Executive second-largest retailer in the U.S. behind Walmart. Costco’s

Executive Summary

“Costco Wholesale Corporation operates an international chain
of membership warehouses, mainly under the “Costco Wholesale” name,
that carry quality, brand name merchandise at substantially lower prices than
are typically found at conventional wholesale or retail sources(Costco
Wholesale, 2015).” The warehouses are designed to help small-to-medium-sized
businesses reduce costs in purchasing for resale and for everyday business use.
Individuals may also purchase for their personal needs.
“Costco Wholesale is one of the most exceptional companies in the retail world
today that delivers consistent revenue and net income growth (Moskowitz).”  Costco has seen a steady revenue and income growth
over the past five years. Costco relies mainly on its domestic operations for
revenue growth. The company targets high-end consumers than its competitors
Walmart and Target. Costco strategic goals are centered on the company mission,
an d vision statement which is to provide exceptional services to consumer at a
competitive price. As mentioned by Moskowitz, 2012, “Costco’s main objective of
selling the highest quality products at the lowest possible prices is quite a
simple and its success is due to the company firm-specific advantages which
include strong bargaining power, a differentiated method of sales, and strong
connections with its suppliers, both domestic and foreign.” Costco main
challenges are the company’s low profit margin, lack of diversification, and
minimal internet presence.

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Company
Overview                               

Costco Wholesale (COST), the second-largest retailer in the
U.S. behind Walmart. Costco’s warehouses present one of the largest and most
exclusive product category selections to be found under a single roof.
Categories include groceries, candy, appliances, television and media,
automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches,
cameras, books, housewares, apparel, health and beauty aids, tobacco,
furniture, office supplies and office equipment. Costco is known for carrying
top quality national and regional brands, with 100% satisfaction guaranteed, at
prices consistently below traditional wholesale or retail outlets. Members can
also shop for private label Kirkland Signature products, designed to be of
equal or better quality than national brands, including juice, cookies, coffee,
housewares, luggage, clothing and detergent.

The Company also operates self-service gasoline stations at a number of its
U.S. and Canadian locations. Additionally, Costco Wholesale Industries, a
division of the Company, operates manufacturing businesses, including special
food packaging, optical laboratories, meat processing and jewelry distribution.
These businesses have a common goal of providing members with high quality
products at substantially lower prices. Costco is open only to members and
offers three types of membership: Business, Gold Star (individual) and the
Executive membership. Business members qualify by owning or operating a
business, and pay an annual fee ($55 in the U.S.) to shop for resale, business
and personal use. This fee includes a household card. Business members may
purchase up to six additional membership cards ($55 each) for partners or
associates in the business.

 

SWOT Analysis

Strengths

Costco’s brand is a household name and many customers have
been exercised brand loyalty. The company
focuses on providing its members with quality products at competitive prices. “Costco
does not focus on high profit margin but instead focuses to maintain a
perception among its members of “pricing authority”, or consistently providing
the most competitive prices (Costco Corporation).” Costco’s provide high salary
and excellent benefits to its employees. Leadership at Costco believed in
motivating and influencing employee to act ethically in carrying out their
daily duties. At Costco there is always room for upward mobility and professional
development and training for its employees.

Weakness

Costco main challenges are the company’s low profit margin,
lack of diversification, and minimal internet presence. Costco depends heavily
on its business operations in U.S. and Canada which represented 87% of the
total sales for 2016. Of the 87% of total sales, the state of California represented
32% of U.S. sales last year. As a result, any substantial slowing in demand or
new government regulations in the state, for any number of reasons, could significantly
hurt the company’s top and bottom lines

Opportunities

Costco business model presents opportunities for the company
to expand both locally and internationally. There are also opportunities for
Costco to merger with other ecommerce businesses so that the company can have a
stronger internet present.  Costco can
also take steps to attract younger customer to its warehouse. The younger
generation is more likely to shop with Amazon as they prefer convenience and
accessibility

Threats

The main threat to its operations is easier access to other
competitor products than Costco’s. Costco is located in main
cities and suburbs while company like Walmart is everywhere.  This industry is highly competitive.    The discount warehouse services and retail
industry is highly competitive. Primary competitors include Sam’s Club, Boxed Warehouse
and BJ’s Wholesale Club.  Costco’s
operations on the global market can be threatened by international political and
governmental interference.