Costco Swot Analysis Essay

The Costco case shows that their business continues to grow and expand. The company now has operations in many overseas locations. Costco is one of the biggest retail companies on earth (Gregory, 2017). Costco has the fundamental strengths to take advantage of unseen opportunities in the retail industry. The company’s low prices make it attractive even when there are economic difficulties. Costco has a basic strategy, which centers on driving sales. This company drive is why Costco is the most prosperous business in the discount store space.

Costco capitalizes on the main strengths of their business. Costco has low prices on basically all good and service offered in its warehouses and website. Costco has fast inventory turnover joined with their high sales create higher revenues. The high sales volume confirms high revenues even when selling low price items (Gregory, 2017).

A business can put in place several basic approaches to competing successfully and gaining a competitive advantage over rivals. These approaches involve delivering more value to customers than competitors (Thompson, 2016).

When planning for the future, Costco must make sure that it comprehends where the industry is headed. Because of the external

environment and competitive industry, Costco must make sure that it can cut their expenses.

Customers have very low switching costs; consequently, Costco needs to constantly compete to sustain their position in the industry.

Because Costco needs to maintain very low prices, a lot of pressure is put on the profit margin of the company. In the past, Costco has kept relatively low profit margin levels versus other competitors within the industry. Costco’s profit margin is considerably less than the competitors. In order to increase its profit margin and remain a competitor in this industry, I recommend that Costco find a way to decrease costs while keeping their prices low. Internal and external analysis elements show that Costco’s managers must formulate new strategies for sustained growth and development of the firm (Gregory,

2017).

Even though Costco is lucrative and one of the largest retailers, the business still suffers from many fragilities. Costco’s main weakness is the membership only warehouse club retail business model. This model inspires customers to buy at Costco stores, but also restricts the number of customers.

There are many opportunities for Costco to improve their business and the bottom line. In order to stay competitive, Costco must consider different opportunities. First Costco has the chance to go into new markets, such as markets in developing countries. Costco also has the chance to expand and improve their website. Costco also has the chance to increase the selection of goods and services to improve the appeal of Costco stores to a more diverse population of consumers (Gregory, 2017). Costco has the weakness of the limited array of goods and services. Customers might go to other retailers that have a broader range of goods and services (Gregory, 2017).

There are many threats to the retail market, which can affect Costco’s growth. The entry of new membership warehouse club retail companies threatens Costco’s potential to succeed in overseas markets. Costco needs to use their website and network of suppliers to compete alongside new membership warehouse retail businesses.

My recommendation would be for Costco to raise prices marginally beneath their competitors. Costco is having an issue with the rising cost of their products, because if they decide to increase prices they might lose customers but keeping prices the same will cause Costco profits to decrease while costs increase. Most retailers are facing the same issue in order for them to stay in business. The increase in the price should be in proportion to how much the costs are increasing while maintaining the same markup. This should help Costco remain profitable at the same level while also staying competitive.