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Select yes for those statements that accurately identify the chief elements of Costcos strategy, and no for those that do not. Individual members of wholesale
Select yes for those statements that accurately identify the chief elements of Costcos strategy, and no for those that do not.
- Individual members of wholesale clubs have essentially no power or leverage to bargain with a wholesale club over the prices they will pay or over other terms and conditions of sale.
- Because a member's switching costs are relatively low, they have greater bargaining power.
- The number of buyers/members is small and not numerous, and they buy in relatively small quantities.
- Buyers can negotiate for lower prices when clubs are overstocked with certain merchandise.
- Wholesale clubs face little to no competitive pressure of any consequence stemming from the bargaining power of their members.
- Net sales increased from $31.6 billion in fiscal 2000 to $126.2 billion in fiscal 2017, equal to a compound average growth rate (CAGR) of 8.5% since 2000; this growth rate is respectable given the tough economic conditions that existed from 2008-2016.
- Long-term debt decreased substantially in 20162017 and remains comfortably below stockholders equity.
- Total revenues (sales plus membership fees) increased from $32.2 billion in fiscal 2000 to $129.0 billion in fiscal 2017, equal to an average annual compound rate of 8.5% from fiscal 2000 through fiscal 2017.
- Net income rose from $631 million in 2000 to $2.71 billion in 2017, a compound average growth rate of 8.95%.
- Merchandise costs as a % of net sales increased slightly in recent fiscal years; lower in 2016 than any other year in Exhibit 1 and has been the lowest since 2000.
- Return on stockholders equity increased significantly in 2017 (primarily due to a jump in net income and a decline in stockholders equity due to modest repurchases of common stock).
- Selling, general, and administrative expenses have decreased since fiscal 2000.
- The current ratio decreased from 1.22 in 2014 to 1.05 in 2015 and eroded a bit further to 0.99 in fiscal 2017, but it is not alarmingly low.
- From fiscal 2005 through fiscal 2017, total revenues grew at a CAGR of 6.71% in the United States.
- From fiscal 2005 through fiscal 2017, operating income grew at a CAGR of 7.05% in the United States.
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