progress report 3 - nov[1]. 15

8/14/2019 Progress Report 3 - Nov[1]. 15

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Meghan Fischer

Elisa Santamaria

Kara Fanty
http://images.google.com/imgres?imgurl=http://www.highlandgame.com/images/site/news/costco.gif&imgrefurl=http://www.highlandgame.com/site/news_detail.asp%3FID%3D52&h=300&w=300&sz=6&hl=en&start=1&um=1&tbnid=nKIqrnOJgXVH8M:&tbnh=116&tbnw=116&prev=/images%3Fq%3Dcostco%26svnum%3D10%26um%3D1%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7SKPB%26sa%3DN


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Kaitie Thomas

Matthew Murphy

Executive Summary:o Costco wants to move the company forward in various ways. First, the opening of new

stores in the United States, Canada and Japan will increase the companys overall sales,which will allow for an increase in its profitability. Along with this, the new stores willincrease comparable store sales from year to year as more and more stores open.

o Next, Costco will divest their stores in Taiwan, due to their decreasing sales over the past

several years. Also, Wal-Mart is opening 100 new stores in the country, which will makeit hard to compete. By divesting these stores, we can concentrate more on the openingand success of the new stores in the United States, Canada and Japan.

o Lastly, Costco will revamp and update their existing website to include several more

features that will appeal to all the nations that Costco operates in. The online shoppingmarket of the website will first be tested in Japan since there is not a feature of onlineshopping yet in that country.

o The future strategies for Costco will only help the success that the company already has.

Since its opening, Costco has grown and been more and more successful; these storeswill only boost the overall performance of the company.

Internal Audit

Current Situation:

The Path to Costco Wholesale Corporation: A History

1976: Sol & Robert Price open Price Club on July 12, the first warehouse club for business

shoppers in San Diego, California.

1980 -1989: The Price Company offers public stock on July 12th, 1980. In 1982, Jeff Brotmanand Jim Sinegal meet and draw up plans to start a new wholesale club business. A year later thefirst Costco warehouse opens in September in Seattle, Washington. Costcos public stock isavailable on December 5th, 1985. Price Club is named the Forbes Magazine's "Best ManagedCompany" 10 years after its open. In 1989 Costco begins the year with 46 warehouses inoperation. The Price Company is the third most profitable company in the United States.

1990 - 1999: Costco celebrates its 10th anniversary in September of 1993 while shareholdersapprove the merger of Price Company and Costco, forming PriceCostco.

Kirkland Signature, Costco's exclusive private label, is introduced in 1995. Two years later, thecompany officially changes its name from PriceCostco to Costco Companies, and the ExecutiveMembership is introduced. 1997, Costco launches its E-Commerce site at Costco.com to bringCostco prices and services to the internet. Before the turn of the millennium the average annualsales per warehouse reaches $100 million. The Company changes its name to Costco WholesaleCorporation on August 30th.

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2000 Present: The 2% reward program is initiated, increasing Executive Member value. InJuly of 2001, Costco celebrates its 25th anniversary. Costco finishes the 2002 fiscal year with40.5 million cardholders and 98,000 employees worldwide. Costco.com generated sales of $226million in 2003 while average annual sales per warehouse were $105 million. In 2004, Costco isthe 5th largest retailer in the U.S. and 11th largest in the world. Fortune Magazine lists Costco

29th on the Fortune 500. Over 57,000 vacation packages were booked through Costco Travel in2005. In 2006, Costco was named one of the "most admired" companies by Fortune magazinewhile approximately 30 million rotisserie chickens were sold company wide.

* Source:Historical Highlights Costco.com

Costcos Words to Live by: Mission & Keyword Analysis

To continually provide our members with quality goods and services at the lowest possibleprices. In order to achieve our mission we will conduct our business with the following Code ofEthics in mind:

Our Code of Ethics Obey the law.

Take care of our members.

Take care of our employees.

Respect our suppliers.If we do these four things throughout our organization, then we will achieve our ultimate goal, which

is to:

Reward our shareholders.

(See Appendix)*Source: Code of Ethics: Costco.com

Current Long-term Objectives: (with in last 2-3 years)

To increase sales

To acquire increasing numbers of memberships each yearo Costco currently ( as of 2/2007) has 49 million cardholders broken down

into:

26.7 million households

18 million Gold Star

5.3 million Business

3.4 million Business Add-Ons

*Source: Costco 10K 2006 p.16-7, Costco.com

Current Corporate Strategies (within last 2-3 yrs)

Growth- Intensive:

Market Penetration

Expand business in new markets by attaining a greater overall market share. Costcoseeks to continually offer quality products at significant savings to members. It is theirphilosophy to keep costs down and pass the savings on to members. Costco also offers a

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unique treasure hunt experience while shopping in their warehouses, making shoppingexciting and fun.

Market Extension

Openings by Fiscal YearUnitedStates

Canada

OtherInternational

Total

Total Warehouses inOperations

2002 and Prior 290 60 24 374 374

2003 19 1 3 23 397

2004 18 2 0 20 417

2005 11 2 3 16 433

2006 20 3 2 25 4582007 (expected through

12/31/06) 16 3 1 20 478

Total 374 71 33 478

Product Development

Martha Stewart plans to bring her own line of fresh, refrigerated, and frozen foods toCostco called Kirkland Signature by Martha Stewart in 2008.

Stabilization:

Enhancement

To continually meet and exceed the high standards for energy efficiency placed byCalifornia law in all of our warehouses in the United States

o Use of solar panel in warehouses 2006

o Testing of hybrid trucks for distribution Spring 2007

To increase interaction with our members to fit current customer trends.o Sampling

o To spend approximately $1.4 1.6 billion for warehousing, clubs, relatedoperations:

o Real estate

o Construction

o Remodeling

o Equipment

*Source: Costco 10K 2006, Costco 2006 Annual Report, Costco.com, Barbaro

Functional Analysis:Management:

Costco is committed to promoting from within the company. The majority of our currenthome and regional office team members are "home grown." This means that they started in ourwarehouses, depots and business centers, learned the business and moved up within thecompany. This philosophy also ensures promotional opportunities for motivated individuals.

Costco has one of the most competitive benefits packages in the industry. Not only do weprovide our employees with a full spectrum of benefits, but employees also may elect coveragefor their spouses, children and domestic partners. The company pays a larger percentage of the

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premiums than do most other retailers and employee-paid premiums are withheld pre-tax, whichmeans you get to keep more of your hard-earned money.

Merchandising is the lifeblood of Costco, and our business is centered on our warehouseoperations.

