecasts of market conditions:

Considering the current market tough competition is found considering the conditions

the sales forecast for 12 month of this entity will be:

Months Units Sales

January 20000
February 22000
March 23000
April 25000
May 26000
June 27000
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July 30000
August 32000
September 33000
October 34000
November 37000
December 40000

Figure 1:

Figure 1 represents the effects of sales strategy in which customer care seems to be

directly proportional to the sales and it will eventually leads in the growth of profitability rate

of Costco

However, social networking sites require time, skill and responsibility in order to

promote the products so just picking systems that can manage the sales properly is crucial for

the company. The expanding quality of online deals is a noteworthy in the retail business.

Retailers that have just online deals or a proficient physical and online deals process can keep

overhead costs low and are ready to keep on gaining efficiency and productivity.
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In the physical stores, versatile alternatives are winding up progressively essential to more

youthful customers, as in-store cell phones, for example, mounted iPad’s helping buyers find

what they're searching for. Littler retail locations are currently shying far from profound

inventories with an expansive purchasing of items and are rather concentrating on a smaller

spread of claim to popular things. Since customers can access such a wide swath of items on the

web, retailers are discovering quality in center.

Most importantly, retailers are concentrating on a frictionless shopping knowledge –

whether it's requesting on the web and grabbing in store, simple alternatives, and the best client

benefit is in understanding number of different procedures.

15.4 Dangers/threats

Likewise with any business, retail has its dangers. A couple of things to remember:

Rivalry is harsh, particularly for the private company. Retail outlets, for example, Wal-Mart and

Costco, Amazon offer a broadness of choice and accommodation that is hard to beat, and are

much of the time ready to offer items at all the more convincing costs(Orendorff, 2017).

Changing purchaser patterns can have adverse effect on retailers. For instance, online

spending is as of now commanding gentler.

In certain retail sections even the climate can be unsafe – consider a garments store that

stocks up on winter stock just to encounter a hotter than anticipated season. They're left with

overloaded retires as spring comes in, and might have no real option except to offload item with

profound rebates.

Monetary pressure or vulnerability is a consistent hazard in the retail segment. Put

basically, individuals spend less cash when they're not feeling certain about their wages.
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16 Implementation Strategy

The strategy in successfully launching the Ecommerce delivery service is not to

launch it yourself but to partner with a firm who specializes in it. The Costco’s

implementation strategy would be simple and straight forward. This includes getting the

delivery partner firm to look over the price and quality strategy. The Costco will need to

keep a check on the quality of the products being delivered. The price should also be on the

main thing in analyzing the partnership with the firm. The company will also have to decide

the delivery charges because the main point of the company is to provide its members with

low price and high delivery fees can increase that price.

The steps include:

1- Analyzing delivery services market for efficient companies

2- Partnership with the most efficient and low cost company

3- Marketing strategy including social media emails, etc.

4- Deliver of the goods with quality and low price

The first step for the company would be finding and analyzing different delivery services

provider. In order to complete this task the company would have to analyze the market and their

competitors. The company would have to analyze which sources are being used by the company’s

competitors and how efficient they are in providing this service. The market analysis will provide

the company feedback that what are the changing factors of the market, the changing factors of

the people’s preferences and the competitor’s role in changing the market.

After finding a suitable delivery service the company should make partnership but strictly

on the facts of quality and price. The products delivered should be of high quality same products
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that the Costco is providing and the increase in the cost should not affect the people in choosing

the Costco’s products over the others.

The third step includes the marketing of the new service launched. This will include the

marketing over different popular social networks as because they provide high level of marketing

than any other source of marketing. The inclusion of smart phones into the lives of people has

made the social network a routine of life.

The last step is the check and balance over the delivery of goods. The periodically

feedback from the consumers is crucial in making this successful. However, the Costco’s products

are limited but the price is also low. This low price should be dealt with during the delivery

(Orendorff, 2017).

16.1 Control Plan

In order to analyze the retail business it is very important to keep in view the whole

picture, however, there are KPI’s which can be looked upon. The company will need to

understand these KPI’s and numbers as it will provide the comparison of different

opportunities and can help in analyzing the growth.

The points that should be made in order to assess the success of company are:

- Firstly, if the company is impacting the lives of its members in a positive

manner and is changing their lives. It means the company is creating an impact on the

preferences of its member. It can be concluded by surveys of its members after the

launch of online delivery service and knowing how satisfied they are.

- Secondly, the financial statements of the company speak everything about

the company. This is why it is crucial to assess the financial results of the company

after the launch of delivery service.

