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Costco Wholesale’s Generic and Intensive Growth Strategies A Costco at Markham, Ontario, Canada. Costco Wholesale Corporation’s generic strategy and intensive growth strategies are combined to ensure the company’s competitive advantage despite tough competition. Costco Wholesale Corporation’s generic strategy (based on Porter’s model) dictates the company’s approach to maintaining its competitive advantage. As the second biggest retailer in the world, Costco follows its generic competitive strategy to directly compete against other giants, especially Walmart. On the other hand, Costco’s intensive growth strategies determine the actions suited to grow the business. The company uses its intensive growth strategies to continue expanding worldwide. In spite of the tough competition with Walmart and local players, Costco remains strong and competitive, thereby showing the effective implementation of its generic competitive strategy and intensive growth strategies. Costco Wholesale Corporation’s combination of its generic competitive strategy and intensive growth strategies enables the business to grow despite competition with firms like Walmart.

Costco Wholesale’s Intensive Strategies (Intensive Growth Strategies) Market Penetration. Costco Wholesale Corporation’s main intensive growth strategy is market penetration. This intensive strategy supports growth though more sales to markets where the firm already operates. For example, Costco uses aggressive marketing campaigns to attract more consumers to its warehouses/stores. A strategic objective for this intensive growth strategy is to increase customer retention, such as through Costco’s discounts based on membership. Costco Wholesale’s generic competitive strategy of cost leadership supports this intensive growth strategy by attracting customers based on low prices.

Market Development. Costco Wholesale’s secondary intensive growth strategy is market development. This intensive strategy enables the company to grow through sales to entirely new markets or market segments. For example, Costco opens new warehouses/stores in new locations, such as overseas markets, to gain new customers. A strategic objective for this intensive growth strategy is to expand the supply chain to support new warehouse/store locations. Costco’s generic competitive strategies of cost leadership and broad differentiation help attract new customers to newly opened locations. Product Development. Costco Wholesale’s tertiary intensive growth strategy is product development. This intensive strategy supports the firm’s growth through the introduction of new products. For example, Costco adds time-limited or seasonal products, as well as new products under the Kirkland Signature brand. A strategic objective for this intensive growth strategy is to establish alliances with manufacturers for co-branding of their products with Costco’s Kirkland Signature brand. This intensive growth strategy supports Costco’s generic competitive strategy of cost differentiation through the high quality associated with Kirkland Signature.

Costco Wholesale Corporation’s Vision Statement Costco Wholesale has not released an official vision statement. However, the company’s history implies that its original vision statement is to be “a place where efficient buying and operating practices give members access to unmatched savings.” This implied vision statement has the following main points about Costco: 1. Efficient operations 2. Unmatched savings 3. Access through membership

This vision statement shows Costco’s need to ensure efficiency in its operations. Such efficiency minimizes costs and prices. Cost minimization leads to the next point of the vision statement: unmatched savings. Costco’s customers can expect such savings through discounts based on membership status or by using Costco Cash Cards. Access through membership is the component of the vision statement that indicates Costco Wholesale’s membership-only warehouse club model. Based on this vision statement, a strategic financial objective is to minimize costs so that the company could continue to offer the discounts that attract customers to its warehouses/stores.

Costco Wholesale’s Mission Statement Costco Wholesale Corporation’s mission statement is similar to the identified vision statement above. The mission statement says that Costco aims “to continually provide our members with quality goods and services at the lowest possible prices.” This mission statement has the following main points: 1. Quality goods and services 2. Lowest possible prices 3. Continual offers

Costco’s mission statement shows that the business uses quality as a selling point. This factor is important because there are many other firms that compete against Costco on the basis of low prices. The company’s mission statement also indicates low prices as a major selling point. Customers are drawn to the discounts and low prices available at Costco. Moreover, the mission statement shows that these offers are always available at Costco warehouses/stores to members. A strategic objective linked to this mission statement is to develop a supply chain that supports cost minimization and high quality.

