Public Domain Costco Wholesale Corporation continues adjusting to the external factors in the retail industry environment, as shown in this Five Forces analysis.
References Executive Summary The purpose of the report is to provide a detailed analysis of Costco industry external environment, critically analyse the company and provide a detailed analysis of resource and competitive position, identify the generic strategy Costco is using to achieve a source of competitive advantage and finally, develop a new five-year strategy for Costco.
Costco Wholesale Corporation operates a chain of membership warehouses and with warehouses across the globe; it is the largest and most profitable chain of its kind. Costco is partially vertically integrated with backward integration with Kirkland Signature Brand. Industry faces new challenges because of shifting demographics, household downsizing, more educated consumers and new channel formats.
Some of the weaknesses identified as: Online sales, increasing house remodelling expenditure and increased demand for technological products are some of the potential areas that Costco can tap.
Threats are stemming mainly from slow economy due to financial crisis. To develop sustainable competitive advantage Costco can cut cost through operating excellence, innovation, speed, adopt triple bottom line accounting and has to successfully manage complexity arising from environment and its own operation.
It can be hoped that Costco will continue its success as long as it keeps following its well thought out ideas and strategies.
List of Tables 2.
In addition to offering low prices, Costco strives to be a valuable member of the community where they do business. On Feb 29,Costco reported 2nd quarter earnings of 0.
Costco is partially vertically integrated with cross-dock distribution. It also has backward integration with Kirkland Signature Brand Khoury,p. The industry operates with large economies of scale that comes from bulk buying from suppliers, gigantic packaging, large warehouse stores and a customer member base.
Costco is operating in a market that is at the stage of maturity with at least one store in each major metropolitan area Khoury,p. This means although the industry is profitable, the sales growth is low. Moreover, the players in the market are already established and strong brand awareness is present among the customers.
Because of the enormous first-mover advantage derived mostly from economies of scale and given the inherent capital intensity of this business, any new entrant would face huge initial cost. Therefore, it could be concluded that the threat of new entrants is low. Until today, Costco has not suffered from any employee strikes.
The firm has chosen to keep its employees happy and will probably not attempt to alter this relationship in the foreseeable future. In terms of the suppliers of inventories, Costco can leverage considerable buyer power in such a way that supplier power is a minimal concern.
On the other hand, Costco can threaten to backward-integrate via its Kirkland private label.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.
The top 10 competitors in Costco's competitive set are Sam's Club, Amazon, Walmart, Kmart, Target, Jet, Safeway, ALDI Einkauf, Kroger and BJ’s. Together they have raised over M between their estimated M employees. As part of this analysis, we will compare Costco's business model to its closest publicly traded competitor, BJ's Wholesale, to understand the competitive dynamics of their interactions with customers.
Furthermore, we will analyze whether Costco's competitive advantages are . On 1/11/18, Walmart announced that they would be closing 63 Sam’s Club locations. This list analyzes instances of overlap between the 63 closures and the following competitors: Costco Wholesale Club BJ’s Wholesale Club Target Walmart* Other Sam’s Club locations* *Self-Inflicted Competition.
Costco Wholesale Corporation Part III Costco Wholesale Corporation is in an industry where there are several of dynamic competition from huge chains such as Wal-Mart or Sam’s Club and Target, and yet it could maintain a competitive and profitable stance.
(source Sam's Club, Costco).
For each of past three fiscal years, Costco had only ~10% additional total warehouse square footage than Sam's Club .