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- Thirdly, knowing that how many new members the company is making.

The more the merrier. This company deals only with those who possess its

membership. If the memberships are on the rise then the company is getting successful

in its execution of the delivery service.

16.2 Risk Management plan

The two possible risks that can occur by the execution of the delivery services are:

1- Price difference

2- Return of goods

16.3 Price difference

Costco’s main point of business is to buy more of limited items and sell it on lower

prices. When the delivery service starts than the company can have different prices due to

the transportation cost, delivery cost etc. This can result in the discrepancy of prices of the

products. In some cases it can switch the people’s preferences to the competitors whose

main business is to provide the Ecommerce services. The way in which this risk can be

dealt is to choose a competent delivery service under the company’s control. The company

mainly deals in the physical stores so it will take time for them to understand the dynamics

of the Ecommerce. So choosing a competent and well established delivery service can

increase their growth.

16.4 Return of goods

When the consumers buy from physical stores or warehouses they have a clear

understanding about what they are buying. But on the other hand when E commerce comes

in, the people have not physically checked the products and the products can also not fulfill
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the expectations of the consumers. This return of goods can be crucial for the company

because the rates at which the goods are being returned are always greater than the

products returned to physical stores. To cope with this problem the company needs to

provide a clear description of the products and quality assurance should be prioritized in

delivering the products.

17 Key Performance Indicators and Measures:

There exist many key performance indicators for the implementation of the

delivery services online but the two crucial ones are:

17.1 Average order size

This key performance indicator states the average order size of the transactions.

This means that how much amount the consumers are demanding in a specific transaction.

There can be number of transactions but will small quantity. However, the sales and

revenue would be higher but your quantity of goods sold can be low. The reasons are

because the Costco deals in specific products but will larger quantity so the company

should expect to have a larger average order size. This will help Costco in maintaining the

stock and knowing the demand perspective. If the average order size of a product is small

than the company can figure out that any other firm is providing it on a lower cost or that

specific product possess less demand among the people.

17.2 Product Affinity

This key performance indicator shows that which products are being sold together or are

being purchased by the consumers jointly. It will help the company is categorizing the products

according to the demands of others. It was also tell the company which products should be

purchased jointly and kept jointly in order to satisfy the needs of consumers. The products that
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have joint demands will change the company’s purchasing pattern and will increase the demand

among its consumers. This will also help in strategizing the company regarding cross-selling

tactics. The cost of the products will also be decided among others and will be beneficial for the

company in financials and operations.

18 Organizational Structure

Describe the organizational structure of the staff that will be needed to implement

the new product or expansion. The following areas should be included:

18.1 Management Team

The management team will include the operations department, IT department and the Sales

department. For the online delivery services there should be conjoint between these two

departments which help in running the online services smoothly. The operations department will

have to daily categorize those products which are mostly sold online and which are sold on physical

warehouses. The IT team will provide the preferences of the consumers and members that are

ordering online (Costco strategy, 2017). Also about the products that are most likely to be sold

online rather than physical store. The directors that would be needed are:

- Jeffrey Elliott AVP-Financial Planning & Investor Relations

- Paul Latham SVP-Membership, Marketing & Services

- Paul G. Moulton Chief Information Officer & Executive VP

18.2 Employees Needed

The employees with an IT background and Customer service experience would be

preferred. As because they are the front face of the company for any online service being provided.

The online services has a drawback that there are many purchase returns by the customers and

most of them gets angry due to their unexpected receiving of products. So there should be persons
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who can handle the attitude of angry customers and would have knowledge about the online

services and products.

18.3 Job Descriptions

Customer Service Representative

- Answering the customer complaint calls with respect to issues, benefit inquiries

and the customer worries efficiently.

- There person should have the skill to implement positive affinity with the customers

at the worst problematic situations.

- Update client data in the client benefit database amid.

- Working with administration group to remain up to date on the item learning and

be educated of any adjustments in the organization arrangements

- Effect organization's primary concern with critical thinking and transforming

baffled customers into loyal clients.

- Answering the calls of customers regarding any complaints regarding the product,

FAQ’S and the general problems regarding the product and services.