(See Appendix)*Source: Costco.com

Costco vs. Wal-Mart Facts:

o 44% of Wal-Mart employees leave after the first year.

o 6% of Costco employees leave after the first year.

o Sell more because well-treated and motivated, which accounts for $16,550 of

operating income in 2004. Wal-Mart employees only contributed $12,800.

*Source: Greenhouse, DiCarlo, Costco.com

Analysis:

As a corporation, Costco cares about their employees. They provide a stable work environment,higher work salaries than the industry average and great benefits. They view their employees asmore than an asset. This is evident because many of the people in the top management positionsonce worked as an employee of Costco.

Costco has the ability to furnish their employees with higher salaries because of the way they runtheir warehouses. The warehouses are designed with a simple structure in mind. They are notostentatious or made to look expensive. This allows for there to be little overhead cost for each

warehouse. Aside from benefiting employees, Costcos operations also benefit the customersbecause it allows Costco to lower the retail price of their products. Lastly, the hours ofoperations for Costco warehouses are shorter on the weekends, which help employees achieve abetter work life balance.

In comparison to Wal-Mart, Costco has a significantly smaller employee turnover, meaning theirinvestments into employees are lasting and ultimately lead to a higher contribution.

In addition to employee benefits and store setup, Costco is a logistically sound company. Theystream light their distribution into a single-step channel they lower costs without cutting quality.

Marketing:Costco figures that it saves a good two percent a year in costs because it rarely shells out moneyfor mass-media advertising. It does, however, effectively target small-business owners as itsprimary target market. Operating largely under the radar of the general public, Costco has cadresof marketing representatives who are attached to each store and whose continual task it is tonetwork with business owners.

There was a 13.7% increase in net sales from 2005-2006, driven by an 8% increase in

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comparable store sales and opening of 25 new warehouses in 2006. Also, there was a 10.0%increase in net sales from 2004 to 2005, driven by a 7% increase in comparable store sales andthe opening of 16 new warehouses in 2005.

(See Appendix)

Total Sales:

Revenue

%

Increase Net Income

%

Increase

Net

Profit

Margin

%

Increase

200

6

$60,151,227 13.70% $1,103,215.00

4% $0.018 -9%

200

5

$52,952,226 10.10% $1,063,092.00

20% $0.02 9%

200

4

$48,109,907 13.10% $882,393.00 22% $0.018 8%

*Source: Costco 10K 2006

Analysis:Net sales in fiscal 2006 increased 13.7% over fiscal 2005, primarily because of an increase incomparable sales of 8%, which include both U.S. comparable store sales growth rates and non-U.S. comparable store sales growth rates, and the opening of 25 new warehouses. Membershipfees for fiscal 2006 increased 10.7% to $1.2 billion, representing new member sign-ups at newwarehouses opened during the fiscal year, increased penetration of the Executive Membershipprogram, and continued strong member renewal rates. As shown above, the profit margindecreased as a percentage. We believe that this decrease is primarily due to increased penetrationof the Executive Membership two-percent reward program.

Comparable warehouse sales, which are broken down and shown in Costcos 10K, are also amajor factor in overall net sales for Costco. Retailers see the percent increases or decreases ofthe amount of warehouse sales, both in the United States and internationally, and react to whatthey observe. They react by determining where to focus most of their distribution of productsbecause whichever warehouses are selling more are the areas the retailers want more of theirproducts to be shipped to.

Marketing Mix

Products:

Our merchandising strategy is to provide our members with a broad range of high quality

merchandise at prices consistently lower than could be obtained through traditional wholesalers,mass merchandisers, supermarkets and supercenters. An important element of this strategy is tocarry only those products on which we can provide our members significant cost savings.

The following table indicates the approximate percentage of net sales accounted for by majorcategory of items:

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Segments 2004 Sales % of Sales 2005 Sales % of Sales 2006 Sales % of Sales

Sundries 12,027,476 25% 13,238,055 25% 14,436,269 24%

Hard Lines 9,621,981 20% 10,590,444 20% 12,030,245 20%

Food 9,621,981 20% 10,060,922 19% 11,428,733 19%

Soft Lines 6,254,287 13% 6,354,266 12% 7,218,147 12%

Fresh Foods 5,292,089 11% 5,824,744 11% 6,616,634 11%

Ancillary/

Other

5,292,089 11% 6,883,788 13% 8,421,171 14%

Total 48,109,907 100% 52,952,223 100% 60,151,227 100%

Members can also shop for private label Kirkland Signature products, designed to be of equal orbetter quality than national brands, including juice, cookies, coffee, tires, housewares, luggage,appliances, clothing and detergent. The Company also operates self-service gasoline stations at anumber of its U.S. and Canadian locations.

Additionally, Costco Wholesale Industries, a division of the Company, operates manufacturingbusinesses, including special food packaging, optical laboratories, and meat processing andjewelry distribution. These businesses have a common goal of providing members with highquality products at substantially lower prices.

Price:

The main objective for Costco is to allow the customers to get more for less because they arebuying in bulk. This allows the company to receive a high industry turnover as well.

(See Appendix)

Place:

Our typical warehouse format averages approximately 140,000 square feet. Floor plans aredesigned for economy and efficiency in the use of selling space, the handling of merchandise and

the control of inventory. Because shoppers are attracted principally by the availability of lowprices, our warehouses need not be located on prime commercial real estate sites or haveelaborate facilities.

(See Appendix)

Promotion:

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We generally limit marketing and promotional activities to new warehouse openings, occasionaldirect mail marketing to prospective new members and direct marketing programs (such as theCostco Connection) to existing members promoting selected merchandise. These practices resultin lower marketing expenses as compared to typical retailers, discount retailers andsupermarkets.

(See Appendix)

Customer Profiles

Costco is open only to members and offers three types of membership: Business, Gold Star(individual) and the Executive membership.. Business members qualify by owning or operatinga business, and pay an annual fee ($50 in the U.S.) to shop for resale, business and personal use.This fee includes a spouse card. Business members may purchase up to six additionalmembership cards ($40 each) for partners or associates in the business. Gold Star members pay a$50 annual fee (in the U.S.), and is available to those individuals that do not own a business. Thisfee includes a free spouse membership.

Costco targets individuals who have a medium to large disposable income and/or are affiliatedwith a small to medium sized business. Both target markets patron Costco because of the uniqueproduct sizes and varieties combined with competitive prices. The Costco member differs fromthe average Wal-Mart shopper. While both target markets are looking for valuable products andservices at low prices, the Costco shopper could perhaps afford to spend more because he/she hasa larger disposable income than the Wal-Mart shopper. Also, while the Costco member enjoysthe low-pricing structure offered, the Treasure Hunts that offer high-price products such asdesigner apparel, are very appealing.

