Internal Analysis for Costco in the US - Research Paper Example

? Internal Analysis for Costco in US Introduction Costco company has been operating since 1976 an aspect that gives the company adequate experience to deal with the changing market requirements. Due to the current globalization the company has been able to diversify its products as a way of reducing risks of being outdone by competitors such as Wal-Mart. Merging of the company in 1993 gave the corporation adequate capital, which act as a competitive tool when the company is planning to enter new markets, segment them and position their products in the minds of the customers (Costco wholesale, 2010). Resources The Corporation has been able to diversify its operations to different parts of United States. The corporation currently operates approximately 387 warehousing-shopping clubs in United States. This has played a great role in creating trust among the target market an aspect that has increased the corporations resources (Costco wholesale, 2010). Another resource that Costco is proud of is the brand name. The corporation has been able to invest heavily in its brand name. This has been through intense advertisement in order to familiarize the name with the market. As a result, the brand name acts an important asset that the company owns. In addition, the brand name plays a great role in the market as it is one of the resources that are used in the market as a competitive tool. The reputation that the company holds in the market plays a great role in ensuring that the corporation remain one of the most competitive wholesalers in the market (Hoovers, 2012). The Corporation has put great emphasis on improving its technology which is a great resource. With the current changes in technological level, companies must work hard in an attempt to remain competitive. As a result, the corporation keeps on reviewing its technology in order to install the current technology. This has enabled the corporation to keep on satisfying the interests of consumers and aspect that has created customer loyalty towards the products (Hoovers, 2012). Costco wholesale has high qualified personnel. These are able to read the market behavior and identify any changes that might occur in the market. The personnel working as a team are also a great resource that the company has as it is able to solve any challenge that may lead to collapse of the wholesale (Hoovers, 2012). Capabilities Costco Corporation has the ability to sell its products at a low price. Since the corporation has spread its risks through diversification of its operations, the corporation is able to reduce its profit margins in some of its branches and still able to sustain its operations. This has also been supported by use of machinery in its operations an aspect that has reduced the overall cost of production therefore, lowering the breakeven price. This provides an opportunity for the company to attract more customers and maintain the existing customers. This has made Costco competitors e.g. AutoZone, Inc, Big Lots, Inc etc unable to keep up with Costco’s level of competition. In addition, the corporation keeps low prices through purchasing high quantities and not making up any product more than 15%, less than the typical 25% at the supermarket and 50% at the departmental store. Costco is able to make up for the low margins through charging fifty five dollars annual membership fee. Approximately 90% of its members renew their membership each year thereby making the Corporation to be profitable (Logan, 2012). The corporation has the ability to produce brand that can compete in national levels. Due to its skills, technology and experienced personnel, Costco has the ability to come up with new brand, which will be supported by the financial ability of the corporation to penetrate, position and segment the market. This has been indicated by the introduction of Kirkland Signature which was mainly aimed at competing with other national brands through lowering the prices of the commodity while maintaining quality. Core competences The corporation has the ability to exploit different opportunities that arise and also able to neutralize all the threats posed by the competitors through its financial resources. The corporation has invested in coming up with new and innovative ideas through rewarding employees and any other stakeholder who come up with an innovative idea to improve its operations. The corporation is also aiming at opening other branches in different cities in the world an aspect that will increase the sources of revenue to be used in fighting any possible threat. Some of the major risks that the corporation might be facing include; lack of adequate knowledge concerning new markets, high levels of competition etc (United States Security and Exchange Commission, 2011). Costco has major plan of entering new markets in different parts of the world. With the use of its brand name, the corporation is aiming at increasing the number of its target customers. This is also aimed at increasing its skills in dealing with several markets. This will also enable the corporation to reduce pressure exerted by the competitors especially to California branch, which previously contributed 24% of the overall sales. The corporation is targeting new markets in Asia and Europe (Logan, 2012). Costco has been able to differentiate itself from competitors. This has been through its strong brand name an aspect that has enabled the corporation attract new customers towards purchasing its products. In addition, it has been able to attract credible suppliers who ensure that the corporation does not run out of stock. This has been an important aspect in creating customer loyalty (Berlinski, 2010). Value chain Value is mainly created through passing cost-saving strategies down the value chain to the end consumer of the products. Every component of Costco corporation is designed to support cost saving strategy. First, suppliers are given the minimal margins possible. On the other hand, marketing and decorations of the corporation structures are non-existent. In addition, margins on branded together with private labeled commodities are less than ten percent lesser than the majority of the competitors and thirty percent less than those of departmental stores. The corporation warehouses also ensure that they are optimized in order to maximize sales. In addition, luxury products lineups keep on being rotated to discourage shoppers from purchasing them. Lastly, the corporation charges annual membership fee which sustain low prices of its commodities (Hoovers, 2012). Process report Resources The corporation has been able to invest heavily in its brand name. This has been through intense advertisement in order to familiarize the name with the market. As a result the brand name acts an important asset that the company owns. In addition the brand name plays a great role in the market as it is one of the resources that are used in competition. Company has high qualified personnel who act as important resources in segmenting the market. The company has a very rich capital especially after the company merged with San Diego-based price club. The company has technological resources which are used to ensure that the company retains its high standard services. Capabilities The corporation has the capability of offering products at low prices as it has diversified its operations thereby spreading risks. Costco has the ability to create new brands that can compete with already existing products in the market. Core competences The corporation has the ability to exploit different opportunities that arise and also able to neutralize all the threats posed by the competitors through its financial resources. The resources of Costco are well distributed in different investments that are distributed in different parts of the world. Through the company brand name, Costco has been able to differentiate itself from the competitors. The organization is well organized and it has the ability to grow through proper utilization of resources. Value chain Costco Company has a well defined value chain that makes its products well competitive in the market. References Berlinski, P. (2010). Jim Sinegal: Maestro of Store Brand Merchandise. Private Label Magazine. Retrieved June 1, 2012 from http://www.privatelabelmag.com/issues/pl-march-2010/Jim-Sinegal.cfm Costco wholesale (2010). Company Profile. Investstor Relations. Retrieved June 4, 2012, from http://http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile Hoovers. (2012). Costco Wholesale Corporation company profile. Retrieved from http://www.hoovers.com/company/Costco_Wholesale_Corporation/rkfjif-1-1njhxf.html Logan, L. G. (2012, April 25). Costco: Breaking All the Retail Rules. CNBC. Retrieved June 4, 2012, from http://http://www.cnbc.com/id/47175492/Costco_Breaking_All_the_Retail_Rules United States Security and Exchange Commission (2011). Costco Wholesale Corporation. Retrieved from http://www.sec.gov/Archives/edgar/data/909832/000119312511271844/d203874d10k.htm Read More