19 Financial Analysis

19.1 Capital Investment

For the expansion purpose the capital investment on E-commerce will be $12,800,000

19.2 Forecasted income statement

Firm name: Costco Wholesale
Name of report: profit and loss statement
December 2019
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Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19

Revenue
(Sales) 2,000,000 2,005,000 2,010,000 2,015,000 2,022,000 2,030,000

Operating
expenses
Marketing 141,000 142,000 143,000 144,000 145,000 146,000
Salaries 120,000 122,000 124,000 126,000 128,000 130,000
Promotions 130,000 130,000 130,000 130,000 130,000 130,000
Utilities 25,000 25,000 25,000 25,000 25,000 25,000
Others 35,000 35,000 35,000 35,000 35,000 35,000
Total
operating
expenses 451,000 454,000 457,000 460,000 463,000 466,000

Profit before
interest 1,549,000 1,551,000 1,553,000 1,555,000 1,559,000 1,564,000
Interest
Expense 7,000 7,500 8,000 8,200 8,300 8,500
Net profit
(Loss)-
Monthly 1,542,000 1,543,500 1,545,000 1,546,800 1,550,700 1,555,500

Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Revenue
(Sales) 2,040,000 2,045,000 2,050,000 2,055,000 2,060,000 2,065,000

Operating
expenses
Marketing 147,000 148,000 149,000 150,000 151,000 152,000
Salaries 132,000 134,000 136,000 138,000 140,000 142,000
Promotions 130,000 130,000 130,000 130,000 130,000 130,000
Utilities 26,000 26,000 26,000 26,000 26,000 26,000
Others 35,000 35,000 35,000 35,000 35,000 35,000
Total
operating
expenses 470,000 473,000 476,000 479,000 482,000 485,000
 Running Head: Expansion 27

Profit before
interest 1,570,000 1,572,000 1,574,000 1,576,000 1,578,000 1,580,000
Interest
Expense 8,600 8,650 8,700 8,750 8,800 8,900
Net profit
(Loss)-
Monthly 1,561,400 1,563,350 1,565,300 1,567,250 1,569,200 1,571,100

Assumptions:

The assumed points are:

 The sales unit’s values are properly considered while calculating the revenue.

 Promotion amount will be fixed due to certain market factors, the expansion will

be typically based on the efforts made on promotion.

 Total operating expenses includes utilities, marketing, salaries, promotions and

some other variables.

 Net profit is calculated by deducting the interest expense from total.

19.3 Forecasted Balance sheet

Firm name: Costco Wholesale
Name of report: Balance sheet
December 2019

Asset Type Month1 Month 2 Month 3 Month 4 Month 5 Month 6

Current
4,500,000 4,560,000 4565000 4565800 4570000 4580000
Assets
Fixed Assets 1,000,000 1,000,000 1000000 1000000 1000000 1000000
Other Assets 50,000 55,000 56000 57000 57500 58000
Long Term
3,000,000 3,100,000 3,120,000 3,150,000 3,160,000 3,165,000
Liabilities
Current
90,000 91,000 92000 93000 94000 95000
Liabilities
Total Assets 5,550,000 5,615,000 5621000 5622800 5627500 5638000
Running Head: Expansion 28

Total Liabilities
& Stockholder 3,090,000 3,191,000 3212000 3243000 3254000 3260000
Equity

Balance 2,460,000 2,424,000 2,409,000 2,379,800 2,373,500 2,378,000

Month Month Month

Asset Type Month 7 Month 8 Month 9
10 11 12
Current 4590000 5000000 5200000 5350000 5420000 5450000
Assets
Fixed Assets 1000000 1000000 1000000 1000000 1000000 1000000

Other Assets 58500 59000 60000 61000 62000 63500

Long Term 3,168,000 3,170,000 3,173,000 3,175,000 3175000 3,100,000
Liabilities
Current 96000 97000 98000 99000 100000 110000
Liabilities
Total Assets 5648500 6059000 6260000 6411000 6482000 6513500
Total
Liabilities & 3264000 3267000 3271000 3274000
Stockholder 3275000 3210000
Equity
Balance 2,384,500 2,792,000 2,989,000 3,137,000 3207000 3,303,500

Assumption

 For the expansion purpose the balance sheet of Costco will include tangible and

intangible assets.

 The current and long term liabilities are recorded in separate columns to identify

which needs to be paid later and which needs earlier clearance.

 The expansion will be held with equity financing.

 Running Head: Expansion 29

20 Recommend course of actions for the expansion or new product/service

20.1 Market Research
The research of market is the only way of knowing all the facts and figures. Lacking the data

means that the company is blindly flying, setting out toward a crash, the research surveys achieves

more than affirming the company’s “feeling of guts," and it provides the basic data and the

direction (BAKER, 2003). It recognizes the needs of the market, the features of a product, price

decisions, leaders, circulation stations, motivation to purchase. These are all very important to the

choice.

