Costco wholesale continues adapting to the external factors that influence its performance. Porter’s model can effectively be used to determine the intensity of the elements. The model highlights the essential external aspect that the Costco Company should address.
Bargaining Power of the Consumers.
Consumers always demand the best offers and often want to pay less. This puts Costco's wholesale profit at risk. When Costco's consumer base is more powerful and smaller, the consumers' bargaining power is subsequently higher, as well as the consumer's ability to look for increasing offers and discounts (Thompson, 2007).
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As there are various retail industry companies, such as Walmart, Sam's Club, and BJ's Wholesale Club, the rate of competition is intense. The Company's goal is to satisfy the customers. The factors that can lead to buyer's bargaining power mostly include low shifting of cost, substitute availability, and high information quality (Thompson, 2007). Substitute availability gives the customers variety of options to choose from. However, prices are hardly expected to change due to the low shifting of costs (Young, 2017). Furthermore, the consumers can easily access another store for the same items provided by Costco. Due to the internet, consumers can get quality information and compare prices of products from different firms. Therefore, Costco has to consider consumer's bargaining power.
In this case, the consumer is the driving force capable of controlling the stores' sale trends. Consequently, Costco has to consider or be dependent the on the consumers' choice. Thus, Costco has to initiate what the consumers will prefer the Company (Thompson, 2007). However, the Company's strategy focuses on maintaining low prices and providing convenient service for its customers. Due to such aspects, it highlights that the bargaining power is high in the retail industry.
There are several ways the Costco Company can handle the consumer bargaining power. Establishing a vast customer base will help the Company in two ways, it will allow the Company to streamline its production process and sales. Also, it will help in the reduction of customers' bargaining power (Young, 2017). The rapid innovation of new products will also help Costco control the bargaining power (Thompson, 2007). Consumers always look for offers and discounts on new products hence limit bargaining power. Similarly, new products will discourage existing Costco customers from shifting to other stores.
Question 6.
Market mix elements: product: Costco sells all its items under the rand's name and five separate categories. Each category works independently. Price: The Company uses a competitive-based strategy of pricing. Place: The Company operates two channels via an online website and sells to wholesalers who sell to retailers (Thompson, 2007). Promotion: Costco practices traditional media advertisements like radio and television. This helps the adverts to reach many people ( Ferrell & Hartline, 2012 ). People: The Company has professional people who are well trained to deliver quality customer services. Process: Costco has systems installed to ensure customers access the products whenever they need them (Gamble, 2019). Physical: The products of Costco are easily identified in the market. They have colorful packaging and are placed on separate shelves given by the Company. Therefore, customers can simply locate the products in a busy store.
Costco has several internal Marketing issues. These issues entail having a business model that is highly dependent on the consumers and their loyalty to Costco (Thompson, 2007). The Company's shopping nature does not entail a grab-and-go method like several of its competitors (Thompson, 2007). Bulk buying is not perfect for some customers, particularly for those living in cities where they are incapable of moving a large number of products to their homes ( Ferrell & Hartline, 2012 ). Most of the customers prefer online shopping, which the Company is slowly adapting to that.
References
Ferrell, O. C., & Hartline, M. (2012). Marketing strategy, text and cases . Nelson Education.
Gamble, J., Arthur, T., & Margaret, P. (2019). Essentials of Strategic Management: The Quest For Competitive Advantage. Mc Graw Hill Education. ISBN: 1259927636
Thompson, A. (2007). Costco Wholesale Corporation: Mission, Business Model, and Strategy. The University of Alabama . C- 2-17.
Young, J. (2017). Costco Wholesaler Five Forces Analysis: Porter’s Model. Business Management . Panmore Institution. https://ww.panmore.com
