Corporate level strategy
Directional Strategy: Growth
The directional strategy of the company Costco has been growth. The main reason is that still the retail industry has a lot of potential and growth prospect which needs to be explored. Secondly, the company since 2013 has looked to expand itself and it has made a move on towards capturing new markets. This again signifies that Costco is looking to grow into new markets and expand its customer based with expanding and exploring new markets.
Diversification Strategy: Single Business Strategy
The aim of corporate level strategy is to align the output of each business unit in such a way that the output serves the best towards the organizational goal (Kotler, 2012).
The sole purpose of the company’s corporate strategy is to create a feeling which tells each and every customer that they are special arrivals in the shop. No doubt it is a challenging task of treating every customer as an individual without ignoring to support their respective communities by maintaining balance between their affordability and company profitability. Coming up with an idea of converting a discount based environment into a host-guest environment is an innovative move from the management that continues improvement to maintain a competitive edge in the market.
Costco is following a single business strategy by continuously investing only in one direction, i.e. to be the world class mart and number one choice. As Costco's core business is to provide daily products for less amount of money of guests with no chance of diversification in it. Costco adopts single business strategy because of the fact that it is earning the entire revenue from the retailing business. Costco has focused on the main business and has created innovation through the tangible and intangible assets and human resource as well (Kotler, 2009).
Costco offers community based services by creating career opportunities in the market and employee retention benefits. Costco does this to contribute to the society in a healthy way that directly or indirectly contributes towards its corporate responsibility. Without taking investment from outside Costco has maintained its individuality everywhere in terms of financial assistance and market. Whereas the Costco call their suppliers as the partners need to develop a healthy relationship with them for strategic benefit.
SWOT Analysis
Strengths
The major strength for Costco has been the financial strength or the financial stability of the company. Along with this, the number of retail outlets for Costco is almost 600 in the United States. The number of employees at Costco exceeds more than 150,000 worldwide. The overall revenue generation for Costco is again strength for the company. The brand of the company has made it achieve large number of loyal customers. Along with this, Costco is the largest retailer of wine in the industry. Costco even offers food court at its stores or outlets to attract customers at a larger scale (Hill, T. 1997).
Weaknesses
The major weakness of Costco is that it keeps quite low prices in the products it offers. Sometimes the prices are so much low that even the profits become marginal. Secondly, another major weakness is that although the store is placed as a low cost provider but it ultimately pays higher wages to the employees (Goldstein, 2005). The company does not spend much on marketing budget. It does not even have a strongmanage plan to look after the human resource. The level of intense competition also accounts as a weakness because the performance of the industry players have actually become quite stagnant (Hill, T. 1997).
Opportunities
Costco’s major opportunity is to look to expand its global reach and cater the needs of foreign or untapped markets throughout the world, especially the Asian region. Secondly, the company should also look to acquit small retail chains in different countries so that they can build upon their experience and use the name of Costco to convince the customers that prices offered to them are cheap along with quality. As for now, Costco does not spend too much on advertising and marketing, therefore it is again an opportunity for Costco moving forward in the future. The company can also expand and extend its supplier pool to attract more suppliers within the organization (Hill, T. 1997).
Threats
The level of competition which comes in the way of Costco is quite stiff and challenging for the company. For example, Wal Mart, Costco are the major competitors for Costco in the retail industry. Along with this, the company also faces threat from the private labels. The increasing labor wage rate has again accounted for the increased prices in general. Cannibalization is another factor that has created hindrance for the company and it has to eventually overcome it in the future (Hill, T. 1997)..................................
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