(See Appendix)

Analysis:

Costco does little to no advertising. Since Costco does not do formal advertising, they run therisk of not being able to reach their full customer potential. However, their main form ofadvertising relies on customer wordofmouth and direct marketing. Pertaining to wordofmouth advertising, Costco feels that the best way to get customers to their warehouses arepositive feedback from current customers. Costco also receives wordofmouth publicity fromcelebrity clients, such as Oprah Winfrey, who name drop the company.

The company also attracts purchases through sampling, which is direct marketing for the specificproduct and, overall, the company. Sampling involves tables and/or displays of differentproducts being strategically placed throughout the warehouses. These displays help to enticecustomers to buy the products they are advertising.

*Source: Robes, Hazel, Costco.com, Costco 10K 2006

Financial Performance

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Costco:

2004 2005 2006

Sales 47,148,627 51,879,070 58,963,180

Net income 882,393 1,063,092 1,103,215

Total Assets 15,092,548 16,665,205 17,495,070

Equity 7,624,810 8,881,109 9,143,439

Current Assets 7,269,099 8,238,001 8,232,082

Current Liability 6,170,550 6,760,537 7,819,191

Inventory 3,643,585 4,014,699 4,568,723

Debt 993,746 713,900 523,892

Receivables 335,175 529,150 565,373

Fixed Assets 7,219,829 7,790,192 8,564,295

COGS 42,092,016 46,346,961 52,745,497Earnings Before Interest &Taxes 1,400,624 1,548,962 1,751,417

Day Sales 129174.32 142134.44 161542.96

2004 2005 2006

ROS (in %) 1.87% 2.05% 1.87%Total Asset Turnover 3.1240 3.1130 3.3703

ROA (in %) 5.85% 6.38% 6.31%Financial Leverage- Equitymultiplier 1.9794 1.8765 1.9134

ROE (in %) 11.57% 11.97% 12.07%

Current Ratio 1.1780 1.2185 1.0528

Quick Ratio 0.5876 0.6247 0.4685

Debt to equity 0.1303 0.0804 0.0573

Inventory Turnover 12.9402 12.9223 12.9058

Receivable Turnover 140.6687 98.0423 104.2908

Fixed Asset Turnover 6.5304 6.6595 6.8848

Gross Profit Margin 0.1072 0.1066 0.1055Operating Profit Margin 0.0297 0.0299 0.0297

Day Sales Outstanding 2.5947 3.7229 3.4998

BJs:

2004 2005 2006

Total Asset Turnover 3.81 3.89 4.17

ROA (in %) 0.06 0.065 0.036

Financial Leverage- Equity multiplier 2.0139 1.9585 1.9539

ROE (in %) 0.12 0.13 0.07

Current Ratio 1.1933 1.986 2.043

Quick Ratio 0.26206 1.1885 0.355


Receivable Turnover 83.043 65.286 62.994

Gross Profit Margin (in %) 8.17 10.3 10.4

Operating Profit Margin (in %) 1.6 1.7 0.9

Costco is in stable financial condition, this is evident in nearly all of their financial ratios.Inventory turnover is particularly strong, with Costco turning over inventory approximately once

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every month. Return on Sales and Return on Assets are also consistent from 2004-2006.Costcos current ratio is also greater than one meaning that the company is fairly liquid and ableto pay their debts as they become due. Also, Costcos Accounts Receivable ratios show that,aside from a slight decrease in 2005, Costco has approximately 104 days to be paid by theircreditors.

Comparing Costco to its competitor, BJs, the company is superior to BJs. This is evident inseveral ratios such as Inventory Turnover, Gross Profit Margin and Operating Profit Margin. Inthese, Costco excelled, such as having a greater ability to turnover inventory, which was aboutonce a month, and to turn more sales into profits, giving Costco a better GPM. However, inAsset Turnover, BJs was better than Costco. Overall, Costco and BJs are stable companies ontheir own, with Costcos dominating BJs in most ratios.

(See Appendix)

*Source: Hoovers Costco 10K 2006

*Source: BJs 10K 2006

Production/Operations

Costco Wholesale operates stores in 37 US states and Puerto Rico. The company also operatesstores in nine Canadian provinces, Japan, South Korea, Taiwan, and the UK. Costco alsooperates 29 outlets in Mexico via a joint venture.

Because of our high sales volume and rapid inventory turnover, we generally have theopportunity to sell and be paid for inventory before we are required to pay many of ourmerchandise vendors. As sales increase and inventory turnover becomes more rapid, a greaterpercentage of the inventory is financed through payment terms provided by vendors rather thanby our working capital.

Our typical warehouse format averages approximately 140,000 square feet. Floor plans aredesigned for economy and efficiency in the use of selling space, the handling of merchandise andthe control of inventory. Our warehouses generally operate on a seven-day, 69-hour week.Generally, warehouses are open weekdays between 10:00 a.m. and 8:30 p.m., with earlierclosing hours on the weekend.

(See Appendix)*Source: Costco.com, Costco 10K 2006

*Source: Standard & Poors 2007

Analysis

Costco is very effective in tapping into global markets in addition to their domestic ones. Theiroperations hours lower production costs and are appealing to employees.

Information Systems

The Internet Systems Division of Costco consists of four groups:

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1.) AS/400 Application Development - designs and maintains programs for the different businessapplications within the company. For example, there are teams to maintain and enhanceaccounting, inventory, payroll, membership, and payroll applications.

2.) Customer Service and System Support - is divided into several groups that provide focused,

daily support of all IS functions for users of all levels throughout the company.

3.) Client/Server and Internet Technologies is divided into three groups (Network Security, E-Commerce Administration, and BackOffice Administration), each with a separate function.

4.) e-Commerce Application Development - supports Costco's corporate efforts in the Internet,obtains the web technology needed to streamline internal systems, and implements major phasesand daily maintenance.

(See Appendix)

*Source: Costco.com, Costco 10K 2006

Analysis:

While Costco is effective with their significant participation in many international markets, thecompany has yet to bring this strength to their websites. By only allowing shipping to Canadaand the United States through their website, they are potentially cutting off and not tapping in toa huge segment of their online market. However, the company does offer websites in the officiallanguages of the countries they are in.

