Costcos Business Model Research Paper Example | Topics and Well Written Essays - 1000 words

Costcos Business Model - Research Paper Example Costco gains revenue not only from individual membership, but also households, and companies. This membership revenue pool is fixed for the year and in 2008 generated $1.5 billion. The main part of the business is literally to please the customer by having the best price. Everything else is based on that concept. Customer's have the ultimate say in what will be bought and sold. Costco doesnt want to have inventory that the customer has no desire for and thus inventory that will be slow moving. Thus Costco watches for specific characteristics of inventory which they will purchase and efficiently deliver to the customer at a price below its competitors. Another part of Costco's business model is the fact that Costco owns 80% of its retail operation stores. This investment in real estate allows Costco to avoid paying lease costs thus cutting down on operating costs. This cost reduction can further allow Costco to concentrate on having a low price, high volume merchandise business model. Also the membership fees can be allocated to purchasing buildings within a year or two since to access the savings the customers provide revenue outright. This can save Costco on long term debt if managed properly. Yes its a good model because due to their memberships customers are more likely to buy directly from them and with a certain level of guaranteed revenue, prices can be low with the assumption that volume will be high. Volume is never guaranteed but Costco can operate on this assumption because it is more than likely that the customer will do daily shopping for groceries in the case of the individual, and household while more than likely that businesses will purchase supplies through Costco in order to purchase office supplies. The only issue with the model is that when customers purchase in bulk, it is likely that the need for the product will be low for a considerable amount of time. If an individual purchases 5-10 boxes of energy efficient light bulbs, that customer is unlikely to come back for more light bulbs for a long time and the same can be said of companies and households. On the other hand it could be likely that the customer purchasing in bulk could be selling each bulb. 2. What are the chief elements of Costco’s strategy? How good is the strategy? â€Å"Low prices, a limited product line and limited selection, and a â€Å"treasure hunt† shopping environment†, are a few of the chief elements of Costco's strategy. They accomplish this by having rapid inventory turnover, less handling, efficient distribution, operating efficiency and â€Å"offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories.† Costco also only kept the best bargains on the shelves with little advertising and deciding on a growth strategy focusing on opening more warehouses and developing a loyal customer base. This is good strategy all around for a variety of reasons. Here is a breakdown of some of the major efficiencies Costco obtained: Due to the fact that they are able to receive cash before the payable is due, Costco didn't have to worry about carrying extra capital throughout the year in order to meet vendor payments. Therefore Costco was able to take advantage of discounts while obtaining direct financing from the vendor's. By doing this Costco was able to pass on part of the savings to customers and obviously retain some of the savings as profit. The way that Costco was able to provide such low prices to its member was that it only sought a 14 percent margin on national brands as opposed to the 20-50% that most other discount

Punitive Law Essay Example | Topics and Well Written Essays - 750 words

Punitive Law - Essay Example There are three fundamental ways in which punitive damages promote justice. Firstly, punitive damages discourage an individual, agency or a company from cutting the corners or displaying gross negligence. Punitive damages provide the concerned parties with adequate incentives that they may utilize to produce such goods and services that are safe for their clients. When the vendors know that there is a possibility of implication of large monetary penalties against the production of defective goods and services, they tend to improve the quality of their work and thus, promote public safety. Secondly, punitive damages encapsulate a very important punishment function. Punitive damages tend to hold the individuals, agencies or companies accountable for their acts when they cause harm to individuals in the society either by gross negligence or intentionally. Punishment is essential in order to forbid people from committing the same crime in the future. Where there is accountability, there is responsibility and peace. Punitive damages impose larger awards upon the guilty in order to make them take the charge seriously and amend their ways accordingly. Thirdly, punitive damages assume a compensatory function. They play a big role in compensating for the intangible harms. Punitive damages are estimated with a view to providing the incentives that are required to commence the civil suits that are desirable for the society. In the circumstances when compensatory damages are not enough a reward for the promotion of commencement of legal action by the sufferer, and yet there is great need of admonishing the behavior of the defendant, incentives do the job well. Punitive damages serve the purpose by becoming the source of required incentive for the initiation of the action. Justice is thus, indirectly promoted as the people working against the public good are affected. Punitive damages not only encourage civil suits, but also promote socially desirable safety levels, and thu s promote justice. This claim is grounded in the perception that levels of safety are not adequately generated by basing the safety decisions’ cost-benefit analysis upon the price needed to compensate the sufferer. Payment of punitive damages and the costs associated with the compensation of the sufferer gives rise to a cost-benefit analysis that is conducive for the generation of adequate levels of safety for the sufferer. Quite often, it so happens that the benefit given to the defendant as a result of the loss-causing incident does not weight equal to the harm that the plaintiff has caused. Therefore, if increase in the levels of safety has to be the reference for the establishment of justice, punitive damages play a big role in promoting justice in the society. Opponents of the punitive damages say that punitive damages should be terminated because they are too large for companies to bear particularly in the contemporary age of financial crisis. This is not a valid argume nt against punitive damages because if the amount of punishment is belittled, individuals, agencies and companies who are charged with the damages would not take the charges seriously and would continue with their unethical practices considering the charges, a necessary cost of running the business. Larger