Costco case analysis
This presentation is the property of its rightful owner.
Sponsored Links
1 / 13

Costco Case Analysis PowerPoint PPT Presentation


  • 106 Views
  • Uploaded on
  • Presentation posted in: General

Costco Case Analysis. INDIA. Overview. Costco’s Business Model Costco’s Value Proposition Review of India Economy Government Infrastructure Real Estate Cost Real Estate Availability / Partners Conclusion on Costco in India Citations. Costco Business Model.

Download Presentation

Costco Case Analysis

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Costco case analysis

Costco Case Analysis

INDIA


Overview

Overview

  • Costco’s Business Model

  • Costco’s Value Proposition

  • Review of India

    • Economy

    • Government

    • Infrastructure

    • Real Estate Cost

    • Real Estate Availability / Partners

  • Conclusion on Costco in India

  • Citations


Costco business model

Costco Business Model

  • Factory direct purchasing, high velocity resale.

    • Manufactures ship containers directly to Costco consolidation depot’s.

    • Allocation of product to warehouse locations is fast (<= 24 hrs)

    • Cost reductions realized from fast inventory sales.

    • SKU’s on hand limited to fast-selling models, sizes and colors.

    • Efficient sales floor layouts – more product, less wasted space = more sales.

    • Customers must pay to shop at Costco.

      • Provides another source of revenue.

      • Builds customer loyalty.

      • Helps reduce shrink.


Costco value proposition

Costco Value Proposition

  • Very low marketing, labor and a targeted discount model

    • Coupon/Sales blasts sent to a limited target audience – members only.

    • Reduction in marketing dollars over competitors equals lower costs for goods.

    • Labor costs reduced via larger volumes of stock on hand, in pallets and ready for customer distribution with low labor required.

    • Hours of operation limited to core shopping times and light need for overnight stocking staff.

    • Return policy highly favorable in the market, most goods accepted back without receipts and with extended warranty options.


India economy

India - Economy

  • Gross Domestic Product (GDP)

    • 2010 - $4.06 trillion (5th in the world)

      • $3.44 Trillion in 2008

      • $3.67 Trillion in 2009.

  • Inflation

    • 2010 - 12% - High (206th in the world)

      • 10.9% in 2009

  • GDP Growth Rate

    • 10.4% (5th in the world)

      • 6.2% in 2008

      • 6.8% in 2009

  • Foreign Reserves

    • $287.1 Billion (7th in the world)

  • GDP Per Capita

    • $3,500 (262nd in the world)

      • $3,000 in 2008

      • $3,200 in 2009

  • Currency Stability

    • The Indian Rupee is trading around 43 - 49:1 USD in the last 52 weeks.


India government

India - Government

  • Ruling Party and Leader

    • PratibhaDevisinghPatil – (2007 – Current)

    • Party: Indian National Congress

  • Government Stability

    • Democratic Nation

    • Harsh relations with China over allegations of munitions being traded with Pakistan and China’s oversized military footprint.

  • Subsidies

    • 14% of Indian GDP is subsidized.

    • Majority of Indian subsidies are oil of which 39% of subsidized kerosene is stolen.


India market access

India - Market Access

  • Tariffs and import barriers

    • Indian Tariffs vary largely depending on what type of goods you are importing. The fees are not percentage based, rather flat fees.

  • Member of World Trade Organization

    • India has been a member of the WTO since 1995.

  • Level of corruption.

    • India has high levels of corruption. In 2010 $19B USD in illicit funds left the country.

  • Acceptance of imported products

    • There are some items now allowed to be imported into India, namely unprocessed Ivory products, however this would not impact Costco’s ability to do business in India.

  • Local competition

    • No competition for Costco in India.


India imports

India – Imports

  • India is one of the largest importers of fossil fuels in the world.

  • Pearls and precious stone imports are important as a large portion of India’s revenue comes from the export of handicrafts.

  • These two represent 50% of all imported goods into India from 2009 to now.