The website layout is over-whelming due to the clutter of the opening page. The tabs are not the

same size, the pictures are cluttered, and there is no distinct focal point of the page. As a result,the navigation of the website is a little confusing, because it conveys a sensory overload.Though the main page is problematic, the department pages give a simplistic way of navigatingthe different products within each department. A more simplistic way of designing the layout ofthe website would help parallel the message of the warehouse layouts, which are simple with alot of products.

In an effort to hedge against the confusing setup, the website does have a business tab that helpsremind the small business customers to check out the different products for companies.

The graphics of the website showcase the quality of the products because of their high-resolution

and clarity. Browsers are also able to enlarge the pictures. Also, some products can be viewedin many different angles, allowing the customer to glean more information about the products.

Global External Audit:

Macro Environment Audit:

Economic Forces

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The United States:

The US has the largest and most technologically powerful economy in the world with a $40,100per capita purchasing power according to 2004 statistics. They have the fastest growing GDPand one of the lowest unemployment rates showing a healthy and prosperous economy for

Costco to be in. These factors affect demand for products and services or require a change in themix of products they sell which adversely affects profitability. There inflation rate is however,the highest of the three countries which causes Costco to face high cost of sales and operating,selling, general and administrative expenses, and otherwise adversely affecting operations andresults. US as compared with Japan has more flexibility to expand capital plant, to lay offsurplus workers, and to develop new products. At the same time, the US faces higher barriers toenter their rivals' home markets than foreign firms face entering US markets.

Canada:

Canada resembles the US in its market-oriented economic system, pattern of production, andaffluent living standards. While the GDP growth rate is not as prominent as the United States it is

still increasing by 2.4 percent. The GDP purchasing power is also slightly less then the UnitedStates but above that of Japan with $31,500 per capita. The unemployment is the highest at 7percent which could affect Costco by having a huge segment of the population out of work andunable to purchase, slowing down the economy. Their inflation rate is lower then the UnitedStates, which presents an opportunity for Costco to have lower cost of sales and operatingexpenses. Costco is highly dependent on both Canada and the US, which represent 94 percent oftheir total net sales. A prosperous economy is necessary for to ensue financial success forCostco.

Japan:

Government-industry cooperation, a strong work ethic, mastery of high technology, and acomparatively small defense allocation (1% of GDP) helped Japan advance to the rank of secondmost technologically powerful economy in the world after the US and the third-largest economyin the world after the US and China. Their GDP growth rate is 2.9 percent which is above that ofCanada and their GDP per capita is $29,400. Their unemployment rate is the lowest of the threecountries at 4.7 percent which has a high potential for Costco to profit. One notablecharacteristic of the economy is how manufacturers, suppliers, and distributors work together inclosely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetimeemployment for a substantial portion of the urban labor force. This results in a stable economythat is able to purchase Costcos products.

United States Canada Japan

GDP Real GrowthRate

4.4% (2004 est.) 2.4% (2004 est.) 2.9% (2004 est.)

GDP Per Capita purchasing power parity - $40,100 (2004est.)

purchasing powerparity - $31,500 (2004est.)

purchasing powerparity - $29,400 (2004est.)

Unemployment Rate 5.5% (2004 est.) 7% (2004) 4.7% (2004 est.)

Inflation Rate 2.5% (2004 est.) 1.9% (2004 est.) -0.1% (2004 est.)

Population Below 12% (2004 est.) 15.9% (2003) NA

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Poverty Line

The following chart summarizes the economic situation for 2004 and forecasts that each of thenations, the United States, Canada and Japan, will continue on this path. The United States willcontinue to be the dominant nation when it comes to purchasing power. Canada has the highest

unemployment rate, which means there is a percentage of the population that is able to work andcould potentially work at Costco. Japan is second highest in GDP Real Growth Rate, next to theUnited States, which make them a significant purchasing power for Costco.

Economy Forecasting: 2006 2009

Country Real GDP Growth Inflation Current Account (in billions)

United States 3.0% 2.7% -$862.3

Canada 3.6% 2.4% $20.56

Japan 2.2% 0.3% $174.4

*Source: www.indexmundi.com, CIA World Factbook, 2007

Demographic/Sociocultural Forces

The United States:

The United States is the most culturally diverse country of the three. They also have the highestpopulation and fastest growth rate. Majority of the spoken language is English but there is stillprominent speaking of Spanish and Asian languages. Costco must adapt to the diverse culturesthat are present in the US but also to the US own culture. The largest population age range is 67percent between the ages of 15-64, which is a great segment for Costco to target to.

Canada:

Canada has a fairly diverse ethnic population with 28 percent British Isles, 23 percent French, 15percent European and 2 percent American. Even though the country is diverse its populationmaintains strong ties to their cultural background. It is important for Costco to understand andadapt to the different cultural products and languages when doing business in Canada. Theyhave the lowest population of the three countries with around 32,000,000 and a growth rate .9percent.

Japan:

Japans population is second to the United States with around 127,000,000 which averages out toaround 327 persons per square kilometer. Such a dense population has help to promoteextremely high land prices. They also maintain a strong pride in their culture do to the fact that

99 percent of the population is Japanese and it is the only spoken language. This forces Costcoto adapt to their language and culture to fully break into their market. The population growth isthe smallest out of the three countries and their biggest age range is 66 percent between the agesof 15-64.


Ethnic Groups white 81.7%, black 12.9%, Asian 4.2%,Amerindian and

British Isles origin28%, French origin23%, other European

Japanese 99%, others1% (Korean 511,262,Chinese 244,241,

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Alaska native 1%,native Hawaiian andother Pacific islander0.2% (2003 est.)note: a separate listing

for Hispanic is notincluded because theUS Census Bureauconsiders Hispanic tomean a person ofLatin Americandescent (includingpersons of Cuban,Mexican, or PuertoRican origin) living inthe US who may be of

any race or ethnicgroup (white, black,Asian, etc.)

15%, Amerindian 2%,other, mostly Asian,African, Arab 6%,mixed background26%

Brazilian 182,232,Filipino 89,851, other237,914)note: up to 230,000Brazilians of Japanese

origin migrated toJapan in the 1990s towork in industries;some have returned toBrazil (2004)

Languages English 82.1%,Spanish 10.7%, otherIndo-European 3.8%,Asian and Pacificisland 2.7%, other0.7% (2000 census)

English (official)59.3%, French(official) 23.2%, other17.5%

Japanese

Population 295,734,134 (July2005 est.)

32,805,041 (July 2005est.)

127,417,244 (July2005 est.)