20.2 Timing
Is the procedure composed of all the components? Is the company producing on a similar

time frame as the promotion? Will the product be ready when the company announces it? Setting

a time lapse for the rollout with sticking to it is crucial for the company. Many products and

services should be added in the business cycle. This world consists of many examples of failed

marketing in which the company announces the product release but is behind in its production

according to the initial demand.

20.3 Limit
In the event of launching the product it is crucial for the company to know that of it possess

the work force and the production facility in order to achieve the production target. Postponing the

dates of release of new product can be very harmful for the company. So the company needs to

first expand its capacity and then launch the new delivery service.

20.4 Testing
Testing the new product Making certain that it contains the features that the consumer

demands. Making sure that the price choose is being easily afforded by the customer and is willing

to pay. The company needs to carry out test regarding the advertisements and advancements.
 Running Head: Expansion 30

20.5 Distribution
Who will sell the item? Would the company be able to utilize a similar dissemination

channels as of utilizing now? Would the company be able to utilize the sales team? Is the new

product being launched possess the capacity in persuading the wholesaler, retailer, or operator to

go up against the new trend? High costs are always incurred in launching and presenting items to

the customers.

20.6 Training
The associations of businesses, the employees, and distribution channels should gain the

info about the new product being launched. This should be done on order to that if the item being

introduced is adequately complex so the company needs to give its employees training. Preparing

before the item hits the racks, not afterward is crucial for the smooth operations of the company

regarding the delivery service.

20.7 Promotion
At last, the company requires time for the purpose of publicizing, expositions, special

writing, tests, motivations, website, classes, and advertising, timing with the generation, stock,

shipments, and production. The new item is basically bringing new consumers and users increasing

the quantity being sold.

21 Conclusion
In conclusion the company “Costco” is one of the leading brands in retail sector. Their

unique way of selling products on wholesale rate and quantities have took them above all and

placed it on the top of the chart of retail sector. The company is lagging behind in the E-commerce

sector because of the presence of large warehouses and less attention on the online sales. The

company should launch their delivery service if they want to be on the top of the chart of retail

sector in the future. The financials also dictate that the company is going to reach up after the

introduction of delivery services. The right marketing strategies should be adapted by the company
 Running Head: Expansion 31

and right people should be hired for the smooth operations. The company is dominant in retail

sector because of its revenue by purchasing limited items on much lower price and providing their

members with competitive rates. The retail sector is shifting from physical stores to the online

shopping and is very much remarkable in gaining higher revenue and less cost. The world is

changing its preference in shopping as stated that Global Retail Ecommerce Sales Will Reach $4.5

Trillion by 2021(Orendorff, 2017). This should be a great concern for the company as if not taken

step carefully can lead to exclusion from the market.

 Running Head: Expansion 32

12 References

Baker, M. J. (2003). Marketing. Butterworth-Heinemann.

Burrows, D. (2017). Costco Expands Online Grocery Delivery With Shipt. Retrieved from
Kiplinger: https://www.kiplinger.com/article/spending/T063-C011-S001-costco-expands-
online-grocery-delivery-with-shipt.html
Costco. (2017). Annual Report.
Costco strategy. (2017). Retrieved from Slideshare:
https://www.slideshare.net/guestce0202a/costco-strategic-plan?qid=bc80ca4c-0d3a-4399-
970f-4ece37f2952f&v=&b=&from_search=2
Farfan, B. (2017). Costco Mission Statement Has the Ethics and Compassion of Its Founders.
Retrieved from Small Business: https://www.thebalancesmb.com/costco-mission-
statement-2891829
Franchise. (2017). Retail industry. Retrieved from Franchise Help:
https://www.franchisehelp.com/industry-reports/retail-industry-analysis-2018-cost-
trends/
Lambardo. (2015). Costco Wholesale Corporation Company profile. Costco.
Leobardo. (2015). Costco Wholesale Corporation Company profile. Costco.
Orendorff, A. (2017, September 1). Global Ecommerce: Statistics and International Growth
Trends [Infographic]. Retrieved from Shopify:
https://www.shopify.com/enterprise/global-ecommerce-statistics
Thompson, A. (2017). Costco Wholesale’s Organizational Structure Analysis. Retrieved from
Panmore Institute: http://panmore.com/costco-wholesale-organizational-structure-
analysis
Whalley, A. (2010). Strategic Marketing. Ventus Publishing.
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