Costco Swot Analysis Essay

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Analysis: Costco’s success is related to the company capabilities and resources to help Costco managers single out and focus on all the factors needed to craft a winning strategy that fits the company’s overall internal and external situation. We will proceed with the Costco’s SWOT analysis, as the SWOT analysis is a simple and powerful tool for sizing up a company’s entire relevant strengths and weaknesses, its market opportunities, and the external threats to its future well – being (Thompson, 2018). Internal Analysis: Strengths: A distinctive competency in price: Costco sells products at very lower prices than competitors do and builds big warehouse style superstores that contain an extensive selection of products at a lower price. Costco’s …show more content…

In 2018, Costco expects to open 20-25 new warehouses and relocate warehouses (Costco, 2017 Annual Report Final). Expanding the company’s product line: Costco can expand its product mix, which is currently limited compared to competitors such as BJ’s and Walmart. E Commerce: Costco has a strong presence in E- commerce, which is growing globally. For instance, Costco operates e-commerce in U.S. and Canada. Online businesses provide customers additional products and services, that may not be found in our warehouses. In addition, online marketing can be a great tool in venturing into new markets and attracting more customers. Private label: Costco’s Kirkland Signature private labels provide clubs with the opportunity for higher gross margins. In addition, Costco can increase the number of Kirkland Signature selections and gradually build sales penetration of Kirkland brand items. …show more content…

Current ratio formula = current assets /current liabilities. According to Costco balance sheet 2017, Costco current ratio in 2017 was (17, 317/17,495) = .99%. Costco current ratio is under 1 in 2017. Costco needs to take a closer look at the business and increase its working capital to eliminate any liquidity issues. For most industrial companies, 1.5% is an acceptable current ratio. Quick Ratio: is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. Quick ratio formula = current assets – Inventories / current liabilities. For 20017, Costco Quick ratio was (17,317- 9,834) / 17,495 = 43%. This low quick ratio is an indicator that Costco is over leverage. Debt-to-equity ratio: Evaluates the capital structure of a company. A ratio of more than 1 implies that the company is a leveraged firm; less than 1 implies that it is a conservative one. Debt-to-equity ratio formula is Total liabilities / Total Equity. In 2017, Costco Debt equity ratio was 2.28. This means Costco will not be able to generate enough cash to pay its debt

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