Organization Analysis: Costco Company

Introduction/History/Background

Costco Company is an American Multinational Corporation that was founded on 15^th September 1983 by James Sinegal and Jeffrey Brotman. Costco Company is considered one of the largest wholesale brands across the globe, with numerous locations totaling to 782 as early as September 2019. Costco Company has been in the wholesale business for four decades and owns the global business environment with a capitalization of $156.6 Billion in early October 2020 (Rahman, 2020). The success of the Company is embedded in its mission as the guiding principle of winning the trust of its prospective customers. Costco’s mission affirms the reasoning of offering quality services at a price that is convenient and affordable to all its customers. The Company’s mission adheres to the code of conduct regarding ethics in business for purposes of taking care of the interest of the targeted customers. The American residents have changed their approach with regards to making purchases in the grocery stores ever since the establishment of Costco Company.

The major business strategy of infiltrating the wholesale business environment that has been considered by Costco Company entails the inclusion of membership fee, offering lower prices than the grocery stores, word of mouth advertising, high employee wages, and the initiative of fewer stock-keeping units. The Company’s portfolio of business and competitive strategy is the provision of quality service and a guarantee of standard products at lower prices (Alshakhoori, 2017). Given the perspective of the membership fee, it is quite categorical to affirm the reasoning that the Company requires customers to subscribe for the service that totals to $60 a year, and comes out the underlying principle that makes up for the lower prices it offers as compared to the prices of the grocery stores.

Given the nature of economic difficulties that people face in the present age, the strategy conceptualized by Costco to offer lower prices in the market gives it a sense of credibility to dominate the wholesale industry. Prospective buyers of household products tend to engage Costco Company based on convenience that comes with lower prices. The consideration of the word-of-mouth advertising technique enables the Company to cut unnecessary expenses than the consideration of loss leader business model and has made numerous grocery stores lose value in the wholesale market (Putra et al., 2020). The consideration of a high employee wage strategy has enabled Costco Company to guarantee a progressive economic performance since employees tend to be more productive. For instance, a Costco employee earns an average of $21 per hour with a guarantee of health benefits and ample vacation opportunities.

Organization Strategy: Major Strategic Issue

The major strategic issue that arises from the current competitive position in the business environment by Costco Company is the engagement of qualified, productive, and competitive employees in every department within the organization. In this regard, it is apparent that Costco manages to maintain a progressive performance by offering its employees higher wages. However, the initiative of offering higher wages is not sustainable if employees are not competitive and intend to become experts in their line of work (Alshakhoori, 2017). The Company needs to find the right leadership with the capacity to motivate employees through the consideration of all motivational tactics rather than higher wages and health cover. It is quite imperative to note that competitors of Costco Company, such as Walmart Inc. and Target Corporations, have established a sustainable foundation in the wholesale business environment through the engagement of experts with the requisite skillset to make their companies shine in the industry. Hence, Costco needs to consider engaging professionals on the basis of their skillset and experience in their line of work in a bid to instill hope and maintain trust in the prospective buyers of its products in the market.

The short-term goals that the Costco Company needs to focus on are coming up with a plan to assess and evaluate the skillset of all its employees with a purpose of establishing clarity of construct on the professional competence of the personnel. The short-goal should not be conducted on the basis of stamping out unfit employees but to offer training and orientations on the guidelines that need to be adhered followed by all employees to avoid the experience of eventualities where a customer can lose faith in the services awarded based on incompetence (Alshakhoori, 2017). The long-term goals that need to be designed and built by the Company for purposes of containing the strategic issue are to come up with a competence analysis framework, and this needs to apply to the future employees that shall be recruited or employed by Costco Company.

Available Alternative Strategies

The available alternative strategies that would improve the economic performance of Costco Company in a wholesale business that suffers the challenge of competitive rivalry is the consideration of effective leadership that embraces the perspective of integrity, transparency, and accountability and the strategy of keeping fewer stock units. The consideration of effective leadership is intended to win the trust of the customers that the Company embraces ethics. Hence, the initiative of engaging with Costco Company gives customers a sense of credibility they deserve as prospective buyers of the Company’s products (Putra et al., 2020). Consideration of leadership potential that values integrity could make Costco Company engages the most skillful and productive employees with capability to visualize customers’ interests and the behavior the prospective buyers with regards to the services and the type of products provided by the Company in the business environment.

The strategy of keeping fewer stock units could prove quite viable for Costco based on the reasoning it enables the Company to reduce unnecessary costs and rescue the Company from experience the challenge and difficulties of expanding their stock selections. In this context, it comes out quite categorically that the majority of Costco Competitors have been underperforming that is entirely dependent on the nature of how they handle their stock keeping units, and this impairs them from negotiating the prices of their products in a competitive manner (Alshakhoori, 2017). The initiative of encouraging fewer stock-keeping units by the Company could make Costco stand a better chance of raising the purchasing power. Hence, suppliers would bid for Costco and would be willing to negotiate a fair price of supplying the product, and this could benefit the Company to the greatest extent.