Costco Wholesale’s Vision & Mission Statements – Recommendation Costco Wholesale Corporation’s mission statement is specific and aligned to the nature of the company’s business. It also agrees well with the implied vision statement of the firm. However, Costco must release an official vision statement to guide employees and investors in their decisions about the business.

Costco Wholesale PESTEL/PESTLE Analysis A Costco in Markham, Ontario, Canada. Costco Wholesale Corporation’s PESTEL/PESTLE analysis shows that the company has mostly opportunities based on the external factors in its remote or macro-environment Costco Wholesale Corporation develops strategies that address the opportunities and threats identifiable in its PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis model enumerates the external factors in the firm’s remote or macro-environment that act as opportunities or threats in the business. Costco Wholesale needs to consider these opportunities and threats to maintain its market position as the biggest membership warehouse club chain in the United States. This PESTEL/PESTLE analysis indicates that Costco has many options for growth and improvement, based on opportunities in its business environment. However, Costco must develop competencies to protect itself from the threats in the retail industry. This PESTEL/PESTLE analysis of Costco Wholesale Corporation shows that the company can experience growth through opportunities in most of the dimensions of its remote or macro-environment.

Political Factors Affecting Costco Wholesale’s Business The performance of Costco’s warehouses/stores is partly dependent on the political influences in its remote or macro-environment. In the PESTEL/PESTLE analysis model, this dimension refers to the effects of governmental action on a firm’s external environment. The political factors in Costco’s case are as follows: 1. Political stability of major markets (opportunity) 2. More complex environmental policies (opportunity) 3. Animal rights policies (opportunity) Costco Wholesale Corporation has the opportunity to grow with minimal political disturbance in major markets. In addition, the company has the opportunity to improve its policies and strategies to exceed the expectations based on environmental and animal rights policies. In this dimension of the PESTEL/PESTLE analysis model, Costco has major opportunities to grow its business.

Economic Factors Important to Costco Wholesale Costco Wholesale needs to align its business with the economic situation. This dimension of the PESTEL/PESTLE analysis model covers the external factors that affect firms’ economic viability. In Costco’s remote or macro-environment, the following are the notable economic factors: 1. Increasing international trade agreements (opportunity) 2. Rapid growth of developing markets (opportunity) 3. Slow growth of American market (opportunity) The increasing international trade agreements give greater support for Costco to expand its supply chain and warehouses/stores. The company also has the opportunity to establish new locations in developing markets to boost financial performance. In addition, Costco can improve its growth and stability in the U.S. even though economic growth remains low. In this dimension of the PESTEL/PESTLE analysis model, Costco Wholesale Corporation has opportunities for further growth.

Social/Sociocultural Factors Influencing Costco’s Business Environment Sociocultural issues impact the remote or macro-environment of firms like Costco. In the PESTEL/PESTLE analysis model, this dimension identifies the social or sociocultural external factors that could change consumer and employee behaviors. In Costco’s case, the following are significant sociocultural factors: 1. Increasing demand for business social responsibility (opportunity) 2. Animal rights trend (opportunity) 3. Environmentalism (opportunity) Based on the external factor of increasing demand for business social responsibility, Costco Wholesale has the opportunity to improve its corporate social responsibility programs to strengthen its brand image and consumer perception. Also, Costco has the opportunity to improve customer satisfaction by implementing policies and strategies for better animal rights and environmental performance. In this dimension of the PESTEL/PESTLE analysis model, Costco Wholesale Corporation has major opportunities to satisfy customers and interest groups.

