Costco wholesale company is categorized seventh retailer company in the world. It was founded in 1983 by James Senegal and Jeffrey Brotman in Washington. It was the first distributing company to be opened during that time and it has grown at high speed. Its main products are wines and soft drinks. It has opened many warehouses in other parts of the world such as; united kingdom, Canada, Mexico, Australia, South Korea, Japan and Taiwan. Its competitors are Sam’s Club and BJ’s Wholesale club.
This is the strategic planning used to evaluate strengths, weakness, opportunities and threats. In Costco company has come up with its planning strategies so that it will be able to serve its customers well and to make sure it achieves the targeted objectives. I am going to categorize these SWOT analysis in two categories; internal and external factors that would be favorable or unfavorable to its objectives (Westbrook 1997).
These are strengths and weakness of the business which are caused by internal factors. The strengths of Costco wholesale company are as follow;
Costco have stable and effective management department where most of its top management officials are old people. They have skills that enable them to manage this company to international levels. They have worked in the company for a long time so they have all the information about its products and markets. It is only about 7% of its employees leave after staying there for an year compared to about 45% who stay there for long. The company creates value for its employee enabling them to get more customers. It pays its employees higher salaries compared with other companies.
Costco Company saves about 3% a year expenses because it does not depend much on advertisement. It advertisement is little only to target small business owners and families that earn $1000 and more. It has laid down some strategies to expand its market in the world. It consists of a group of products that are sold in their stores (Gamble 2010). They sell their products in different areas of the world according to the culture of people around. Sometimes where food products are not needed in huge amount, Costco sell them in small bundles to meet the need of customers making them to earn more profit.
The prices or services of the product are discounted. This depends on currencies and exchange rates of different countries. Therefore, prices are expected to fluctuate in those countries. The prices are kept low because of low overhead costs in its store all over the world. This is its philosophy. This is because it eliminates delivery expenditure, inventory, account receivable, sales people and fancy buildings (Craig 2007). Costco warehouse layout attracts more customers because it is spacious. The floor space is used economically for handling customers. Costco Company is planning to open more than 53 stores in the world to increase its sales volume. This is going to be done within a period of three years.
Costco Company turns over its inventory once a month. This is more frequent compared to its competitors like BJ’S. It also has consistent return on sales and assets.
Costco operates many stores in US, Canada, Mexico, Japan, South Korea and Taiwan. This has enabled its products to be almost known in many countries hence increasing its sales volume. Because of its high inventory turnover, they can sell and be paid for inventory before they pay their merchandise vendors.
Costco Company has different web for different stores in the world. This maintains independence in those stores even if they are under central management. It offers online deal each week named “this week’s treasure hunt”.
Costco does not make a lot of advertisement unless when opening a new store. This means it does not reach many customers. This means even though they sell high volume of goods, it can be increased if they make more advert in Medias. Its competitor BJ’s has stronger asset turnover. It has not opened many stores in the world. It has limited online retail outlet to customers in other stores except in Canada and US.
2. External factors.
These are opportunities and threats caused by the environment to the business.
The main target of Costco Company is in countries with high GPD and disposable income of their consumers where inflation is low. Examples of such countries are; USA, Japan and Canada (Craig 2007). It also invests only in democratic countries where government is stable. There is a witnessed growth of its members in the world making it known in the world. It is expanding rapidly because of its good services to its customers. It enjoys the advantage of economic downturn. Costco has gained positive image because of salaries it gives to its employees. This is the reason why many people are willing to work in this company.
Costco offers high membership fees. This means people who are below poverty level cannot afford to be members. Goods are also sold in bulky form and these people cannot afford to purchase them. It has high competition from Sam’s Club and BJ’s club. It mostly depends on sales from only two major countries where it has opened many stores Canada and US. There are high expectations of changes in market in terms of price and financial performance.
Poster analysis recaps
Costco Company does not depend on posters to advertise their goods. They have limited the numbers unless when they are launching a new product in the market. This is to maintain they philosophy of selling goods at low price to their customers by reducing overhead costs in their stores.
Macro factors recap
The fact about macro factors recap is competition from BJ’s club which is making effort to win the market by lowering prices of their goods to a level that will enable them win many customers. This is going up with a great speed therefore Costco is supposed to take an immediate action. The other one is a world financial crisis which has led to fluctuation of prices especially in developing countries. This reduces the volume of goods sold in affected countries. Costco Company has not invested in other continents like Africa and Australia.
In conclusion, Costco is trying different mechanism to defeat its nearest competitors like BJ’s. It has also opened many stores in the world so as to increase its sales volume.
- Thompson A.A, Strickland, AJ and JE Gamble.(2010). Crafting and executive strategy. The quest for competitive advantage, New York-McGraw Hill Irwin.
- Costco Wholesale. (2006). Annual Report 2006. From the Costco Wholesale Web site.
- Harris, Craig. (2007). Costco Hourly Workers to Get a Raise; Lowest Wage Will Be $10.50 an Hour; Top Scale To Hit $20.Seattle Post – Intelligencer
- Hill, T. & R. Westbrook (1997). "SWOT Analysis: It’s Time for a Product Recall". Long Range Planning, New York times.