Population Growth 0.92% (2005 est.) 0.9% (2005 est.) 0.05% (2005 est.)Age Structure 0-14 years: 20.6%(male31,095,725/female29,703,997)15-64 years: 67%(male98,914,382/female99,324,126)65 years and over:

12.4% (male

15,298,676/female21,397,228) (2005est.)

0-14 years: 17.9%(male3,016,032/female2,869,244)15-64 years: 68.9%(male11,357,425/female11,244,356)65 years and over:

13.2% (male

1,842,496/female2,475,488) (2005 est.)

0-14 years: 14.3%(male9,328,584/female8,866,772)15-64 years: 66.2%(male42,462,533/female41,942,835)65 years and over:

19.5% (male

10,435,284/female14,381,236) (2005est.)

Literacy Rate definition: age 15 andover can read andwritetotal population: 97%

definition: age 15 andover can read andwritetotal population: 97%(1986 est.)

definition: age 15 andover can read andwritetotal population: 99%male: 99%

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male: 97%female: 97% (1999est.)

male: NA%female: NA%

female: 99% (2002)

(See Appendix)

Political/Legal:


Budget revenues: $1.862trillionexpenditures: $2.338trillion, includingcapital expendituresof NA (2004 est.)

revenues: $151 billion

expenditures: $144billion, includingcapital expendituresof NA (2004 est.)

revenues: $1.401trillionexpenditures: $1.748trillion, includingcapital expenditures(public works only) ofabout $71 billion(2004 est.)

(See Appendix)

Technological:


Telephones-Main Lines 181,599,900 (2003) 19,950,900 (2003) 71,149,000 (2002)

Telephones- CellularPhones

158.722 million(2003)

13,221,800 (2003) 86,658,600 (2003)

Internet Users 159 million (2002) 16.11 million (2002) 57.2 million (2002)

These three nations are very technologically advanced. Due to the growing Internet users in each

nation, visitors to the Costco website will increase. Also, many people are more and moretechnologically savvy. This means that, for Costco, new ways of scanning membership cards orhaving a more interactive shopping experience will become increasingly important to the successof the company.

(See Appendix)

*Source: Costco 10K 2006

*Source: CIA World Factbook

*Source: U.S. Department of Commerce

*Source: U.S. Census Bureau, 2004, "U.S. Interim Projections by Age, Sex, Race, and Hispanic

Origin,"

Industry Audit:

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Costco is identified as a major player in the Warehouse Clubs & Supercenter industry along withSams Club and BJs Wholesale. According to NAICS, this industry specified with code452910, comprises establishments known as warehouse clubs, superstores or supercentersprimarily engaged in retailing a general line of groceries in combination with general lines ofnew merchandise, such as apparel, furniture, and appliances..

Breakdown of Warehouse Club and Supercenter Industry from the parent industry of

Retail Trade is as follows:

Industry NAICS # of % of %

%

Estab. S

Detail Code Description Estab. Sales

Estab

.

Sale

s GM

44-45 Retail Trade1,114,63

73,056,421,99

7

452 General Merchandise Stores 40,723 445,224,985 3.7% 14.6%

4529Other General MerchandiseStores 31,368 224,482,103 2.8% 7.3% 77.0%

45291Warehouse Clubs &Supercenters 2,912 191,252,396 0.3% 6.3% 7.2%

452910Warehouse Clubs &Supercenters 2,912 191,252,396

Although Warehouse Clubs & Supercenters (WC&S) only make up .3% of the retail tradeindustry in terms of number of establishments, this industry earns only 1% less than othergeneral merchandise stores in terms of sales.

If the WC&S industry is compared to General Merchandise Stores, it pulls in 43% of theindustrys sales with only 7.2% of the industries establishments running with a WC&Sclassification. According to Hoovers Online, warehouse clubs are seeing customer membershipat an all-time high. While annual membership fees range from $40-100, Costcos offers itsmemberships from $45-60.

The supermarket industry lost market share to such warehouse clubs and supercenters. Currentlyin North America, supercenter Wal-Mart has achieved the number one spot of top 10 MassMarket Retailers, with Costco coming in at number 3. On the global scale, Costco is the seventhlargest food retailer. In regard to the warehouse industry, Costco rivals both Sams Club andBJs for the number 1 spot.

(See Appendix)

*Source: US Census Bureau. Industry Statistics Sampler

*Source: Hoover's, Inc.

*Source: Supermarket News 2006

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*Source: Mass Market Retailers, August 2006

*Source Mintel Oxygen: Warehouse Club Buying, 2005

Financial Performance:The industry has a steadily growing return on revenues and return on assets. Return on equity,throughout the industry, varies from year to year. This is mainly because the amount of debt thedifferent companies take on during specific years. The debt to capital ratio has a wide range dueto the amount of financial leverage the different companies choose to incur. The net income is amixed stream throughout the industry due to the increase of sales of the varying companies. Theforecast of the industry appears to be positive, with strong financial activity ratios. This isapparent from Costcos Annual Report and their 10K statements.

(See Appendix)

*Source: Standard & Poors

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Porters Model: Industry: Warehouse Club and Supercenters

Overall competitiveness is High to Moderate, thus profit potential is High.

* Source Mintel Oxygen: Warehouse Club Buying, 2005

*Source: Costco.com

*Source: Standard & Poors

Competitor Analysis:

Costcos industry is highly competitive, based on factors such as price, merchandise quality andselection, location and member service. In addition to other membership warehouse operators,they compete with a wide range of national and regional retailers and wholesalers, includingsupermarkets, supercenters, general merchandise chains, specialty chains, gasoline stations, aswell as E-commerce businesses. Over 1,178 warehouse club locations exist across the U.S. andCanada, including our 426 North American warehouses, and every major metropolitan area has

Degree of Rivalry = MOD.

Number of Competitors LowIndustry Growth ModerateAsset Intensity LowProduct Differentiation Low

Exit Barriers - Low

Bargaining Power

Of Buyers

(consumers) = HIGH

BuyerConcentration High#of Buyers High

Switching Costs LowSubstitute Products LowThreat of BackwardIntegration High

Bargaining Power

OfSuppliers = LOWSupplierConcentration Low# of Buyers LowSwitching Costs Mod.

