There are several facts in this case. The first fact is that the three companies are competitors in the retail market serving the US market, among other markets in Asia and also South America. The other fact is that these companies have employed different strategies in order to acquire their respective market shares in their markets (Thompson, 2010). The first assumption is that these companies will keep growing and employing strategies to stay in their markets competitively. I expect that none of the companies will withdraw from its business line. Another assumption I have is that these companies have revealed information on their strategies and operations in full and accurately.
In macro environmental and industry analysis, the PESTEL framework will be applied. The political factors in the case are minor since it concentrates on North America, which is a politically stable region. The economic factors depend on the economic framework of a particular country (Hill & Jones, 2012). For instance, Korea recorded the most profitable warehouses for Costco. This implies that the other countries had a poor economic performance. The social factors relate to population elements that shape strategy decisions. The decisions involved location of food courts, hot dog stands and print shops.
With regard to technological factors, these companies had databases for recognizing members and their spouses. For Sam’s club, members could shop online by accessing the website. Therefore, the technological factors have shaped success for these companies depending on the degree of application of these technologies (Hill & Jones, 2012). Since these companies are retailers, there are no major environmental concerns associated with other companies such as manufacturers. The legal factors concerning these companies came into place during major expansions. There had not been any flaws regarding entry and any rules in the country. From this analysis, each of these companies has a chance of growth dependent on internal factors since the macro environment and industry factors are conducive.
The main problem faced by Costco regards competition with BJ wholesale and also Sam’s Club. The company doesn’t offer an experience without frills for its purchases. This is contrasted to the strategy by its competitors who provide the frills experience when members buy bulk goods. This has enabled its competitors to offer their members an improved and well-rounded shopping experience (Edwardson, 2012). This strategy by competitors fits with the mission of Costco since it aims at providing quality merchandise at prices below those of competitors. In implementing such a strategy, Costco has to deal with some internal issues. The main point for failure in this area is the strategy focus of this company. It has been focusing on membership fees and selling goods in bulk. Therefore, low income individuals may shy away from Costco.
A possible solution is offering of perks while still retaining low prices and bulk selling. The second option is enhancing the quality of the shopping experience. In this case, Costco should add express lanes and also checkout lanes so that the entire shopping and exiting process is fast (Edwardson, 2012). The third option is provision of additional personnel to assist in the shopping experience. Customers will be free to ask such employees any questions, and they will be provided after sales services such as packaging.
The best solution for Costco is allowing for perks while holding on to bulk sales. This will enable Costco to catch up with the competition. Since this option will counter its major weakness, Costco will improve its market share and sales (Hill & Jones, 2012). This strategy is sustainable hence it can give Costco a competitive edge in the long term. Intertwined with other strategies such as those on pricing, the company will transform into a strong market leader and hence improve its value to shareholders in line with its mission.
As far as competitor analysis is concerned, they are putting efforts in response to the market competition. They have been advertising and improving their market relations. For instance, BJ has been using the BJ Journal and social market outreach (Thompson, 2010). In addition, these competitors have been minimizing overhead and costs of running the warehouse. Therefore, Costco must rise to this competition.
With regard to Porter’s Five Force Analysis, the first factor is the suppliers’ power. There is considerable influence in this line since the gray market sells big ticket items. As a result, these suppliers may affect the warehouse market (Hill & Jones, 2012). The buyer power is driven by their need for high quality and also low price merchandise. This power is considerably low since there are three major players only.
As far as competitive rivalry is concerned, there is a lot of competition since all of them are focusing on the low price strategy. The substitutes' threat, in this case, is quite low. This is due to product uniqueness as compared to those offered by retailers such as Wal-Mart (Edwardson, 2012). Finally, the threat of entry is low due to the economies of scale for the three companies. Costco has an opportunity to improve its competitiveness and market share by refocusing its strategy in light of its industry environment.
Edwardson, P. (2012). Porter’s Five Forces: A situational Approach. The Wall Street Journal, 127-134.
Hill, C., & Jones, G. (2012). Strategic Management: An Integrated Approach. Cengage Learning: Stamford.
Thompson, A. A. (2010). Industry Background. Competition Among the North American Warehouse Clubs: Costco Wholesale versus Sam's Club versus BJ's Wholesale, 56-58.