Cost Leadership - Costco

http://www.forbes.com/sites/glennllopis/2011/01/31/the-costco-factor-to-win-the-business-game-you-need-to-change-how-you-think/#15d0a0266444

Todays chapter is about cost leadership and the first company I thought of was Costco. People buy memberships from them to be able to buy the items that Costco already bought in bulk. So basically Costco saves a lot per item buying so much of a certain item, and then they pass on some of their savings to the customer. The reason people shop at Costco can be for many reasons but every reason has some sort of “cost” reason.

Costco definitely use the cost leadership strategy to attract customers. Costco has something called a capped margin which inexactly what you would think it is, it is where the margins that they make on everything is set and they do not go above it. ‘For every $100 that Costco spends to buy its products, it’s selling them, on average, for $110.60” (investopedia). This makes it worth while to purchase the $55 membership because if you shop there regularly then you will save. Often times when I ever am considering buy something expensive like furniture or a TV, I do my research to see which one I want and then I go to Costco to pay for it. it feels like Black Friday everyday as Costco.

http://www.investopedia.com/articles/investing/070715/costcos-business-model-smarter-you-think.asp