Substitute RawMaterials HighThreat of ForwardIntegration Low

Threat of Entry = HIGH

Absolute Cost Advantage - High

Economies ofScale - HighBrand Identity - HighAccess to Distribution HighSwitching Costs - HighGovernment Policy - Mod

Threat of Substitution

Functional Similarity HighPrice/Performance Trend ModProduct Identity High

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one, if not several, club operations. Wal-Mart has become the largest retailer in the world andhas expanded further into various food merchandising formats. Target and Kohls have alsoemerged as significant retail competitors. Low-cost operators selling a single category or narrowrange of merchandise, such as Lowes, Home Depot, Office Depot, PetSmart, Staples, Best Buyand Barnes & Noble, have significant market share in their respective categories.

CompetitorAnalysis BJ's Wal-Mart Staples

* Provide high-quality,brand

* Provide low cost goods sopeople

* Be enviromentallyfriendly and

CurrentObjectives name merchandise can live better

provide various waysfor recycling

* Provide lower pricesthan

*Provide qualitymerchandise and

* Provude easy,multiple options

other retailers Services For customers

*High sales with rapidinventory

* Reward and embracemutual respect,

* Be the number onebrand for

turnover integrity and diversity.school and officesupplies

*Be first or second inevery market

*Sams Club segmentprovides brand-

* Offer high qualityoffice products

name merchandise at"members only" at a low cost

prices for business andpersonal use

*Offer narrowassortment of food * Continue unit growth, with660 stores *Emphasize brandqualityCurrent

Strategiesand generalmerchandise with half in the US

*Donate schoolsupplies to

*Use warehouse clubto sell dive-

* Focus on supercentergrowth

schools around theworld

rsfied categories. *Provide organic foods* Target smallbusinesses

*Target smallbusinesses,

*Utilize store designefficiency

households, andindividual

*Open two regional andgrocerydistibution centers

*EDLP and Rollback areappealing

*Domestic retail andstrong sales

Competencies*Customer-friendlyshopping to customers operations

*High namerecognition

* One-stop shoppingexperience

*Domestic delivery toprovide

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*Streamlinedmanagement, dis-

* Distribution leads to highin-stock

prompt deliveriesthroughout

tribution, andmarketing. levels for products The U.S.

*Convenient operation

hours

* Many stores are open 24

hours

*Strong brand

Recognition

*Diverse product linethat exceeds * Operates in 14 countriesbulk packaging

FutureOutlook

*Open 8-10 new clubsin existing

* Continue todifferentiate from

markets for 2007* Expand to Hungary,Poland, major competitors

*Develop new clubprototype Taiwan

* Be the world's bestoffice

*Gain membership * products supplier

*Play harder againstcompetition*Offer newpresentation ofproducts

Staples Wal-mart BJ's

2006 2006 2006

Revenue 16,078.80

315,654.00 7,949.90

Cost of Goods Sold 11,493.3

0

240,391.00 7,123.70

Gross Profit 4,585.50 75,263.00 826.2

Gross Profit Margin 28.50% 23.80% 10.40%

SG&A Expense 2,968.40 52,016.00 518.5

Depreciation & Amortization 303.9 4,717.00 103.8

Operating Income 1,313.30 18,530.00 203.9

Operating Margin 8.20% 5.90% 2.60%

Non-operating Income 58 248 7.8

Non-operating Expenses 56.8 1,420.00 0.6

Income Before Taxes 1,314.50 17,358.00 211.1

Income Taxes 479.8 5,803.00 82.3

Net Income After Taxes 834.7 11,555.00 128.8

Continuing Operations 834.4 11,231.00 128.8Discontinued Operations -- -- -0.3

Total Operations 834.4 11,231.00 128.5

Total Net Income 834.4 11,231.00 128.5

Net Profit Margin 5.20% 3.60% 1.60%

Gross Profit Margin 28.60% 24.20% 9.90%

Pre-Tax Profit Margin 8.10% 5.40% 1.80%

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Net Profit Margin 5.40% 3.40% 0.90%

Return on Equity 21.00% 20.80% 7.80%

Return on Assets 12.60% 8.20% 4.10%

Days of Sales Outstanding 17.85 2.78 5.32


Days Cost of Goods Sold in Inventory 56 44 37

Asset Turnover 2.4 2.4 4.5

Current Ratio 1.59 0.84 1.32

Quick Ratio 0.7 0.2 0.4

Leverage Ratio 0.06 0.27 0.01

Looking the 3 competitors financials, Wal-Mart has a substantial amount of revenue over BJsand Staples. BJs limits its expenses which reflects their low cost of goods sold and SG&Aexpenses. They also turn over their inventory 9.7 times which is higher than Wal-Marts of 8.3.However, Wal-Mart had a high debt leverage ratio of .27 when compared to staples .06. Wal-Mart has high revenues and a strong leverage ratio which shows that they are at the top of theindustry and a leading retailer.

(See Appendix)

*Source: BJs 10K 2006

*Sources: BJ's 10-k, Hoovers, Planet Retail, Wal-mart's 10k, Staple's 10k

SWOT Analysis: Current Situation

Strengths Weaknesses

Management Majority of top management officialsare home grown.

Only 6% of Costco employees leaveafter the first year, compared to 44% ofWal-Marts.Section B-1

Simple layout may detract fromluxury items offered in store.

Section B-1

Marketing Increase in comparable store sales 2004-2005 (8%) and 2005-2006(7%).

Internet sales increased 59% from 2005to 2006 and are projected to reach $1billion in 2007

Membership increases steadily at 10%each year and is a constant 2% ofrevenue

Treasure Hunt aspect makes shoppingfun again;

Costco does little to no formaladvertising except in the instance ofa store opening, so they may not bereaching their full membershippotential.

Section B-2

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Costcos philosophy is to keep overheadcosts low and pass those savings on tocustomers in the form of low prices.

Section B-2

Accounting /Finance Costco turns over its inventory nearlyonce a month, which is more frequentthan its competitor BJs.

Costco has consistent Return on Salesand Return on Assets.

Section B-3

BJs has a stronger Asset Turnoverthan Costco.

Costcos gross profit margin hasdeclined from 2004-2006, whileBJs has increased.

Section B-3

Production &Operations

Costco operates stores in the US,Canada, Mexico, UK, Japan, South

Korea, and Taiwan.

Because of Costcos high inventoryturnover we generally have theopportunity to sell and be paid forinventory before we are required to paymany of our merchandise vendors.

Section B-4

Costcos international sales are only6% of total net sales

Taiwan stores are losing money

Section B-4

Information

Systems

Costco has a separate website for stores

in each of its international reasons.

Costco offers special online deals eachweek dubbed This Weeks TreasureHunt.

Costcos website showcases the qualityof the products it offers and lets thecustomer view products from variousdifferent angles.

Section B-5

Costco only offers an online retail

outlet to customers in Canada andthe US.

