The key success factors are strategies that a company can use to ensure a successful relationship with the customers. One of the key success factors that Costco is well concerned about is the market-related key success factor. The Company's market strategy is crucial since it does not observe some of the critical limitations of marketing; however, it still maintains high customer loyalty (Woolf, 2020). Costco's marketing limitations include the culture of no advertising and making the customers pay for a membership card to access Costco. The Company’s focus is mainly on providing high-quality products at a lower price.
The Company is dedicated to offering its consumers the lowest prices and consistently. Costco mostly sells products in large sizes, and the cost is usually less compared to other retailers. The value is always noticed, especially in high-margin categories of products like pharmacy (Gamble et al., 2019). Also, despite having customers paying for membership cards, Costco provides the customers an offer to earn their membership fee back (Gamble et al., 2019). This gives the customers a reason to shop more in Costco as they save more as they shop.
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Costco also sensitive to products and provides high-quality products to the customers. This helps the Company produce over $400,000 sales every week, without promotions and advertisements. This shows how the Company has a strong band that markets itself, making huge sales (Gamble et al., 2019). Quality items assure customers’ trust towards Costco’s quality and values. If trust is greater, the customer is more likely to come back. Costco's tendency to provide a flow of in-out products encourages the customers to come back more frequently. Costco also pays its employees well enough. This helps enhance the productivity and customer service of Costco (Gamble et al., 2019).
Question 3
Among the generic strategies, the main one that Costco is using is cost leadership which focuses on the overall low-cost provider strategy. This strategy creates a competitive advantage in the industry by having a low cost on the product (Gamble et al., 2019). The cost leadership strategy has highlighted a lot of benefits that Costco has experienced. They include increasing consumer base, fast brand recognition, enhancing consumption, and meeting sales targets (Lewis et al., 2019). This is due to the low prices that the Company has provided. Though cost leadership is the Company's primary strategy, it also incorporates a differentiation strategy to gain an advantage in the competition (Young, 2017).
Costco's main goal to use a cost leadership strategy is to maintain a market leadership position by competent value chain management. The Company's well-organized supply chain enables the Company to maintain low operational costs and provide benefits to the members. The strategy enables the Company to stretch its market to reach the middle class, which is the prime population of the general consumer market mix. Middle-class customers often tend to consider price actors; therefore, cost leadership is the perfect strategy to cover these consumers' needs (Young, 2017). The Company also focuses on the low pricing and easy convenience of its products globally. This helps create awareness of the brand hence resulting in high sales and also providing firm competition (Tanwar, 2016). Apart from charging low prices by limiting the cost of production and exploiting supply chain effectiveness, the Company often gives out coupons and discounts to meet sales targets and control the pressure of competition (Young, 2017). Furthermore, promotions and discounts are mainly to create brand awareness and motivate customers.
This strategy is usually influenced by the Company's size, scope, efficiency, cumulative experience, and scale. As low-cost leadership is Costco's main strategy, it provides customers with the lowest prices possible of its products. The Company only sells to its members which means, the customers have membership cards to access Costco. Most of the Company's revenue is from the membership fee. But the membership fee is worth it due to the exclusive benefits that they get from the Company. Also, the relationship of the Company and its suppliers has contributed to the low cost that it provides to its members (Young, 2017). Costco buys its products in bulk from the suppliers at very low prices, enabling them to sell at lower prices.
Question 4
The Costco Company lies on level two to three turbulence that is expanding and changing environmental turbulence. Expanding considers gradual growth and stabilities of the marketplace (Gamble et al., 2019). This leads to consider the Costco market development strategy that focuses on exploring and entering new markets. Costco's market expansion and global strategy make use of product development and market penetration. The Company has applied this strategy and present in many competitors' countries. Most of its merits on appearing globally are the firm brand name and low prices of its products (Wang, & Baek, 2018). Apart from that, Costco's marketing and celebrity-certified promotional campaigns helped the Company expand globally, hence capturing new customers and lead in the market.
