Economic Impact Essay

1642 words - 7 pages

ECON 310 Intermediate Microeconomics
Costco; Your Local Friend
Lawrence Lam
Cal State Fullerton

Superstores such as Wal-Mart, Target, and Home Depot have always been frowned upon by local businesses because of the competition it brings. Lower prices forces nearby stores to lower their prices until they shut down because of the negative profits from lowering their prices or because they don't acquire enough revenue to stay in the market. However ironically this feeling isn't shared towards the opening of Costco, another wholesale superstore. Costco's lower prices surprisingly causes local businesses to raise their prices. Even to the point where investors find area's ...view middle of the document...

(times) This is because of Block Pricing, which puts a consumer at a fork in the road; whether to buy the unit or not. The majority of Costco's product are either considered packaged products or bulk products. For example, at a typically grocery store you could buy a single jar of peanut butter. At Costco you only have the option of buying a pack of two jars of peanut butter. However the pack at Costco would be relatively cheaper then purchasing two separate jars of peanut butter. Another example would be the sale of Alcohol. Local stores would sell a range of six packs up to a thirty-six pack of beer and a range from 50ml up to 1.75L of liquor. At Costco you can only purchase a 24 or 36 pack (depending on the type of beer) and a 1.75L of liquor, at a lower price of course. This brings consumers to pay more to get more at a lower cost. This is how Costco's Block Pricing keeps local stores in business, even as far as to raise their prices. Study shows that in 2011 in the short run, local stores raised their prices by 1.4% and 2.7% in the long run. So how does bulk sale at a cheaper price provide this benefit to local stores. (Freakonomics)
Costco's entrance into s local area's market changes the reason behind consumers choosing between a superstore and a local grocery store. Prices are no longer the main competitive advantage for attracting consumers. Instead is replaced by "convenience and experience". (ann arbor).
A comparison between Wal-Mart and Costco provided by a article by (Wayne F. Casicio) illustrates the experience provided. By experience we mean the quality of customer service. Statistics provided determine that 70% of the total costs of operations are towards labor.(MVOpat) Meaning the employees at Costco are paid well, which provides an incentive to work more efficiently. Costco also provides a unique job security which involves employment status', where an employee with two or more years of service can't be terminated without approval of a senior officer. (mvo) Which in return provides more confidence and motivation in the employee to remain working at an efficient pace. Which all in all provides a better atmosphere of customer service towards consumers. This convinces consumers to prefer to shop at Costco, knowing that they will come out satisfied at the end of the day. (USA TODAY)
Another key difference between Wal-Mart and Costco is the fact that Costco requires memberships from consumers. A contract which consumers pay in order to purchase any product at Costco. Membership prices range from $55-110 annually which in return for the discount prices is well worth. Costco memberships also provide reward programs for the more premium package such as 3% cash back for gasoline purchases. (ann arbor) This provides an incentive for consumers to do their bulk spending ,like groceries, at Costco; knowing that a small fraction will be returned in the short run which eventually adds up in the long run. This not only applies for...

Other Papers Like Economic Impact

Impact of Global Economic Situation on the Indian Banking Industry.Doc

2825 words - 12 pages INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD Impact of Global Economic Situation on the Indian Banking Industry By Ankit Jain & Deepti Gunjikar 17 Jan, 2009 TABLE OF CONTENTS ABSTRACT 1 INTRODUCTION 2 THE INDIAN BANKING INDUSTRY 2 The structure 2 A snapshot of 2006-07 3 RBI’s MONETARY POLICY 4 Changes in the monetary policy 4 Impact on the banking industry 5 FOREIGN CAPITAL FLOW TRENDS 5 ASSET

The Economic Impact on the Fast Food Industry

3693 words - 15 pages consumer behavior in the fast food industry to support the results demonstrating the economic effect from the efforts of marketing. Introduction Fast food has become a major source of nutrition for many Americans, and therefore has a large impact on the American economy in various ways. To begin to paint the picture of how important the Fast Food industry is to the U.S economy, it is important to understand its beginnings

Impact of High Staff Turnover on Divisional Performance at Limpopo Economic Development Agency


Impact of Nationwide Strikes on Economic Development: a Case Study of Bangladesh

4473 words - 18 pages through hartal. According to the information of Bangladesh is Human Development Report. 1991 the economic loss of one days hartal is approximately taka 386 crores. Again the impact of hartal on public utility services like railways. Buses, municipal service and postal service cause serious consequences. In the World Bank Report hartal has been marked as the crisis of Bangladesh for which all her development work is being impeded. Indeed, it is

Impact of Female Labor Force Participation in Economic Growth in Usa and Turkey Between 1990 and 2010

