Costco Corporation Analysis
Costco Corporation is a retail trade business located in the United States. The corporation is among the largest companies operating in retail trade globally. The two segments of the general environment that highly influence the operations of the company include demographic environment and legal/political environment. Political environment ranks high among the factors that influence the operations of Costco Corporation across the world. The host nation’s political climate influences much on the operations of the firm since the political policies established in the country will dictate if the firm will make loses of profits in the long run. The firm is focusing on how it can increase employee motivation in the firm, given that the political environment of the host nations favours the operations of the corporation (Cascio 2018). At times the firm faces tough political policies that are formulated in the country which it has to ensure that it adheres to them for it to continue in operation and to generate more revenue for the company. The retail trade industry is highly affected by the political environments of the nations in which the companies operate. Favourable political environments will enable the firms to make more revenues. With unfavourable political situations in some nations, it becomes difficult for corporations to undertake their activities in those nations.
Another general environment that ranks high in influencing the operation of Costco is the demographic environment. This segment of the environment includes the social class, income distribution, and gender. Costco operates on a global basis; therefore, it must analyse the composition of the target population in different parts of the world. Under this segment, the corporation deals with people from diverse cultures which requires that the firm ensures it meets all their needs and also it must incorporate the aspect of the diverse population when making decisions regarding operations of the company. Population distribution across the world affects the retail industry because most of the firms in this industry operate in different parts of the world, and also they require a large population to get their customers. As a result of the demographic change, the firm must always be prepared to develop laws that will address any form of discrimination that might arise.
The two forces of competition that the firm considers to be important include rivalry among major corporations in the industry and availability of the substitutes for the products and services. The availability of close substitutes for the products offered by the firm creates a lot of competitiveness in the industry. With retail business offering many products with close substitutes in the industry, the firm has to come with advanced mechanisms that can help it acquire the largest market share with the products that it offers to its customers. The rivalry is another force of competition that the firm is experiencing. There are many players in this industry; hence the firm has to use strategies like selling goods at lower prices to attract many customers. After Costco decided to sell products at lower prices, competition in the industry has intensified. As a result of the strong competition experienced in the industry, Costco has been able to come up with strategies that help it withstand the strong competition that is imposed by other firms.
The corporation can address these issues in the near future by using pricing mechanisms to attract customers, developing new technology in its operations to aid in service delivery and lastly it can develop product differentiation. These strategies will enable the firm to gain a competitive advantage in the industry and generate more revenue. The external threats that are affecting the corporation include unpredictable exchange rates in the world trade, which leads to fluctuation reducing the profits that the firm earns. Another threat is the firm is exposed so much to markets which are experiencing low growth rate (Stettner 2017). Lastly is that the cost of hiring employees is increasingly going up, leading to reduced profits for the corporation in the long run. Establishing new firms worldwide requires new employees who are threatening the amount of revenue the firm will be receiving due to high expenses. The opportunities available include advanced technology which provides online platforms for business. Also, the high population in many countries across the world offers an opportunity for a ready market for the products. The firm can address the threat of low growth rate markets by targeting new markets which are still growing like establishing branches in developing countries. The firm can maximize the greatest opportunity, which is technology to cover the most significant market and attract many customers.
The greatest strength of the firm is its ability to sell at low prices to gain market share. My opinion is that this strategy is the best in acquiring market in a competitive situation. The weakness that the firm is facing is a few products that it offers in the market. The firm needs to diverse its operation and have a variety of products for customers (Guarna 2019). The strategy the firm can adopt to maximize the strengths is setting fixed prices so that the firm becomes the price leader in the market. This will enable the corporation to maintain the lead and attract many customers. The strategy to fix its weakness is diversifying its operations to include a variety of products so that customers can have many products that they can choose instead of having limited products for consumers.
The resources of the company include human capital with expertise in various fields of marketing, management, and technology. Another resource is the brand name ”Costco” which cannot be used by any other firm. The capabilities of the firm include extensive research and development. This capability enables the firm to research the market and put appropriate strategies that can attract many customers. The competencies of the corporation are offering high-quality products to consumers and its ability to sell its products at reduced prices and still make enough revenues for all the operations of the firm. Another competency is the ability of the corporation to retain as many customers as possible and also attract new ones.
References
Cascio, W. F. (2018). A COMPARISON OF COSTCO TO WALMART’S SAM’S CLUB”. Business Ethics: The Big Picture, 276.
Stettner, A. (2017). How to Protect Work and Wages in America. Challenge, 60(3), 268-278.
Guarna, N. (2019). The Behavioral Case for B Corporations.