Costcos homepage is overwhelmingdue to the conglomeration ofgraphics.

Costcos website focuses onconsumers, leaving out smallbusinesses.Section B-5

Opportunities Threats

Economic High GDP per capita means thesepeople have disposable income:US- $40,100Canada-$31,500

12% of the US population is belowthe poverty line and 15.9% ofCanadas population is below thepoverty line.

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Japan- $29,400

Inflation Rates are relatively low:US- 2.5%Canada-1.9%

Japan- -0.1%Demographic /Sociocultural

Approximately 67% of the population inthe US, Japan, and Canada are betweenthe ages of 15-64

Costco will have to expend energyand resources for translation ofcompany materials and websites asall of the regions we operate in havea different primary language.

Political / Legal Canada and Japans revenues andexpenditures are fairly balanced

The United States expenditures farexceed their revenues.

Technological 159 million internet users in Americaand 16.11 million in Canada

57.2 million Internet users do nothave access to online purchases inJapan.

Strategic Issues:

o Growth is the critical area of success for Costco; all other areas are stable and could only

benefit from the growth of the company.o Costco is a global company, but only operates in seven countries, so the company has a

great potential to expand.o BJs is becoming more successful in areas where Costco is losing ground.

o Costcos website does not offer different languages or online purchasing opportunities in

all the countries in operates in.o Costco will grow both geographically and financially through the opening of new stores.

o Costco is being pushed out of Taiwan by Wal-Mart, so it is important the companychoose the most profitable countries to enter and know which countries to divest.

o Must keep a close eye on their competition as to avoide being pushed out of

anywhere else.

Strategy Analysis:

Revised Mission Statement:

To continually provide our members with a unique product mix of quality brand name andprivate label merchandise, as well as everyday services, at the lowest possible prices in order tobe an industry leader competing in a global market. In order to achieve our mission we willconduct our business with the following Code of Ethics in mind:

Our Code of Ethics

Obey the law.

Take care of our members.

Take care of our employees.

Respect our suppliers.

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Be environmentally aware.If we do these four things throughout our organization, then we will achieve our ultimate goal, which is to:

Reward our shareholders.

Long Term Objectives:

o

Increase sales by 14% annually for the next 5 years.

%

increase2006 2007 2008 2009 2010 2011

Sales 14% 58,963,180 67,218,025 76,628,549 87,356,546 99,586,462 113,528,567

o Increase total asset turnover to 4.5% in the next 5 years.

% increase 2006 2007 2008 2009 2010 2011

Asset Turnover 4.5% 4.17 4.67 4.88 5.10 5.33 5.57

o Increase membership sales by 12% annually.

%

increase2006 2007 2008 2009 2010 2011

Membership

Sales12% 1,188,047 1,330,613 1,490,286 1,669,120 1,869,415 2,093,745

o For Costco to increase number of stores domestically and globally by 11%, or 53 stores

(with 33 stores in the United States and 20 stores outside of the United States), in 3 years.o Costco plans to open 53 stores over the next three years in:

= Existing Stores

= New Store

United States (33):

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Canada (14):

Japan (6):

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Costco New Store Openings 2007-2009

2007 (20)

United States (14)Laramie County, WYCass County, NDPennington County, SDOklahoma County, OKJackson, MOSt. Louis County, MOPulaski County, ARCaddo County, LAKanawha County, WV

Lancaster County, NEShawnee County, KSMilwaukee County, WISanta Fe County, NMHillsborough County, NH

Japan (2)Sapporo, Hokkaido

Kochi, Shikoku

Canada (4)Westlock, AlbertaPort McNeill, British ColumbiaSwift Current, SaskatchewanGander, Newfoundland

2008 (16)

United States (11)Rockingham County, NH

Cumberland County, MEAroostook County, MERichland County, SCBerkley County, SCDakota County, MNKnox County, TNDelaware County, PALackawanna County, PA

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Kent County, DENew Castle County, DE

Japan (1)

Fukushima, Honshu

Canada (4)Fox Creek, AlbertaMerritt, British ColumbiaWawa, OntarioAmos, Quebec

2009

United States (8)

Allen County, INGloucester County, NJAtlantic County, NJ

Collin County, TXLinn County, IAShelby County, ALFayette County, KYMarietta County, GA

Japan (3)Nago, HonshuOsaka, HonshuMiyazaki, Kyushu

Canada (6)New Hazelton, British ColumbiaYorkton, SaskatchewanPierceland, SaskatchewanPortage la Prairie, Quebec

Dauphin, QuebecNew Glasglow, Nova Scotia

o Focus expansion in other markets of the world, specifically in Asia, Australia and Ireland.

o Make the website fully functional by:

o Create a universal website that provides one standard opening page that allows the

viewer to click on any of the countries Costco operates in and view the Costcowebsite that is specific to that country.

o Enable the online shopping application and be able to ship from one country to

any other Costco operates in.

o Achieve this in 3 5 years to keep in accordance with the timing of the openingstores.

Possible Corporate Strategies:

TOWS Matrix Model:

Strengths S

1.) An increase incomparable store salesfrom 2004 to 2005 of8% and from 2005 to

2006 of 7%.2.) High inventory

turnover rate (nearlyonce a month).

3.) Costco has a consistentROS and ROA.

4.) Costco keeps overheadcost low and pass those

Weaknesses W

1.) Costco only offers anonline retail outlet tocustomers in Canadaand the United States.

2.) Costco does little to noformal advertising.

3.) Costco has not yetexpanded into everyregion of the globe.

4.) Costco puts so muchemphasis on beingsimple (layout of

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savings on tocustomers in the formof low prices.

warehouses) that ismay translate tocustomers that noquality products couldbe bought there.

5.) Costco in Taiwan isstruggling to stay aliveand the market there isfailing.

Opportunities O

1.) Canada, Japan andUnited States havehigh GDP per capitaand low inflation rates.

2.) Potential to compete inexploding global

markets.3.) There are 59 millionInternet users in theUnited States and16.11 million inCanada.

4.) There is an explodingmiddle class in Indiawhich wants to be likeAmericans

5.) An online website that

ships to the UnitedStates and Canada.6.) Costco in Japan is very

stable, with middle tohigh market share,growth, opportunities,etc.

Strength Opportunity

Strategy:

SO1: Costco will increase itscomparable store sales from2006 introducing a makeupcounter department and

increasing frequency andvariety of in store samples

SO2: With the increase ofcountries being able to orderoff the updated website, saleswill increase for Costco from2006 on.

