Environmental Scanning Costco
Key environmental forces that helped Costco in the beginning
The key environmental forces that helped Costco in the beginning would have to be competition, social and cultural forces, population and resources. These environmental forces helped Costco’s growth significantly easy in the beginning. With these forces is has helped that company become ranked 18 largest firm in the Fortune 500 (Soni 2016).
When the company first began, there wasn’t much competition because there was very few wholesale companies around. With there not being an extensive amount of wholesale companies around it made it extremely easy for Costco to take off at the beginning. The wholesale companies that were present when Costco took off
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Communities accepted the large business and was pleased with the products offered and the prices for such quantities that they could buy. The lifestyle of the community around made a ready market for the products that Costco was supplying (Daft & Marcic 2016). As the company grew with the consumers interests in mind they didn’t have much rejection in which caused them to grow.
They based the locations of the company in highly populated areas which meant that the ready market wasn’t exploited to the full potential. With not so much competition Costco had extremely high sales because the number of customers willing to shop for bulk items. With the proper placement in the populated areas it provided and overflowing market the products that Costco offered to their customers.
Costco being a wholesale company they needed a large number of employees to meet the demand of the customers. With the placement of their locations in high populated areas made it easy for Costco to find suitable employees to work in the stores. The number of employees needed to operate was so large that it increased the stores productivity which helped to grow and succeed in the market of wholesale.
The five environmental forces that affect Costco
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With the new competition coming in offering better pricing its making it harder for Costco to survive in the market.
Regulatory
There are new regulations that come out every year that has been affecting the operations of Costco such as wage increases and how employees should be treated by companies. With the new regulations that are set by the government Costco has to abide by them which has increased pricing and lowered their employment.
Trends that are likely to influence Costco’s marketing efforts in the future
The competition level of having an excessive number of wholesalers in the market Costco’s trend that will make the company is their marketing efforts. There has been an increase in the level of competition in alternative products in the market. In this case for Costco to survive they will need to improve their marketing techniques.
Strategy to counter competition
The strategy that Costco will need to use would be offering a better quality and price on their products. By doing this they will meet their customers’ needs and challenge their competitors who may offer a lower quality product at a higher
Promotion: Costco doesn’t have any conventional marketing/ promotion strategies like their competitors as they are not big on advertising. They email and mail their members flyers and product descriptions which help them maintain their customer retention. However, they don’t actively advertise to new customers, primarily relying on their current customers to advertise by word of mouth like Kimberley Peterson, the
As the private brands may not achieve or maintain market acceptance these brands may provide the adverse results expected. Financial condition and results of operation can be negatively affected if pricing, quality and other factors are not up to customer’s satisfaction levels. With all brands sold by Dollar General there is the unfortunate shrinkage that may occur. Profitability may be negatively affected by inventory shrinkage and the inability to properly manage the inventory balances. Effective inventory management is a key component of Dollar General’s business success and profitability. If the company’s buying decisions do not accurately predict consumer trends, excess inventory will negatively affect financial results. Inventory turnover has improved and the company is aware and focusing on addressing all of these risks in the most productive way possible. The biggest risk that the company is facing from a consumer’s perspective is that their sector is highly competitive. Operating in a basic consumer goods market there is already a strain on margins, and low prices are necessary to stay competitive. This restriction on increasing prices may result in a loss when costs increase. The objective is to keep overhead, salaries, marketing and all costs to a bare minimal. Other competitors have saturated the geographic market where Dollar General once was
The threat of rivalry is high because there are several firms in the industry such as Safeway, Sobeys, Atlantic and Pacific, Metro, convenience stores, and online grocery shopping. Moreover, with the addition of Wal-Mart in the mix this increases the threat among the rivalry which will cause an intense price rivalry. This is also caused by firms unable to different their products in the industry, in this case they are forced to compete on the basis of price which will result in price competition.
There are ten elements needed to survive a zombie apocalypse: a steady food supply, clean water, medicine, transportation, gas, a defense system, a sturdy shelter, a safe place to sleep within the shelter, weapons, and simple tools. Costco supplies all of these items. According an article in The Concordian, “If you asked 100 people where they would hide during a zombie apocalypse, 98 would say Costco. Costco is a vast market that sells basically anything you would need to live there permanently” (Menexis). Unfortunately that still leaves those two out of one hundred people that disagree. Those people say that Costco would be an unwise place to be during the apocalypse because of its sheer size. They state that the massive size of a Costco store is too big for a person or even small group of people to defend. While this argument has a logical line of thinking behind it, there are several factors that render this viewpoint invalid. Costco does not need a huge defense system because it is literally a huge warehouse. This means that Costco is essentially a huge concrete box with two ope...