Technological Factors in Costco Wholesale’s Business Costco Wholesale’s remote or macro-environment is subject to the effects of technologies. This dimension of the PESTEL/PESTLE analysis model deals with the influence of technologies and technological innovation on firms. In Costco’s case, the following are significant technological external factors: 1. Increasing e-commerce transactions (opportunity) 2. Increasing business automation (opportunity) 3. Rapid rate of technological innovation (opportunity) Costco has the opportunity to attract a larger market share through e-commerce. In addition, the company can implement new automation technologies to increase its business efficiency, which should translate to savings and better financial performance. Also, Costco can innovate in terms of other technological applications, such as in information processing, knowledge management, and HR training. This dimension of the PESTEL/PESTLE analysis model shows that Costco has technological opportunities to improve its business processes.

Ecological/Environmental Factors As a retailer, Costco needs to consider the effects of ecological concerns on its remote or macro-environment. In the PESTEL/PESTLE analysis model, this dimension refers to the ecological conditions that influence business performance, such as through supply chain performance or market growth. In Costco’s case, the following are the main ecological external factors: 1. Climate change (threat) 2. Low-carbon lifestyles (opportunity) 3. Collapsing bee colonies (threat) Climate change threatens Costco Wholesale Corporation because part of the business sells produce, which is dependent on optimal climate conditions. In relation, Costco must adapt its product mix to satisfy the changing lifestyles of consumers. Also, the continuing colony collapse disorder (CCD) affects bees and, in turn, the supply of food products that Costco sells. However, the company cannot do much about this specific threat of CCD. In this dimension of the PESTEL/PESTLE analysis model, Costco must consider adjusting its strategies to strengthen its supply chain.

Legal Factors Legal systems impose requirements on firms like Costco. This dimension of the PESTEL/PESTLE analysis model shows the effects of laws or regulations on firms’ remote or macro-environment. Some of the important legal external factors in Costco’s case are as follows: 1. Changing employment laws (opportunity) 2. Tax reforms (opportunity & threat) 3. GMO regulations (opportunity) Costco has the opportunity to improve its employment practices to exceed the requirements of employment laws. Also, Costco can adjust its policies and strategies to optimize its performance despite tax reform issues. In addition, the company can impose new policies that require more accurate GMO labeling for its food products. This dimension of the PESTEL/PESTLE analysis model shows that Costco Wholesale Corporation can change its business practices to exploit legal opportunities.

Costco Wholesale’s PESTEL/PESTLE Analysis – Recommendations Costco Wholesale has many opportunities to improve its processes, increase its financial performance, and grow its business. However, this PESTEL/PESTLE analysis also shows that Costco needs to address a number of significant threats. To address the threat of climate change, the company can expand and further diversify its supply chain. Costco must also expand its business in high-growth economies to exploit the opportunities linked to their rapid development

Costco Wholesale Five Forces Analysis (Porter’s Model) A Costco in Neihu, Taiwan. In Costco Wholesale Corporation’s Five Forces analysis (based on Porter’s model), the external factors in the retail industry environment emphasize competition, customers, and substitution as the strongest forces Costco Wholesale Corporation continues adjusting to the external factors in the retail industry environment, as shown in this Five Forces analysis. The Five Forces analysis is Michael Porter’s model for determining the degree of influence of external factors. In Costco’s case, the Five Forces analysis model indicates the most important external factors that the company must address. While all of these external factors influence Costco, they differ in terms of their effects on the firm. As such, Costco Wholesale’s strategic direction must overcome these forces to maintain the company’s position as the largest membership warehouse club chain in the United States. Costco Wholesale Corporation’s Five Forces analysis indicates that the company faces strong forces in its industry environment. Suppliers have the weakest force in affecting Costco’s business.

Overview: Costco Wholesale’s Five Forces Analysis Costco Wholesale faces external factors with varying intensities. These intensities may change over time. At present, the following are the Five Forces in Costco’s industry environment, with their respective intensities: 1. 2. 3. 4. 5.

