Costco case study analysis Example | Topics and Well Written Essays - 250 words

Costco analysis - Case Study Example Because of the low prices, the company covered all the operating expenses and got low operating profits. The method focused more on impressing the customers and increased membership fees and in the financial income, the membership fees were higher than the company’s net income. For the above reasons, the company may fail in the long run (Arthur, p. 195). The problem of pricing can only be solved as explained below. As the membership fees caters for the operating expenses, the company should maintain the prices. Since the goods and services are of high quality and underpriced, it may highly affect the company. To avoid the consequences, the company should use penetration-pricing model to solve the problem. In the model, goods are lowly priced and then are gradually increased to match the market value of the products. By using the penetration-pricing model, they will maintain sales, customers and most importantly increase organization profitability (Arthur,