Organizational Design and Assessment of Effectiveness

Analysis of the External Environment

The external environment of Costco Company tends to be very competitive and is dominated by major giants in retail and wholesale businesses such as Walmart Inc. and the Target Corporation. The important factor that Costco Company needs to consider in a bid to maintain its progressive economic performance in the foreseeable future is an accurate interpretation of the current market trends in the wholesale business. For instance, the major competitors of Costco Company focus on the production of quality products with an attempt not only to make mega sales but also to improve the health of progressive customers. For instance, the emergence of diabetes and cases of obesity has not only compromised the quality of lifestyle of humanity but has also claimed human lives (Tikhonova, 2021). Hence, the decision made by the executive management of Costco Company to sell healthy food products is the guiding principle to enable the Company to outdo its competitors in the market such as Walmart Inc. and the Target Corporation. The reasoning behind the concern that a greater percentage of the wholesale companies in every corner of the globe focuses on cutting costs and making a major sale without the consent of acknowledging the health of the targeted customers need to be considered an opportunity by Costco Company to advance in the wholesale business.

The interpretation of the PESTEL framework with regards to the analysis of Costco business situation across the globe affirms that the Company stands a chance to experience the challenge of economic factors, and this needs to be considered a threat to impairing the performance of the Company (Rahman, Md Habibur, 2020). In this context, the fact that every retail and wholesale business may adopt the strategy of guaranteeing higher wages to their employees and offer lower prices to the grocery products means that Costco needs to revisit its business strategies in a bid to maintain the trust between the Company and its loyal customers.

Given the nature of the wholesale business environment, it is quite imperative to note that the industry is structured on the basis of the competitive tactics employed by companies to outdo one another in the industry. Hence, the business environment that Costco Company intends to survive calls for the need to acknowledge Porter’s 5-force model in a bit to maintain its professional image and guarantee quality service delivery in the wholesale business. The success factors in the wholesale business depend on the willingness and the determination of every enterprise to offer standard products and quality service with the concern of taking care of the prospective buyers’ interests (Rahdari et al., 2020). The most important threat in Costco’s business industry is competitive rivalry, and this dwells on the existence of numerous numbers of competitors in the market with the capacity to offer quality service. However, the most important opportunity that exists for Costco Company in the business environment is to acknowledge the essentiality of the buyer power. Apparently, Costco Company has achieved success based on the broad customer base and the loyalty of its prospective buyers.

SWOT Analysis of Costco

Costco Strengths: The Perception of Internal Strategic Factors

Costco has managed to gain a competitive advantage in the global market based on the initiative to uphold the economic principles of guaranteeing a strong brand name, a competitive brand evaluation, and customer oriented economic philosophies Costco’s economic situation is conceptualized in every corner of the globe as a giant in the marketplace. The professional image justified by Costco in the global marketplace is contextualized as a benchmark by a greater percentage of business enterprises for attaining and guaranteeing an excellence performance in a dynamic and competitive business environment (Tikhonova, 2021). Besides, given the nature of perspectives shared by Interbrand Global Ranking, Costco comes out as the most competitive eCommerce enterprise that comes after companies such as Amazon, Apple and Google Inc. Hence, the future of Costco needs to be visualized based on the standpoint of becoming a customer-oriented organization in which large number of customers is engaged at a competitive price.

Costco Weaknesses: The Perception of Internal Strategic factors

Costco market ideologies are easily imitable and this perception justifies the reasoning for conceptualized as quite common in the digital world. The fact that the business generic strategies such as cost leadership can easily be embraced by any business organization justifies the reasoning why Costco needs to find the better strategic modalities of staying in business in the foreseeable future. As observed by Cascio (2018), Costco stands a worse chance to lose the business to upcoming organization such as eBay, Netflix and Hulu, and this is deeply rooted on the sense of perception that every business enterprise that engages in the online business can easily adopted the strategy applied by Costco to gain a competitive performance in the marketplace.

Opportunities

Costco takes advantage of the number of its potential clients to gain a huge market share. The fact that clients require unique products, Costco has managed to lay a firm foundation for the production of unique and sustainable products that meet all the needs and wants of its customers. The issue of traffic generation to Costco’s website is considered as an opportunity to advance in establishing diverse managerial marketing strategies that would help the company survive in the foreseeable future (Spencer-McDaniel & Anthony, 2012). The existence of social media also creates an opportunity for the company to prosper in any wave of economic eventuality on the basis that the company has the advantage of hitting all possible location of the consumers of their products.

