Costco Wholesale Corporation has evolved to be a leading warehouse business in America and international markets. A critical analysis of Costco Wholesale in 2012 indicates that the company has taken several strategies to achieve market experience. The aim of the present case study is to explore the key issues affecting the business, management challenges, steps appropriate for addressing these issues and why the proposed strategies are likely to work in favor of the corporation. This paper addresses these issues against the backdrop of the historical development and competitive atmosphere in which the corporation operates.
There are a number of issues that should be given devoted attention to the Costco Wholesale Corporation. To begin with, competition is a serious matter that directly concerns the management of the corporation. From the case study, it is evident that Sam’s Club and BJ’s Wholesale are the major competitors that pose great threats to the performance of Costco. This assignment considers competition a crucial matter worthy of urgent attention because it provides a challenge for Costco to reinvent strategies that will allow for rebranding which attracts more customers. In fact, the two businesses mentioned above are coming at an alarming speed and it is therefore important to address competition because it is the only way Costco can assess its relevance vis-à-vis other businesses in the field.
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The best approach to tackle competition in Costco would be to lower the prices of commodities. From the research done by Thomson (2012), it is noteworthy to point out that because the competitors are leveraging lower prices on similar products, the safest way for Costco is to reduce prices so that it can enjoy volume purchases and increased distributions. This can equally be approached through absolute pricing policy that is unbeatable. This step is particularly going to work for the company because it maintains the stock and devises policies that attract more customers hence undercutting the competition.
The second issue that needs to be addressed by the management of Costco is internationalization of branches and services. As Thomson (2012) observes, the market share of Costo stands at 57% in the USA and Canada. This issue is important because the competitors of the corporation have grown fast and covered 43% of the market share. This is indicated in Sam’s Club covering 35% while BJ's Warehouse covers 8%. The matter is equally important for the management of Costco because aspects of merchandise, quality, location, and price used to gauge market share seem to rank higher hence posing a great challenge to the corporation. In order to address this matter of internationalization, Costco needs to deliberately increase the number of warehouses in the international arena. Also, it can expand its marketing to global regions. Another step that can help the company concerns establishing a wider customer base on online platforms. There are at least two reasons why the expansion of branches is likely to solve the challenge of internationalization. Thomson (2012) argues that when this step is undertaken, customers will be encouraged because the services are brought closer. Secondly, this strategy is workable because it will promote operational excellence and diversification which is the expectation of every customer. From the brief background of the company through 2000 and 2011, it is evident that internationalization is the best practice that can maintain the trust customers have already invested in the company.
The final issue that needs to be addressed by the management of Costco is demands management. From the case study provided by Thomson (2012), Costco enjoyed a somehow irrelevant competition between 2000 and 2011 until two serious competitors ventured into the market. It is for this reason that the company has to seriously think of the strategies of sustaining the demands of the customers who are already loyal to the corporation. The issue of demand management is a weight issue because it is the only tool that can be used to examine past records while at the same time projecting the future prospects. In light of the competition in the field, it is necessary to vigorously address the issue. Vendor managed inventories can be used as a step to track demand trends for the years that the corporation has operated in the market.
Demand management can be equally addressed if Costco takes a bold step to embrace vertical integration. Although it is undeniable that the corporation has tried to partner with big market players like Amazon and Kirkland, Thomson (2012) argues that this area has received limited attention. It is for this reason that vertical integration is recommended with more companies and products. This can really make the company exceed expectations in the sale of products. Vertical integration is likely to be successful only if brainy individuals are tasked with the responsibility of benchmarking the best practices that can give the company a competitive edge in the business environment.
The step of initiating vertical integration with different companies is a plan of action that will work due to certain reasons. First, popular companies have a large market presence that motivates customers to buy their products. Secondly, integration creates room for achieving customer loyalty and aptness. In the long run, customers who may not be particularly drawn to Costco will find themselves buying their product because of the brand name. This is a strategy that will beat competitors which rely solely on their own identity. Costco can, therefore, rebrand itself and exceed expectations if the recommendations provided herein are effectively implemented.
References
Thomson, A. A. (2012). Costco Wholesale in 2012: Mission, Business Model, and Strategy