Costco's growth worldwide is enhanced by continuously investing in research and development globally, especially in the developing world, where it has a strong appearance (Gamble et al., 2019). Although the Company has ventured into most markets, thus market development acts as a supporting strategy. The Company's strategic goal in the expansion is to reduce costs and achieve a cost leadership point. Costco's expansion strategy recognizes the importance of recognizing culture and incorporating norms and values while marketing campaigns as they venture into new regions. A high level of cultural intelligence enables Costco to be accepted in the diversified consumer market (Wang, & Baek, 2018). For this strategy to work effectively, Costco needs to conduct detailed competitor research and have market intelligence (Dininni, 2017). This will enable the Company to make the right decisions when considering entering a new market. Nevertheless, putting on this strategy entails the risk of isolating some of the existing consumers.
Question 5
Costco Wholesale has been prosperous in its operations through strategic growth decisions and choices. Ansoff matrix plays a significant role in Costco's growth. It mainly entails of four selections which includes market development.
Market Development
The primary goal of a market development strategy is to explore and find ways to enter a new market. Market development strategy can improve Costco Wholesale growth by introducing its existing products into new markets (Park, 2019). The Company has to do that through considering some aspects like research and development. For Costco Wholesale to identify more potential consumer groups and new markets for the existing products, it should focus on investing in research and development for the new markets. The research and development should mostly consider understanding and identifying consumer behaviors, market cultures, and trends (Gamble et al., 2019). Through research and development, the Firm can be able to understand and adapt the patterns in the new markets.
The Costco Wholesale Corporation can as well extend regionally, that is, in various cities outside or within the geographical region. In regional expansion, the Firm should as well consider consumption methods and product or marketing modification (Park, 2019). The Costco Company can as well benefit from international expansion. This allows Costco Wholesale to identify and access a variety of consumer segments and increase the market's general share (Tai & Chuang, 2015). Furthermore, the Firm needs to incorporate PESTLE, SWOT analysis, and Porter's five forces to establish a reasonable strategy and general image of the expansion (Gamble et al., 2019). In addition, the international expansion process also should consider the varieties of culture globally.
Costco Company can also focus on searching for new consumer groups in the existing market for the product it produces. The Corporation can even identify new features and new product uses for the current products that target the new consumer groups (Tai & Chuang, 2015). This move will enable the Corporation to tap into the new markets and trends within the same market to assist in expansion and growth. The Company also focuses on investing in issues of building brand awareness. Establishing brand awareness is essential to the Company as it assists in reaching out to new consumer segments, thus increasing its awareness (Gamble et al., 2019). Creating brand awareness also increases brand recall, which is essential in influencing decisions for purchasing products. Therefore, creating brand awareness leads to an increase in sales and facilitates advancement in the new markets.
Costco Corporation should also provide consumer education for the products in the new market. Providing product knowledge to the consumers enables them to understand the products and their benefits to them (Irochka, 2017). The product education will as well provide an understanding of the consumption patterns of the products. By providing education to new consumer groups in new and existing markets, the Firm grows its sales, resulting in business growth and development.
References
Dininni, J. (2017). Management Theory of Igor Ansoff. Business Basics . https://www.business.com
Gamble, J. Thompson, A. & Strickland, A. (2019). Crafting and Executing Strategy: Concepts and Readings: quest For Competitive Advantages. Concepts and Cases . Ed. 22, 88-137. ISBN: 1260075109
Irochka, T. (2017). The Ansoff Matrix: Understanding the Risk of Different Options. Business Basics . 12-18. https://www.business.com
Lewis, A., Kipley, D., & Stevens, R. (2019). From Strategic Planning to Strategic Management. Implanting Strategic Management . 41-49. Doi: 10.1007/978-3-319-99599-1-4
Park, C. (2019). Costco Wholesale Corporation: Market Expansion and Global Strategy. Harvard Business Publishing . https://www.hbsp.harvard.edu
Tai, F. & Chuang, P. (2015). Strategic Differentiation Management: A transformational Study of Costco. Journal of International Management Studies. Vol. 9 (2) 126-130.
Tanwar, R. (2016). Porter’s Generic Competitive Strategies. Journal of Business and Management . Vol. 15, (1) 12-18. https://www.iosrjournals.org
Wang, S. & Baek, J. (2018). The Localization Strategies and Success of Costco. Journal Industrial Distribution and Business . Vol. 9 (2); 6-17. Doi:10.13106/ijidb.2018.vol9.no2.7
Woolf, B. (2020). Costco Key Success Factors. Best Customer Guide . Vol.3, 12-15. https://www.customerstrategynetwork.com
Young, J. (2017). Costco Wholesale’s Generic and Intensive Growth Strategies. Business Management . https://www.panmore.com