Threats

The new wave of competition comes out as one of the significant threats that Costco has faced in the recent past. For instance, competitors such as Amazon among several others adopting the latest managerial marketing techniques contribute to widening the gaps for Costco to gain a wider market share (Chen, 2021). The expense of running media advertisements that are perceived to be dynamic makes it difficult for the company to maintain a progressive marketing performance.

Evaluation of Costco SWOT Analysis

SWOT analysis of Costco Company can help the company in a better understanding of the key issues affecting the business. The analysis gives the company insights into areas that the Company should move into in a bid to stay relevant and competitive in the market. By understanding better the opportunities available for Costco, the Company will be able to make several adjustments to capture the opportunities. Given the threats available in the business environment, the Company is able to understand the probable means of minimizing these threats for the advantage of the business (He et al., 2017). In view of Costco marketing strategy, the company could use the SWOT analysis to look at the different types of companies that are available and determine the most effective approaches to become competitive in the market. A conclusive understanding of SWOT analysis could enable the company identify the competitors and to deal with the threats posed to it by the competitors in the market.

Organizational Culture

Identification of the Costco organizational culture solely rests on the Company’s level of competitive strategy and the marketing strategy. Based on the Company’s invention of the content delivery network, Costco has the right the competitive to serve large multination companies that include Amazon, Netflix, and Apple. Such levels of service-oriented engagements outline why the Company has been in the e-Commerce for years. The fact that Costco Company has the capacity to engage in the e-Commerce business likes its competitors confirms its economic standpoint for a sustainable competitive strategy through the consideration of cross-cultural interests (Dallas, 2019). The fact that Costco Company has developed the best approaches of a faster deliver to targeted cultural populations through the technology of server distributors, it stands a better chance of surviving in the coming years. Based on the perception of the Company’s organizational culture, it is evident that the Company focuses on the factor of global expansion.

Costco Company also focuses on improving the productivity of its salespeople as one of the business culture to outdo its competitors in the market. In this connection, creating value for their firms ‘customers means that salespeople ensure that the product or service offered by their organization meets the interests, needs, and expectations of their customers. The role of managing relationships dwells on the fact that a salesperson has the professional mandate to convince the customers that being part of the company is sustainable and comes with good returns and benefits (Cascio, 2018). Relaying customers’ feedback back to the organization establishes a solid foundation for the company to assess its performance in a bid to register a competitive performance.

The company business strategy outlines the fact that two ways that salespeople create value include sharing with the customers the relevant and accurate information regarding the type of products and services offered by the company and ensuring the product or service is delivered in a timely manner. Sharing the specifications of a product or a service with a potential customer is intended to enlighten the customers about the legitimacy of an organization and its capacity to meet clients’ needs and expectations (Lee et al., 2019). Delivering a product or offering a service within the clients’ most convenient timelines is intended to instil confidence in clients about the reliability of an organization.

Costco Company values customer relations as a viable organizational culture to stay competitive in the market. In this regard, the Customers’ relationships do begin at transactional and move towards strategic partnership since trust and confidence about the product or service offered must be built between a buyer and a seller prior to making a decision to spend time and resources in a bid to expand the business (Gamble et al., 2018). Ideally, Costco company benefits when most customers are satisfied based on the fact that the level of satisfaction diminishes over time if a company does not keep up to the standards of the current market that comes with so much pressure.

Conclusion

The analysis of the current business environment gives Costco Company the credibility to maintain its progressive economic performance in the wholesale business. Costco’s mission focuses on strict adherence to ethics in business and with a solid plan of offering quality products at affordable prices. Hence, if the executive management of the Company pays attention to offering standard products and focus on the health of the prospective buyers, then it stands a better chance of outdoing the giants in the wholesale industry such as Walmart Inc. and the Target Corporation (Cascio 41). However, Costco Company needs to be aware of the threats in the industry, such as competitive rivalry in a bid to come up with a plan that would contain its loyal customers with no contrary perspective of exploring the products offered by the competitors. Ultimately, the consideration of the business strategy of engaging, competitive personnel and effective leadership that focuses on embracing transparency and integrity are the guiding principles that could make the Company achieve sustainability in the most competitive business environment.

References

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Gamble, J. E., Thompson, A. A., & Peteraf, M. A. (2018). Essentials of strategic management: The quest for competitive advantage. McGraw-Hill/Irwin.

He, W., Wang, F. K., & Akula, V. (2017). Managing extracted knowledge from big social media data for business decision making. Journal of Knowledge Management.

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Spencer-McDaniel Sr, J. A., & Anthony, P. (2012). Sustainable Solutions Paper: Several Strategic Analyses of Costco Wholesale Corporation.

Tikhonova, M. (2021). Financial Analysis of Walmart and Costco in 2017-2018. SCIENTISTs, 100.