Costco: External and Internal Environments, and Strategic Alternatives

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Introduction

Costco, a membership warehouse club, has established itself as a formidable wholesale rival. Costco provides a wide range of items and services as part of its low-cost business approach. Costco is able to sell large amounts of things at a low price due to economies of scale. Costco has developed substantially over the last decade and is now one of the top three wholesale club operators. Like any other company, Costco’s success is determined by the implementation of its business plan. This study will examine Costco’s external and internal environment in order to conduct strategic analysis. This will be followed by a critical problem evaluation and a strategy proposal.

SWOT Analysis

Costco has a distinct business strategy from its competitors in that customers must be members of Costco or have a Costco membership card to shop there. Costco has a low-price approach that has helped the corporation cement its position as a retail giant. The fact that Costco’s client base is aging has implications for the company’s earnings projections in the future (Habibur, 2020). As a result, there is potential to appeal to younger individuals by making e-commerce buying easier. The firm will have additional chances to invest in its online platform and make it more accessible to people of all ages (Gupta, 2022). Costco faces fierce competition from global wholesale and retailing companies like Amazon and Walmart (Habibur, 2020). They have great opportunities for development, thereby taking away potential customers. Given that Costco currently operates in several nations, a lack of an advertising or marketing plan might jeopardize the company’s earnings (Gupta, 2022). Therefore, it is necessary to increase the amount of advertising to maintain a presence in the media space.

Advantages and Disadvantages of the Strategic Alternatives

Expansion into foreign markets is one strategic option for reducing over-reliance on the US and Canadian markets. The other strategy is e-commerce, which may help the business expand its market reach because most people purchase online. Market expansion into new nations will increase sales and membership memberships, resulting in improved profitability (Habibur, 2020). However, it has the drawback of higher operating expenses and the danger of the business not growing up as quickly as projected in new countries. E-commerce offers several benefits, including removing geographical obstacles and reducing operational expenses by removing the need for numerous physical warehouses (Gupta, 2022). Because of the various threats associated with the internet, such as hackers, the corporation will need to invest in information technology.

Application of the Decision Matrix

A decision matrix is a tool for evaluating and choosing the best option out of several possible ones. It is beneficial if the company has more than one solution to the problem and several factors that need to be considered to make a final decision. This is a powerful — but relatively simple – process that is most effective when choosing from several comparable options (Peek, 2021). If the criteria for evaluating different options are not the same, then the decision-making matrix will most likely not be the best tool. For example, it will not help decide which direction the company will move next year because the business will have to choose between disparate options.

Strategic Alternative Inhibitors

The dynamic features of the environment influence the method in which a strategy is chosen. The interplay of environmental components, including shareholders, consumers, suppliers, rivals, the government, and the community, is critical to a company’s existence and development (Chen, 2021). The external restrictions are made up of these elements. The size and degree of the company’s reliance on the environment frequently determine the flexibility in strategy selection. In order for Costco to succeed in the short and long run, it will need to combine innovative online experiences with a more substantial social media presence (Chen, 2021). Customers might be enticed to shop online by offering treasure hunt discounts. They may integrate this with social media by implementing a points-based reward system.

Growth Initiatives

One of the most important aspects of growing a company is to extend into new areas. By tapping into new markets, some organizations can achieve tremendous organizational development. Increasing demand for a company’s product or service, especially in a market where competition is still developing, can lead to explosive expansion (All Answers Ltd, 2021). On the other hand, the company may pay attention to the development of a new product or service that will allow it to expand its customer base (Chen, 2021). The process begins with ideation and concept development and finishes with the product’s launch to the market; the process lays out a sequence of steps that new products usually go through. A company’s most sophisticated technology may be licensed for it to develop and grow (Chen, 2021). Because rivals will almost certainly duplicate anything a business creates at some point, this strategy is frequently advocated by enterprises with their exclusive technology. Licensing is one approach that may increase a company’s value from its technology.

Summary

Costco has developed and extended its operations considerably over the last decade, both geographically and within its client base. Both the interior and exterior settings of Costco offer advantages and disadvantages. Other wholesalers are not Costco’s only competitors in this established business; the store also needs to worry about other merchants stealing its consumers. As a result, Costco must concentrate on redirecting customers’ attention to Costco to build long-term client connections. Costco will grow its client base and secure consumer loyalty if it uses a few techniques more in line with current communication.

References

All Answers Ltd. (2021, June 1). Costco business analysis: PESTLE and industry evaluation. UKDiss. Web.

Chen, J. (2021). Marketing strategy management of Costco: Analysis and comparison to S-Group (Thesis). Centria. Web.

Gupta, S. K. (2022). Costco SWOT analysis (2022). Business Strategy Hub. Web.

Habibur, R. (2020). Financial analysis of Costco wholesale corporation: Exploring the strengths and weaknesses. The Bangladesh Journal of Agricultural Economics, 41(1), 17-34. Web.

Peek, S. (2021). What is a decision matrix? Definition and examples. Business News Daily. Web.

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BusinessEssay. (2023) 'Costco: External and Internal Environments, and Strategic Alternatives'. 13 January.

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BusinessEssay. 2023. "Costco: External and Internal Environments, and Strategic Alternatives." January 13, 2023. https://business-essay.com/costco-external-and-internal-environments-and-strategic-alternatives/.

1. BusinessEssay. "Costco: External and Internal Environments, and Strategic Alternatives." January 13, 2023. https://business-essay.com/costco-external-and-internal-environments-and-strategic-alternatives/.


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BusinessEssay. "Costco: External and Internal Environments, and Strategic Alternatives." January 13, 2023. https://business-essay.com/costco-external-and-internal-environments-and-strategic-alternatives/.