The wholesale club industry
4HRS
MGMT 615 Week 2 (I need two 250 responses in APA style)
I am taking a strategic planning course. I am posting two responses that students made on an article. I need responses for each student (I am attaching two documents which are each students responses). They need to be 250 words (minimum) and must list references (APA style).
I need to comment on this response from this student. The response needs to be 250 words minimum in APA style with references.
Response:
The wholesale club industry has reached a high level of demand and competition in North America. In spite of the competition and the pivotal instances of high and low points within the market place, these markets continue to expand and are continuously thriving to maintain strategic components to stay on top in the food and retail industry. Every company operates in a larger environment that goes well beyond just the industry in which it operates. Key economic indicators of an industry’s growth prospects include market size, in terms of overall unit sales and sales volume, as well as industry growth rate (p. 53).
The competition is very fierce in today’s market. Executives and shareholders understand the demand to stay on track with change and know that in order to compete in today’s market and be stronger than other companies, executives must have innovative development to bring in new consumers and to keep their core customers. This is the case with any business to include companies such as Sam’s, Costco, and BJ’s Wholesale. The five force analysis provides a streamline on which industries can base the facets of opportunities available to them.
These steps help to assess the strategic course of action to effectively match and surpass the competition. To break this analysis down in the simplest terms we should consider competition from new industries, substitute products, buyers, suppliers, and rivalry. Competitive pressures stemming from the competitive jockeying among rivals, competitive pressure, sellers of substitutes, the threat of new entrants into the market, supplier bargaining power, and buyer bargaining are all factors that must be evaluated by leaders in today’s market. While each of the five forces are important, the competitive force that is strongest is the market maneuvering involving the products Sam’s,Costco, BJ’s,and other wholesale providers are distributing and marketing to consumers and shareholders alike.
All three of these markets have a great track record that customers continue to enjoy. Each company also prides itself in providing good deals that appeal to customers, along with quality products and services for buying in bulk. Almost everyone is able to relate to Sam’s regardless of whether they are in North America or not. Costco and BJ’s are also well known industries that thrive on exceptional performance. Nonetheless, Costco currently has a competitive edge over its competition. This company tends to have a core mission that coincides with customer service to its members and for this reason they have a better strategic approach over its competitors.
Costco’s mission is to continually provide members with quality goods and services at the lowest price. They work by a code of ethics and run their organization by those same standards. This ultimately helps the company to fulfill its ultimate goal which is to reward shareholders (Costco, 2012). This strategy has also provided Costco with the revenue and the appeal it needs to perform above its competition. Although all three companies are high intuitives in the sale of food, retail, gas, and other products and services, as of present Costco has maneuvered above other selective competitors. This has a lot to do with the energy, the need to satisfy shareholders and consumers, and its ability to provide the products and services consumers deserve at affordable prices in a failing economy.
I need to respond to the student’s response below with at least 250 words in APA format with references.
The wholesale club industry has evolved into a common oligopoly just as other major industries have. The “big three” of this industry are CostCo, Sam’s Club, and BJ’s. A five forces analysis will be examined in regards to the wholesale club industry.
By examining force one, barriers to entry; the three companies are at an advantage because of the difficulty of new firms entering the industry. They accomplish economies of scale and scope due to the size and volume of their sales by buying and selling more goods on a larger scale with lower costs. It would take a considerable amount of time for a new entrant to achieve the benefits of economies of scale. The capital requirements are large due to the construction of buildings and acquisition of land and licenses. Finally, only companies with an established distribution network would have a fair chance of entering the industry. There would be few companies with the ability to enter this industry. For example, Target Corp. could navigate towards converting some of their current stores into wholesale clubs. They would also have an easier trasition because they already have distribution centers around the country. In fact, Target made an attempt to sell certain items in bulk in some of their stores to “test the market” of possible entry into the market (White, 2010).
Force two, the threat of substitutes, is not a factor because the service they offer is not offered by other outside competitors. Force three, the bargaining power of buyers, is the strongest force working in the favor of the industry. This is so because buyers cannot negotiate the price. The main reason customers come to wholesale clubs is they are attracted by the already low prices and value of buying in bulk. This is not an industry like the automobile industry where it would seem every purchase is a negotiation and most buyers go into purchase situation with a price haggling mind-set. The prices are set as they are and the buyers accept the prices.
Force four, the bargaining power of suppliers could come into play if a more favorable opportunity presents itself in the general retail industry. Wholesale clubs offer only a percentage of the products (ranging from 4000-8000 SKUs) that a general retailer does (100,000+ SKUs). For example, if Proctor & Gamble (P&G), the makers of Crest toothpaste, decides that it is not beneficial to their company to sell Crest wholesale, they could apply pressure to the clubs by pulling their product. A key strategy of CostCo is aimed squarely at selling top-quality merchandise at prices consistently below what other wholesalers or retailers charge (Thompson, 2010). To not carry a popular product such as Crest could cause sales to decline especially if numerous suppliers apply the same pressure. The clubs would lose credibility of carrying top-quality merchandise.
The fifth and final force, rivalry among existing players, is not a major factor. The analysis of the case shows that sales have remained steady at all three across the board. CostCo net sales for 2009, were 71 billion, roughly $1 billion lower than 2008. Sam’s nets sales were $46 billion, off only 0.7% from the previous year. BJ’s actually increased net sales around $1 billion each of the past two years. Contributing factors to the success of each is that each offers a niche market within a niche market. Simply put, each club offers subtle yet distinctly impactful differences than the other two. CostCo, the runaway leader presently, offers the “treasure hunt” deals where extreme bargains are offered for short, unannounced periods of time. This creates buzz amongst customers by enticing them to return on a consistent basis to explore what “treasures” are available. BJ’s sets itself apart by being the only club among the three to accept manufacturer’s coupons. They also are the only club to accept all four major credit cards, MasterCard, Visa, Discover, and American Express, at all locations. They also offer a broader assortment of items as compared to Sam’s and CostCo (approximately 7,000 SKUs).
The analysis shows that CostCo is the runaway leader of the industry. Annual net sales are nearly double of the nearest competitor, Sam’s Club. It would appear that they also currently have the best strategy. The no frills, low margin markup strategy has been sustainable and grown the company over the past 5 years. Not only have they added warehouse locations, but since 2000, they have increased membership by 1.5 million just in business members. They also have pay far better wages and predominantly promote from within. This helps develop and maintain a strong, knowledgeable, and loyal workforce.
…………………..Answer preview…………………….
This paper describes two responses that two different student made on an article. Each student made his own view on wholesale club industry, the general idea in the article. In this assignment, I will review the two responses made by the students by focusing on the aspect of wholesale club industry broadly…………………….
APA
751 words