During 1994, Costco suffered a partial break up due to internal discrepancies between owners James Sinegal and Robert Price (Chesley). This resulted in PriceCostco's commercial real estate properties and other assets being spun off as Price Enterprises, Inc., headed by Robert Price ("Costco Wholesale Corporation"). Costco then operated as PriceCostco until 1997, when the company changed its name to Costco Wholesale and all remaining Price Club locations were rebranded Costco, becoming the Costco known today (“Costco Wholesale Historical Highlights”).
Petco on the other hand is competing with PetSmart and other pet food stores and maintaining their percentage in the market. The company’s competitive strategy relating to its internal analysis is to expand its market to other animals: Horses, Cattle, and Hamsters to Tarantulas.
The success of Wal-Mart is so great, that many people believe that Wal-Mart is becoming a monopsony . Suppliers are forced to deal with Wal-Mart because of the large percentage of sales at Wal-Mart cash registers. As such, Wal-Mart also has the ability to dictate prices of the goods it receives from the suppliers. Every day, more and more retail stores close their doors for good because Wal-Mart controls such a huge margin of the retail sector.
Their ability to distribute the cut rate from their operating proficiencies in supply chain management and cash flow, permits them to offers items at discounted rate and a lower price than their competitors. For Costco the meaning of being the low-cost provider while also differentiating from the competitors is ambiguous at best. Costco’s CEO, Jim Sinegal, is certain that low priced, and the high value merchandises are exactly what is needed maintain and achieve a staying power in the industry. Costco also entices their customers with low prices on designated set apart products available only at their stores. Within these designated products, Costco provides a limited selection of nationwide brand-named merchandises in some wide categories. Their approach comprises of selling a limited number of items, keep their costs down, maintain a high volume, compensate employees well, ensure that customers buy their memberships, and target upscale small-business owners through their business only
Their boards are similar in member size (Walmart with 12 and Costco with 13). Both companies also advocate for a separate CEO and Chairman. They also have a similar number of meetings per year (Walmart 6 and Costco 5) (Spencer 4). Both companies also utilize executive sessions and Costco, like Walmart, has at least two executive sessions a year for independent directors (Costco 11). Finally Costco also has a code of ethics that applies to all employees, directors and executives. They
In the warehouse segment, Wal-Mart’s Sam’s Club competes harshly with Costco. Costco has fewer warehouses but greater sales and revenues. Costco customers also shop at Costco more frequently than Sam’s Club customers and, on average, spend more each visit as well. Costco’s dominance may be the result of better innovation. Costco offers luxury items and was the first to sell fresh meat and produce, and gasoline. This is important because innovation is a key factor in assessing competitors in an industry.
As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is their expenses, which include merchandising costs and pre-opening expenses, have been increasing steadily and they need to balance this out to keep a positive net income. Analysis: Key Issue #1: Costco has many competitors, with the primary two being Sam’s Club, a wholesale business managed by Walmart, and BJ’s wholesale club. Sam’s Club offers the same services as Costco.
This strategic capitalises on weaknesses since will decrease the cost of coffee beans/beverages but also Starbucks operating cost which they regularly ship across the world to various stores. Starbucks can capitalise on this weakness to improve their brand options. It adds value in the inbound logistics activities, operations and procurements. Starbucks should consider this option since it will decrease their operating cost and therefore will reduce the prices on their menu. The attractiveness is the exact same as mentioned in option 1.
Costco is a membership warehouse club that dedicates itself to providing the members of Costco with a wide selection of products at the best possible prices. Costco promises their members products of great quality and value and if the member is not satisfied, they will refund the money back to the member. Costco pays their employees much better than Sam’s club, a competitor of Costco, with Costco paying $15.97 versus Sam’s Club paying $11.52 (Cascio, 2006). Costco also provides a heath care insurance plan that covers 82% of their employees where Sam’s Club is at 47% (Cascio, 2006). Costco employees are covered by a retirement plan with the company contributing an average of $1,330 per employee versus 64% of employees at Sam’s Club and the
This essay describes how Costco has undergone evolutionary changes from its inception to present through its value chain model to become a success story. For example, in its distribution system, Costco utilizes the cross-docking technology to help in the conveyance of products in the different locations. This ensures that there are no product delays in the respective markets (Guo, 2016). Accordingly, Costco can attract more customers who prefer the warehousing services provided by the company.
The rivalry aspect of Porter’s Five Forces that influence’s the grocery industry finds that there is a high degree of competition for consumer’s business among the dominate retailers as well as those companies trying to take any share of the market they can get. The large retailers engage in intense competition among each other as well as other stores that are competing for sales. Price wars drive down the profit margins for individual items and new and improved store design to bring in customers increases fixed cost. Improved distribution lines affect distribution and storage cost is competitive adjustments that the major retailers use to stave off the increasing competition. The last area of rivalry that the major companies use is the relationships they have with their suppliers to sign exclusive deals or lower cost than those prices paid by competing firms. As more retailers such as Wal-Mart and Target add groceries to their sales floor the competition increases as well as the stores that offer individual grocery items in their stores such as Dollar General, Walgreens and CVS. The grocery rival...