The Biggest Threats and the Business Strategy of Costco

On July 12 1976, Sol and Robert Price raised $2.5 million from relatives and family friends to found and open Price Club. A remodeled airplane hangar in San Diego California was the very first warehouse club specifically designed for business shoppers only (Costco). During the past 38 years Price club, now known as Costco Wholesale, has continued to grow and expand. Costco Wholesale is highly competitive with other warehouses such as Sam’s Club, Wal-Mart, and Ikea. To stay at the top of the market and continue to excel Costco has expanded and brought in verity to its business.

Some examples of their chosen verity are the issuance of their own name brand called Kirkland Signature, gas stations, photo departments, pharmacies, eye specialist, and even hearing aid centers. They are also national with stores from California to South Carolina and international with stores in Canada, Japan, Puerto Rico, and Australia. Costco is also a partner with American Express to provide the best possible care for their customers (Throughout, 1).

Not only does Costco take care of its customers they also take care of their employees. Over 164,000 men and women are employed for Costco and are currently earning 40% more income than if they were employed for any other competing warehouse retailer such as Sam’s Club (Why, 6). In addition Costco employees also receive better benefits such as health care and retirement plans, flexible schedules, and better training than their competitive counterparts. With 98% of all store managers advanced from within the corporation Costco’s employee turnover rate hovers right around 6% while a similar warehouse has a turnover rate of 41% (Economic, 2).

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A SWOT analysis was compiled by the organization MarketLine to view Costco’s strengths, weaknesses, opportunities, and threats for the coming years. Costco’s many strengths include “price positioning, customer loyalty, low cost operations, and improved revenue and debt position.” (MarketLine, 4). Unfortunately, however strong a company may be they will always have weaknesses. Costco has limited product choices with about 3,600 products to choose from compared to the leading competitor with 100,000 product choices. Costco has many opportunities available to them. They are anticipating exceptional growth in the Asian markets such as Taiwan and South Korea (MarketLine, 6-7). With the down turn in economy more families are looking for private name brands instead of name brand items. Costco has capitalized on the private brand aspect of the economy, helping keep cost low for the customer and helping to save money for families. Online purchases are another example of Costco’s opportunities. With online shopping growing at astounding rates Costco has also capitalized in online sales by offering deals and discounts with easy and convenient delivery. Costco’s biggest threat, however, is high exposure to low growth mature markets. With consumer spending declining because of the economy Costco and other retailers have no room to grow because of the low profit rates (MarketLine, 8).

Works Cited

1. Cascio, W. F. (n.d.). The economic impact of employee behaviors on organizational performance. Retrieved February 13, 2014, from EBSCO.
2. Costco Wholesale corp. (n.d.). Retrieved February 13, 2014, from http://www.costco.com/membership-information.html
3. Ton, Z. (n.d.). Why good jobs are good for retailers. Retrieved February 13, 2014, from EBSCO. MarketLine . (n.d.). Costco Wholesale Corporation. Retrieved February 13, 2014, from EBSCO.
4. Throughout its history, Costco has kept progressing. (n.d.). Retrieved February 13, 2014, from EBSCO.