SO3: Costcos already highinventory rate will continue to

increase and be faster due toCostco entering andcompeting in exploding globalmarkets.

SO4: Costco will offer trialmemberships through theirwebsite to increase same storesales and website visits.

Weakness Opportunity

Strategy:

WO1: Costco will overcomeits lack of stores in the globalmarket by opening new storesin India.

WO2: Develop promotionsonline to display the qualitygoods Costco offers, whichwould deter customers fromthinking Costco does not sellquality goods.

WO3: Increase advertisingexpenditures for onlineadvertising for the 59 million

Internet users in the UnitedStates and the 16.11 million inCanada.

WO4: Costco will divest theirstores in Taiwan, due to thefailing market there, and willbegin to move into Japan moreand more, due to their marketstability.

Threats T

1.) 57.2 million Internetusers do not haveaccess to onlinepurchases in Japan.

2.) BJs has a strongerasset turnover ratiothan Costco.

3.) Different legal laws

Strengths Threats

Strategy:

ST1: Costco has a good ROAthat will make sure ourinvestments in other countriesgrow and they can then havethe resources to expend ontranslations for company

Weakness Threats

Strategy:

WT1: Costco does little to noformal advertising, whichmeans they would have toexpend less on translations.

WT2: Increasing advertising

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and restrictions exist inthe different countries,which creates achallenge.

4.) Diversity of the

languages in the globalregions cause forenergy and resourcesto be expended fortranslation forcompany materials andthe website.

5.) Wal-Mart is set toopen 100 supercentersin Taiwan.

materials and websites.

ST2: Costco is already veryefficient at inventory turnover,that they will focus more on

the turnover of their otherassets, as to compete withBJs, their biggest competitor.

ST3: Costco will keep costslow when translatingmaterials, as to continue tokeep overall prices for thecustomers low.

in other countries will informthose customers that Costco ismaking attempts to appeal totheir cultural needs.

WT3: Costco will have tounderstand all the legalrestrictions of each new nationit enters, which will allow forCostco to expand into theregions they have not yet.

WT4: Costco will divest theirstores in Taiwan, due to theincoming Wal-Mart threat.

Chosen Strategies:

Rejected TOWS:

o SO3: Costcos already high inventory rate will continue to increase and be faster due to

Costco entering and competing in exploding global markets.o ST1: Costco has a good ROA that will make sure our investments in other countries

grow and they can then have the resources to expend on translations for companymaterials and websites.

o ST3: Costco will keep costs low when translating materials, as to continue to keep

overall prices for the customers low.o WO2: Develop promotions online to display the quality goods Costco offers, which

would deter customers from thinking Costco does not sell quality goods.o WT1: Costco does little to no formal advertising, which means they would have to

expend less on translations.o WT2: Increasing advertising in other countries will inform those customers that Costco is

making attempts to appeal to their cultural needs.

The above strategies were rejected because they are secondary strategies. This means that thestrategies we accepted should be implemented first, so later the rejected strategies could be putinto effect. Overall, these strategies are not as important for the initial long-term objectives, asthe accepted ones.

Accepted TOWS:o SO1: Costco will increase its comparable store sales from 2006 on by introducing a

makeup counter and increasing frequency and variety of in store samples.o SO2: With the increase of countries being able to order off the updated website, sales

will increase for Costco from 2006 on.o ST2: Costco is already very efficient at inventory turnover, that they will focus more on

the turnover of their other assets, as to compete with BJs, their biggest competitor.

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o WO1: Costco will overcome its lack of stores in the global market by opening new stores

in India.o WO3: Increase advertising expenditures for online advertising for the 59 million Internet

users in the United States and the 16.11 million in Canada.o WT3: Costco will have to understand all the legal restrictions of each new nation it

enters, which will allow for Costco to expand into the regions they have not yet.o WO4: Costco will divest their stores in Taiwan, due to the failing market there, and will

begin to move into Japan more and more, due to their market stability.o SO4: Costco will offer trial memberships through their website to increase same store

sales and website visits.

The above strategies were accepted because they are the most influential to the growth andsuccess of Costco. Beginning with these strategies, Costco as a whole would feel a large positiveimpact because these strategies are the best for implementing our long-term objectives. Forexample, increase in advertising (since at the moment Costco does very little) and opening newstores in the exploding global market are sure to help boost Costcos success. These strategies

would be implemented first because they would set the pace for the strategies that were rejected,in hopes of making all of the strategies contribute to the long-term success of Costco.

Strategy Implementation:

Management Issues:

Costcos management structure is very stable and effective and there are little to no strategiesthat need to occur to make this segment more productive. Most upper management are peoplethat were once long-term employees of the company that have since worked their way up.Whether it be upper management or store employees, both stay with the company for long

periods of time, if not for an entire working career. Costco creates value for its employees,which then creates value for its customers; this continues the value creation cycle. Costco issignificantly better than its competitors, in the management department, paying higher salaries totheir employees and lower employee turnover (higher employee retention). Having a completeand effective management segment allows for other areas of Costco, those that may not be doingso well, to be focused on and restructured.

Strategic Selection Matrix:

1 2 3 4 5 6 7 Total

SO1 5 4 4 5 3 4 3 28

SO25 4 5 5 4 4 3

30SO3 4 4 5 5 3 4 5 30

ST1 4 3 4 4 2 3 2 22

ST2 5 4 5 4 3 4 4 29

ST3 4 2 4 3 2 4 2 21

WO1 5 3 5 5 2 4 3 27

WO2 4 2 4 3 2 3 4 22

WO3 5 4 4 4 3 4 3 27

WO4 3 5 4 3 4 3 3 25

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WT1 1 2 3 1 3 1 3 14

WT2 3 3 3 5 2 5 2 23

WT3 4 4 4 3 2 4 3 24

1. Fit with mission, vision, & objectives2. Consistency with realities of external audit3. Feasibility given firms internal audit4. Ability to build upon competitive advantage5. Shelter from environmental changes6. Potential rewards7. Lack of risk

GE Matrix:

Marketing Issues:

2004200520062007

200820

09REVE

NUENe

t

Sales

13%5

8,963

,18066,628

,3937

5,290

,0858

5,077

,796F

ood3

0%17

,688,

9541

9,988

,5182

2,587,0252

5,523

,339S

undri

es24

%14,

151,1

6315,

990,8

1418,

069,6

2020,

418,671Ha

rdline

s20%

11,79

2,636

13,32

5,679

15,05

8,017

1 01

progress report 3 - nov[1]. 15

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