  • Growth from 2009 - 2011

    • Fuels – 20.6%

    • Pearls – 66.35%


India infrastructure

India - Infrastructure

  • Indian Transport and Fuel Infrastructure

    • Airports – 353 (249 with paved runways)

    • Heliports – 40

    • Pipelines

      • Condensate/Gas – 2km

      • Gas – 9,596km

      • Liquid Petroleum Gas – 2,152km

      • Oil – 7,448km

      • Refined Products – 10,486km

    • Railways – 63,974km (4th in the world)

    • Roadways - 3,320,410km (3rd in the world)

    • Waterways – 14,500km (9th in the world)

    • Merchant Marine – 324 (29th in the world)

      • Air and sea import/export is generally considered to be sufficient in India. The recent thread of pirates from Somalia have reduced the efficiency of waterway capability and have added risk of shipping/freight contains being compromised.

      • Road and railway conditions are poor in India. Public investment has been insufficient to correct this condition and India is seeking private investments to help improve these two.

      • Energy infrastructure in India is sufficient for sustaining retail business operations.


India real estate cost

India – Real Estate Cost

  • Indian Real Estate Cost

    • India-wide real estate prices have increased 21.3% in Q2 2011.

    • Ranked 2nd out of 50 countries for annual growth

    • High Growth - Compared to 2010 by City

      • Bhopal +46.41%

      • Faridabad +44.74%

      • Chennai +35.52%

      • Bengaluru +35.29%

      • New Delhi +33.64%

    • Low Growth – Compared to 2010 by City

      • Kolkata +10.23%

      • Surat +9.56%

      • Jaipur +4.92%


India real estate avail partners

India Real Estate – Avail/Partners

  • Real Estate Availability

    • Moderate availability due to financial situations in India.

    • High cost is a big detractor in Indian Real Estate Sales.

    • Cost of land post Indian 2001 Economic Bubble exceed that of the median home sales prices.

    • 65% of flats sold in Delhi and 35% of flats sold in Mumbai have sold to speculators.

    • Booming growth in Indian GDP may result in more availability over 2013-2015 at affordable prices.

    • Jones Lang LaSalle remains the largest partner for real estate sales and coverage in India.


Costco in india conclusion

Costco in India - Conclusion

We do not believe Costco should seek India as a market to move into over the course of the next 3 years. The following points highlight how we came to this decision:

  • Indian land prices are too high

    • High land prices now make moving into India in the short term less attractive.

    • Continued GDP growth over the next 1-2 years may help lower land prices.

  • Indian Inflation too high

    • Continued growth in Inflation would make doing business in India risky.

    • GDP Per Capita shows the standard of living is improving in India, however not at a rate fast enough to make India an attractive market to enter.

  • Indian Infrastructure is poor and threats loom

    • Indian road conditions would not support the Costco business model of central delivery and distribution within 24 hours.

    • Higher costs would be incurred by Costco by moving product slower than they do in the US, Canada and Mexico markets.

    • The presence of pirates from nearby Somalia makes importing of goods via sea risky.


Apa citations

APA Citations

  • The following Web Content was used for this presentation.

    • The United States Central Intelligence Agency, Retrieved 10/6/2011 from

      https://www.cia.gov/library/publications/the-world-factbook/geos/in.html

    • Yahoo! Finance, Retrieved 10/6/2011 from

      http://finance.yahoo.com/q/bc?s=USDINR=X&t=5y&l=on&z=m&q=l&c

    • Wikipedia, Retrieved 10/6/2011 from

      http://en.wikipedia.org/wiki/Energy_policy_of_India

      http://en.wikipedia.org/wiki/Real_Estate_in_India

    • Global Property Guide, Retrieved 10/6/2011 from

      http://www.globalpropertyguide.com/Asia/India

    • Costco Investor Relations, Retrieved 10/6/2011 from

      http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-sec

    • World Trade Organization, Retrieved 10/10/2011 from

      http://www.wto.org/english/tratop_e/tpr_e/s249_sum_e.pdf

    • India Department of Commerce, Retrieved 10/10/2011 from

      http://commerce.nic.in/eidb/Icomq.asp

    • India Imports, Trade Chakra, Retrieved 10/10/2011 from

      http://www.tradechakra.com/indian-economy/imports/index.html

    • India, Speaking up for Integrity. (2011, 08 26). Retrieved 10/10/2011 from http://www.transparency.org/news_room/in_focus/2011/india_speaking_up_for_integrity


  • Login