Competitive rivalry or competition (strong force) Bargaining power of buyers or customers (strong force) Bargaining power of suppliers (weak force) Threat of substitutes or substitution (strong force) Threat of new entrants or new entry (moderate force) The above synopsis of the Five Forces analysis of Costco Wholesale shows that the company faces challenges linked to most of the five forces. The bargaining power of suppliers is the least of Costco’s concerns. To remain effective and to keep its position in the retail market, Costco needs to continue enhancing its competencies to combat the effects of competition and new entrants. Costco also needs to improve its goods and services over time to address the potential negative effects of substitutes.

Competitive Rivalry or Competition with Costco Wholesale (Strong Force) Costco Wholesale Corporation must counteract the effects of competition on the retail industry environment. This element of the Five Forces analysis refers to the influence of competing firms on each other. The following are the external factors that contribute to the strong force of competitive rivalry against Costco:   

Large number of firms (strong force) High variety of firms (strong force) Low switching costs (strong force) The retail industry is saturated, with many firms aggressively competing against Costco. Also, the high variety of firms makes the competition tougher, as firms capitalize on their unique competencies to compete against Costco. In addition, the low switching costs are an external factor that makes it easy for consumers to transfer from Costco to other firms. Thus, based on this element of the Five Forces analysis, competition is among Costco’s most important concerns.

Bargaining Power of Costco’s Customers/Buyers (Strong Force) Costco must ensure that it satisfies consumers. This element of the Five Forces analysis considers the influence of customers on firms’ effectiveness in the retail industry environment. In Costco’s case, the external factors that lead to the strong bargaining power of customers are as follows:   

Low switching costs (strong force) High availability of substitutes (strong force) High quality of information (strong force) The low switching costs mean that Costco’s customers can easily transfer to other retailers like Walmart’s Sam’s Club. In relation, Costco consumers have many substitutes to choose from. Also, because of the Internet, Costco’s customers can easily access information about prices and offers among competing retailers. As a result, it becomes even easier for them to transfer to the retailers that have the best offers. These external factors indicate that Costco Wholesale Corporation must consider the bargaining power of buyers as among the top issues in this Five Forces analysis.

Bargaining Power of Costco Wholesale’s Suppliers (Weak Force) Suppliers affect Costco’s business and the retail industry environment. The demands and impact of suppliers on businesses are covered in this element of the Five Forces analysis. The following are the external factors that create the weak bargaining power of suppliers in Costco’s case:   

Large population of suppliers (weak force) High overall supply (weak force) Low forward integration (weak force) Because of the large population of suppliers, no single supplier can easily impose its demands on firms like Costco. Suppliers’ bargaining power is further weakened because the overall supply is high, which means that a single supplier’s action is unlikely to significantly impact the level of total supply available to Costco. In addition, most of Costco’s suppliers have low forward integration, which means that they have minimal control on the distribution and sale of their products in Costco warehouses/stores. This element of the Five Forces analysis shows that the external factors leading to the bargaining power of suppliers are among the least of Costco’s concerns.

Threat of Substitutes or Substitution (Strong Force) Substitution is a challenge to Costco. In this element of the Five Forces analysis, substitutes’ influences on firms and the retail industry environment are addressed. In Costco’s case, the external factors that contribute to the strong threat of substitution are as follows:   

Low switching costs (strong force) High availability of substitutes (strong force) High performance-to-price ratio of substitutes (strong force) Substitutes to Costco Wholesale’s products are easily accessible with no added expense in the process of transferring to the substitutes (low switching costs). In addition, there are many substitutes to most of Costco’s goods, especially food products and related commodities. Moreover, these substitutes can satisfy consumers’ expectations, thereby making the threat of substitution a strong force against Costco. Based on this element of the Five Forces analysis, the external factors leading to the strong threat of substitution should be among Costco Wholesale Corporation’s most important challenges.

Threat of New Entrants or New Entry (Moderate Force) New entrants or new firms pose a threat against established firms like Costco. The effect of new entrants on the retail industry environment is determined in this element of the Five Forces analysis. The following are the external factors that create the moderate threat of new entry against Costco:   

Low switching costs (strong force) Moderate cost of doing business (m...