Costco Company Case Analysis
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Case Analysis of the Company’s History, Development and Growth
Costco was founded in 1983 and is currently the third largest retailer in the United States and seventh in the world. It has about 600 stores in America, United Kingdom and Asia, with some outlets owned as joint ventures. The company developed a membership concept with discount retailing which subjects members to shop in their outlets spurring the sales volume, an initiative which has far been expanded to it suppliers. Costco became a public company in 1985 with its founders Jim Sinegal and Jeff Brotman ensuring its expansion and merger with other stores. It has established strategies and models to enhance growth and expansion in the market and maintain its customers, with well laid down operating excerpts and principles for guideline.
Internal strengths and weaknesses
The company has different strengths and weaknesses. It has proper constituted structure and has since has a leadership committed to its growth and success. The introduction of family membership initiative and the discounted sales makes it have spurred growth and access wider market. Proper leadership at the top also encourages trust among the employees with their seniors providing for their commitment to work. Costco has a large number of outlets globally and enough employees to cater for the workforce. Its revenue base and performance in the market is outstanding, making it the best outlet. Its centers offer convenience to customers by providing complementary services such as hospitality and professional deliveries.
The weaknesses that can be identified are that at some outlets, the employees taken never had experience required. The review of work policies and contracts do not offer protection to its employees either way. Its old customer base does not allow it to rake new customers. Rivalry is continual and does not give the chain a chance for mistakes. Its policy of high salary to employees while maintaining lower margin can sometimes negatively affect the company revenue.
Analysis of the external environment
People like higher quality products at a higher price that they can get in a wholesale like Costco, which the company needs to find each time than before to maintain and attract customers. There is still chance for expansion that the company can undertake since its number of outlets are limited outside North America, but must watch trends in the foreign states to avert operation problems. The company can have hard time dealing with competitors in the market and must come up with strategies that will keep it high. Economic hardships and global inflation currently is capable of affecting company sales and revenues.
SWOT analysis of Costco
Notable strength of Costco is its revenue base enabling it acquires quality stock in large volumes at a lower price. Increased expansion and cross border ventures grows its membership resulting to spur in profits. The relationship between the leadership and the employees reduces the employee turnover, coupled with higher pay improves company productivity. The company has strategies that encourage stakeholders and more investors to join. The everyday low price edge would ensure continued profitability for the chain. Its weaknesses include its concentration in the North American market and collaborating with firms that are incorporated with other players in the same market. Its performance focus may also stagnate due to continued competition in the sector.
The opportunities include the increasing demand for online transaction that has seen it launch websites that customers can access. The focus on younger customers can elongate loyalty and ensure strategic expansion of its services. With the emerging economies, the company can venture in other places it does not have its stores. The continued merger and partnership can be its strategy that would eliminate or reduce competitors while making it seen as the industry giant.
Threats the chain face are the labor laws in other markets and instability in terms of the economy and politics. That coupled with inflation and increased wage demands can render the company revenues unrealistic and scare away potential investors. There are large numbers of competitors coming up and existing that can displace the business segments.
Corporate-Level Strategy
The strategy of the wholesale was low prices, which so far saw it introduce everyday low price, limited selection that gives the customers a selection of just a few quality products. Its suppliers also developed one-time purchase items that would appeal to its customers.
Business-level strategy
While other players advertise for their products, Costco does not advertise. It focuses on driving sales and offers better pay and benefits to its employees than the competitors due to higher sales volumes, which propel profits. Its offer for deep discount clubs and convenient shopping for customers is another strategy to outshine competitors.
Analysis of the Company’s Strategic Plan to that of its Structure and Control Systems
The company strategic plan fits to its structure and control systems. By minimizing on the number of items sold, it increases sales volume and limits selection-giving ease to the clients while undertaking their shopping. The increased sales in turn increases the profits enabling the business to offer its employees a better pay and still make reasonable profit.
Recommendations
The wholesale should focus on expanding its outlets to the regions it does not exist in the upcoming economies to expand its market base. Even though it does not focus on advertisements, it must continue with initiatives that would attract customers to the business. Focusing on young people and smaller families would also make it increase its sales as the customers increase.
Actions for Successful Changes
The company needs to be on the outlook to see any opportunity that it can seize in order to expand. It also has to ensure that its products fit the different markets it operates in to remain relevant. Convenience shopping also is a good way of encouraging clients to visit the store each time they are thinking of making purchase.
Reference
Gamble, J. Strickland, A., & Thompson, A. (2014). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases (19th ed.). New York, NY: McGraw Hill.