Good Case Study About Costco Wholesale SWOT Analysis
Costco Wholesale current strategy is to sell at low prices in order to increase sales volumes. This plan may eat up some of the company’s sales revenues at the point of sale, but increase the business’s revenue since more customers will be attracted by the low prices. This paper is an analysis of the Costco Wholesale stores’ Strength, Weakness, Opportunity, and Threat study. Some of the opportunities and threats facing Costco Wholesale have been identified by the study of its case study. The opportunities and threats will be compared to the company’s strengths and weaknesses. Based on the identified company strengths and weaknesses, this paper will develop a strategy for dealing with the opportunities and threats facing the company.
The company is faced with more threats than opportunities as it can be established from the above table. Some of the threats facing Costco Wholesale include fluctuations in foreign exchange, restrictive foreign policies, market analysts’ negative comments, among other threats. Since Costco Wholesale has invested in other countries, some of its revenues may be adversely affected by changes in foreign exchange. In order to address this threat, Costco Wholesale needs to decentralize all operations to the various stores. It would help each store run its costs thus avoiding exportation of foreign exchange costs to the head office (Ferrel & Hartline, 2010).
In order to address negative comments from market analysts, Costco Wholesale can show its strong balance sheet and high annual revenues to proof that its current strategy is generating more profits than its competitors. The generated profits also give Costco Wholesale an enormous competitive advantage over its competitors since it may have revenue reserves to invest in new technology, which is one of the threats facing the company. By investing in new technology, Costco Wholesale will also have more efficient operational efficiency than the competitors thus being able to deal with the rising cost of doing business, which is another threat facing the company. It can be established that Costco Wholesale may not be in a position to handle or address some threats since the enterprise does not have the needed strengths to face the threats.
Costco Wholesale is also faced with some opportunities that it can use to its advantage if it has the strength to invest in the opportunities. Some of the opportunities that Costco Wholesale can make use of include investing in other international markets, selling to online buyers, and entering joint ventures for expansion purposes. Costco Wholesale can venture into new international markets by partnering with other stores or expanding to target areas using its revenue reserves. The company can also increase its revenue from online sales by being aggressive in advertisements, which is one of their weaknesses (Stonehouse & Houston, 2002).
Economic stability is another opportunity that Costco Wholesale can take advantage of through investing using the reserved revenue while the future is certain. When the economy becomes unstable and the future uncertain, Costco Wholesale can try minimizing its risks by saving up the revenue for future investment when the economy becomes stable. Through expansion of new geographical markets, Costco Wholesale will be able to increase its revenue since the company’s philosophy is to sell cheaply to create more demand, thus making more profits.
Regarding the weaknesses, Costco Wholesale should address the ones that are easier to deal with thus increasing its competitive advantage. For example, Costco Wholesale can increase its product line to match that of its competitors, thus increasing its revenue. Costco Wholesale can also improve its customer operations to ensure customer satisfaction. The Image of the business premises can also be changed so as to improve the brand image of the enterprise. Some weaknesses may be hard to change since they may be contrary to the company’s philosophy of low prices to generate more sales. Such a weakness includes low contribution of revenue per product.
Ferrel, C., & Hartline, M. (2010). Marketing Strategy. London: Profile Books.
Stonehouse, G., & Houston, B. (2002). Business Strategy. Oxford: Routledge.