3865 words - 16 pages Impact of Female Labor Force Participation in Economic Growth in USA and Turkey between 1990 and 2010 Name Institution Course Tutor Date Table of Contents Introduction 3 Background of the Topic 4 Research Problem 4 Research Questions 5 Research Aims and Objectives 5 Literature Review 6 The Trend in the Female Labor Force Participation in United States and Turkey between 1990 and 2010 6 The Economic Situations in

Analyse the Impact of Development Strategies on the Economic Growth and the Quality of Life for an Economy Other Than Australia

1605 words - 7 pages Analyse the impact of development strategies on the economic growth and the quality of life for an economy other than Australia. (20 marks) Globalisation is the process of increasing integration between different countries and economies resulting in the establishment of a single world market and the increased impact of international influences on all aspects of life and economic activity. This essay will look at how globalisation has affected

The Impact of Corruption on National Growth and Economic Development

4703 words - 19 pages there are 7, 8 or 9Ms to list resources, or whether tax is a political, economic or a legal influence. It doesn’t really matter: you have identified that considering resources might be important and also that tax can be an important environmental influence. You do not need to know any models that are not mentioned in the ACCA Paper P3 Study Guide. clues about the main models might be useful The question mentions, or the scenario has information

Naomi Project Analyze A Selected Organization’S Environmental Factors (Legal, Social And Economic). Discuss The Operational, Managerial And Financial Issues. Provide A Discussion On The Impact Of...

1765 words - 8 pages Naomi Project BUSN300: Lower Division Capstone American InterContinental University Dolce & Gabbana is a legendary company doing business with expensive perfumes and fashions. Companies like this can keep this status by knowing how to adjust to the economic and social environment. These companies are hasty in resolving any issues that steam from a number of things such as operational, financial, or managerial areas. This paper will be


1040 words - 5 pages To achieve P5, the assignment is based on McDonalds in the UK and India or China. You must pick two of the following topics (Economic, Demand, Supply, Changes in Supply and Demand or Government interaction) and cover the points below: Economic Outline * Describe the importance of stability in each of the economic environments. * How do changes in the different economic environments impact the business (growth, recession, ripple

Theory and Practice of the Economic Analysis of Law

1006 words - 5 pages Economic Analysis of Deterrence through Criminal Law A vast literature, stemming from Gary Becker’s seminal article, discusses the use of criminal law to deter harmful behavior. Many of the normative implications of this literature are at odds with people’s basic intuitions and with the existing criminal law system. 18. The Impact of Economic Analysis on Swiss/Continental Law The role of economic analysis of law is very different in different parts of the world. There are some analyses of why economic analysis is much less influential in Europe than in North America. This is a more external view on economic analysis of law from a cultural or sociological perspective.

Impact Investing and the Power Sector in Ghana

875 words - 4 pages Impact Investing and the Power Sector in Ghana By Godfred Amewu Despite the positive economic news and encouraging trends that have emerged from Ghana over the past decade, the troubling reality remains that the everyday livelihoods of Ghanaians have not kept pace with macroeconomic growth, and per capita GDP persistently lag behind the rest of the world. There is diverse school of thought deeply explaining why the livelihoods of Ghanaians

Related Essays

Intro To Economic Impact Analysis

2022 words - 9 pages Economic Impact Analyses analyze the economic effects of a particular project in a particular area. This analysis can cover a region as small as a neighborhood and as large as the world. The main variables analyzed include revenue, profits, wages, and jobs. They consider the direct impact the economic impact has on an area as well as indirect impacts. For instance, you can analyze the total number of employees a firm will hire if it builds a new

Impact Of Global Warming On Economic Development

2036 words - 9 pages Impact of Global Warming on Economic Development Global Warming, the general increase in the earth's near-surface air and ocean temperatures, remains a pressing issue in a society that has expanded its industrial use since the mid-twentieth century. Everyone born this century, in one form or another, has been exposed to the effects of global warming. The fact is that global warming, in its smallest stages, is a natural occurrence. Everyday

Economic Impact Of A Materialistic Society

3461 words - 14 pages for ABC news a reputable national news site. They collaborate on this article to spread the awareness of the positive impact that holiday shopping has on the economy. Though this article is from a few years ago it is still relevant in current time. They elaborate on how the increase in spending boosts the country’s economic state. Though their points though work in my favor in my thesis it does present positive evidence for the counter argument. Which is that any spending at all will benefit the greater good even if it’s on useless, shallow products.

Impact Of The Current Global Economic Environment At Costco

4569 words - 19 pages also minimizes packaging of products as a way of not only saving on costs but also protecting the environment. This is also observed more closely during the current tough global economic conditions as a way of cutting costs and keeping the company profitable. The impact of the prevailing global financial and economic condition on the operations management of Costco is also evident in the manner in which the company is handling its opening of new