Description
Craig Jelinek, CEO of Costco, has employed you as a consultant to assess the attractiveness of the North American wholesale club industry and Costco’s overall situation and to provide a set of recommendations that will help the company grow. Please prepare a report to Mr. Jelinek that assesses the long-run profitability of the North American wholesale club industry, the quality of Costco’s internal situation and that makes specific recommendations on how they can attain their goals. In analyzing the situation be sure to perform a thorough Industry and Competitive Analysis (e.g., PESTEL, Porter’s 5 –forces, Driving Forces, KSF’s, competitor analysis, etc. from Chapter 3) as well as an analysis of Costco’s internal situation including its business level strategy, their resources and competitive capabilities (e.g., SWOT from Chapter 4), a Competitor Analysis (A discussion of key competitors and a group map) and a Performance Analysis (financial and strategic). Your recommendations should be specific, actionable and should logically flow from your analysis.
Your report should be no more than 15 pages inclusive of an executive summary, a recommendation section that is no more than 4 pages in length (double spaced), and appendices (single spaced) that should include analyses and may be presented in charts, tables, or any other format you deem useful and appropriate. The cover page is not included in this page limit. All pages must have 1 inch margins and you must use Times New Roman 12 font.
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Running Head: INTERNAL & EXTERNAL ANALYSIS FOR COSTCO WHOLESALE CORPORATION
EXTERNAL AND INTERNAL ANALYSIS FOR COSTCO WHOLESALE
CORPORATION
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Running Head: INTERNAL & EXTERNAL ANALYSIS FOR COSTCO WHOLESALE CORPORATION
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Executive Summary
This report provides an internal and external analysis of the internal situation of Costco
Wholesale Corporation. These analyses include analysis of Costco’s internal situation, Industry
and Competitive Analysis, Competitor Analysis and Performance analysis. The methods of
analysis include business-level strategy, SWOT analysis, PESTEL analysis, Porter’s Five Forces
Analysis, Competitive analysis and financial analysis. The analysis reveals that Costco’s
business model and strategy aligns with its mission and visions. Furthermore, the analysis also
indicates that Costco’s major strengths and opportunities lie on its sound management and Ecommerce respectively.
Furthermore, the external analysis of Costco also shows that its weaknesses and threats
are posed by its high geographical concentration of stores and stiff competition respectively.
Similarly, external analysis of the company shows that even though it enjoys political stability
domestically and overseas, various other economic, social, technological, environmental and
legal factors still impacts its operations around the world. The report also finds that Costco and
other key players within the industry enjoys a very low threat to new entrants due to various
challenges such as high initial capital. Despite facing stiff competition from rivals such as
Walmart and Target Corporation, the report finds that Costco is still the second leading retailer in
the industry globally. An analysis of Costco’s performance also reveals that most of the key
financial ratios are above industry average especially in the areas of price-to-earnings and profit
margin.
The report also finds that the prospects of Costco in its present position are positive.
However, some key areas of shortcomings still require concrete actions by the management. The
report recommends that the company should expand its E-commerce, change its decision-making
Running Head: INTERNAL & EXTERNAL ANALYSIS FOR COSTCO WHOLESALE CORPORATION
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style, embrace strategies that maximize its threats and opportunities while minimizing
weaknesses and addressing threats.
Introduction
Costco Wholesale Corporation (CWC), commonly referred to as Costco, is a Fortune
company headquartered in Issaquah, Washington, United States. Costco operates several
memberships within the US and other countries with a core objective to provide low prices on
the specialty and selective merchandize within a variety of products. As of 2015, Costco was the
largest retailer globally after Walmart. In 2010, Stores Org Costco as the largest wine retailer
globally. Costco has a direct connection of merchandize over which the organization purchases
its goods straight from the producers or manufacturers and similarly distributes them to its
warehouse facilities. Costco’s warehouses are of medium size with an average of one hundred
and forty thousand square feet. The company’s warehouses operate throughout the week. As of
2017, the company had 729 warehouses around the United States and nine other countries. In
addition, as of 2016, the company had approximately 126,000 employees directly employed.
Costco is a public company, and its stocks are traded in the stocks of the company are traded on
the NASDAQ under the symbol COST.
Mission, Vision, Business Model and Strategy
Costco’s Mission
Costco’s mission statement is “to continually provide members with quality goods and
services at the lowest possible prices.”
Running Head: INTERNAL & EXTERNAL ANALYSIS FOR COSTCO WHOLESALE CORPORATION
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Costco’s mission statement is connected to the company’s business model and strategy.
The mission illustrates that the company emphasizes on quality as a competitive edge. Quality is
critical for the company since various other rival firms’ race against the company on a low price
basis. Costco’s mission statement further shows offering low prices as the company’s main
selling point. Most clients are attracted to the lower prices and discounts offered by Costco.
Furthermore, the mission indicates that such discounts are often present at the company’s stores
to its members. The major strategic aim associated with the mission is to create a supply chain
that facilitates cost-cutting and high quality. This objective reinforces Costco’s aim to maintain
and advance the firm’s competitive ability and long-range market position by customer value.
Whereas financial targets emphasize on attaining reasonable profitability in an organization’s
quest for its mission and existence, Costco’s mission is central to accomplishing its visions.
Costco’s Vision
Costco vision statement is “A place where efficient buying and operating practices give
members access to unmatched savings.”
The vision illustrates the firm’s desire to ascertain efficiency in its processes. Efficiency
is vital for Costco since it significantly cuts down on costs that might otherwise adversely impact
prices. Thus, cost minimization drives the succeeding part of the statement: unmatched savings.
The company’s clients reap these saving over discounts through membership status and other
services. Entry via membership is an element of Costco vision that shows its wholesale
membership-only warehouse club model. Cost cutting is vital for reinforcing Costco’s
competitively low pricing strategy.
Business Model
Running Head: INTERNAL & EXTERNAL ANALYSIS FOR COSTCO WHOLESALE CORPORATION
Costco uses a subscription business model. In this membership-only warehouse club
model, clients pay a membership fee to access the low-cost merchandise present at the
company’s warehouses. Customers who are not members are allo...
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