Costco business model analysis

Date

Costco is one of the biggest warehouse stores in America apart from Walmart. Costco warehouse was founded in 1983 in Seattle by Jeffrey Brotman and Jim Sinegal. It was during this time that Jeffrey Brotman had started a small shop of men’s clothing but had flopped later on while Jim Sinegal was working for fed mart at the time. Jeffrey approached JimSinegal with the idea of opening a warehouse store in Seattle and they both had agreed upon a start up warehouse club in which result became Costco. During this time Costco was conceived to be more than a business company, but a mission thus is the mantra of “Do the right thing always”. Both Jeffrey and Sinegal divided their roles to smoothen out their work and be able to operate clearly and more focused. Sinegal became the merchandising, operational leader and the face of the company as the CEO until his retirement in 2011. Broman’s roles included selection of store sites and competitive strategist. It was during October 1993 that Costco merged with price club. The company was then able to establish its routes further outside the country into the world.

To this day, Costco has valued itself as being a discount based company wholesale where they sell their products cheaper (in bulk for consumers) to make a faster turnover of commodities. To make this possible, Costco has gone ahead and marked some strategic external environments that might hinder their visions. The external forces may include political, technological factors, social factors, economic factors, and lastly environment. These factors have all been considered by Costco by partnering with the government and making sure they adhere to the rules and regulations required by the law. Costco is a major third-largest warehouse store that has gone ahead fashioned in working with the best mins in the job of technology experts and buying the latest technology to go with the latest models. Social factors have a significant impact on how stores run their shops by studying the population of where you are going to set up shop to show that you can account the people's needs and what kind of products you need to focus on giving discounts which Costco has keenly observed. Environmental factor includes land law, climate of the place affect how business will run and so far Costco has established a clean sheet of being the best in the industry by engaging research on lands laws and regulation that can safeguard their work.

Costco strength and weakness

Costco's strength, weakness, opportunity, and threat analysis usually confirm the most significant threat that concerns the company at hand. Costco has been a discount friendly company that faces a lot of challenges and weaknesses a lot when it comes to buying and selling products and the returns that the company makes in profit.

Strength weakness.

Stiff market availability competition with retail store

Expansive supply chainanimal rights trends

Strong brand signature online competition

Diversification exclusive to membership

Expansion of products low-profit margins

Expansion of locations limited product margins

Costco SWOT analysis

Like all retail stores, Costco faces a significant threat of weakness and opportunities that usually save the company operations by looking into Costco's internal gaps and strategic factors, limited product, and exclusiveness to membership and low-profit margin (Frue, 2019). Having low insufficient product margin compared to their competitor makes it hard for customer to get what they wanted due to the low availability of products in-store and having a customer membership to exclusively make it hard for others to enter and buy goods in its warehouse. Due to Costco discount rate it makes it hard to make a big profit from their sales and leaves small window of price adjustments.

Though Costco may be facing some severe threats, there are a few ways that can save the company from falling and go down the drain like diversification, expansion of product mix, and the development of locations. Costco can diversify and expand through the extension of products like Walmart. Products sold at the company can also get added where customer has all the variety they need in one place. The company has no zero policy to open its shops in one place but can do so in many areas, states, and countries where there are better economic benefits and grow in size. This makes points that Costco has a better chance in growth opportunity and expansion.

Costco faces threats that are social cultural-based that can render the market performance redundant. Competition with retail stores, online games, and online competitions are some of the risks that Costco is facing at the moment. The company is facing threats from its rivals such as Walmart’s Sam’s clubs in the market segment. Small business is now selling products online for a cheaper price giving Costco a run for their money and a hard time. Animal rights are some of the challenges that Costco is dealing with at the moment due to the fact they can reduce their animal products thought the company could make some adjustments and comply with the law and improving their supply chain policy. The company, however, needs to enhance its environment to do better than its competition.