SWOT Analysis And Marketing Strategy Of Costco Wholesale Retailer

Question:

Discuss bout the Market Planning for SWOT Analysis Company.

Developing a market plan is an important aspect of business organizations. Marketing is the spine of a business. It determines the turnover and profitability of the company. It is important to develop a strategic marketing plan for an organization, which determines not only the profitability of the organization but also the growth and success of the organization.

The following report is made on Costco Wholesale Retailer. The report studies the SWOT analysis and studies the marketing objectives of the company and also devises a marketing strategy of the company. The company’s objectives and mission are studied and strategies and recommendations are provided.

Strengths

Costco Wholesale Retailer enjoys certain benefits. The strengths of the company are:  

• The market presence of the company. The company enjoys customer’s demands and is widely recognised.
• The company enjoys significant supply chain. It allows the company to achieve economies of scale.
• The company also enjoys customer’s loyalty because of the Kirkland Brand Signature. The public infers as that as a symbol of quality and standard. Therefore, these factors lend significant strength to the company.
• The company has significant turnover number, which contribute to the high profit the company enjoys.
• The company also has significant inventory turnover mixed with high sales number.
• Since the revenue is high due to economies of scale, the sales per unit is low that attracts demands from customers (www.costco.com, 2016)

Weakness

The company also suffers from shortcomings and limitations. These are:

• Costco has limitations in the product mix compared to the competitors. There is not enough option for the customers, who seeks wide array for goods.
• The company allows only members to purchase from its warehouse and limits the entry to non-members. This might not be accepted by public and also limits the profitability of the company.
• According to the business model of the company, the low profit margins do not allow flexibility in adjustment of price.

These factors pose as the weaknesses of the company and limit the profitability aspect of the company.

Opportunities

• One of the opportunities of the company is the diversification aspect of the company. The company has open up a new business in a different sector. It can add new services or features to the business.
• The company can increase the variety factor in the product mix. It can increase the types of product it produces. This will create satisfaction among customers and help it compete with its rivals.
• The company can also expand its locations by establishing new warehouses and shop across the geographical locations. The company can extend its operational activities in different and foreign countries with developed economies. This will allow the company to achieve expansion policy and achieve growth and success (www.costco.com, 2016)

 These factors are some of the opportunities for the company to better its operational activities and further substantiate its chances for success.

Threats

• The company faces stiff completion from rival companies and supergiant like Walmart. The company faces competition from the intense marketing policies of the rivals.
• The company faces rivalry from online marketing. Online marketing allows many small and medium sized enterprises to sell goods at very low prices, which provides threats of substitutes and competitive rivalry.
• The power of animal rights acts tends to pose certain threats to the product of the company.

• High number of turnover per warehouse:

The company is a one of the dominant retailers in the world and enjoys good reputation. It was recorded that the sales in one of the warehouse clocked to $300 million. The average sales in the warehouse were seen to be $127 million. It is seen that the sales of the company is seen to double and triple in comparison to competitors (Bozarth & Handfield, 2015). 

• Incur the lowest cost in operation:

There are various factors, which revolve around the fact that the company produce at a low cost and are one of the leading players in wholesale and retail. There are minimum frills present in the operational activity of the company. The products are left in the original packages and material before being shipped to the store. This saves variable and indirect costs of the company. It is also observed to save time for the company. The company is efficient in this regard. The company has a significant purchasing power and can purchase quantities in large number to achieve economies in scale. Since the company purchases in large number, their cost of production also reduces to a minimum level and the company can achieve high profit margin by maintaining low sales price per unit (Howell & Market, 2013).

• Establishment of new warehouses:

The company intends of establishing around 33- 35 new warehouses in the quest of diversifying location. The company has planned an expenditure of $1.4- $1.6 billion and this allow the company to incur necessary expenditure on real estate, establishment, restructure and purchase of equipment for new warehouses and ancillary operations related to it. Thus, the company aims of diversifying location in the United States and Canada. This will expand the scope of profitability for the company (Kerzner, 2013). 

• Expanding the club warehouse membership:

The company follows the policy of increasing the sales by increasing the membership per warehouse. The company believes that following this policy would allow them to purchase in large quantities and also transfer the benefit to the customers. The customers believe that large scale purchase would allow them to have low purchase price per unit and also facilitate economical buying (Bozarth & Handfield, 2015).

Weaknesses

The main target market of Costco is small business. The marketing team of the company get in touch with local owners of firms and try to convince them to purchase a membership of the company when they establish a new warehouse in an area. The marketing team uses a direct mail service to prospective buyers and try to create a customer base if it matches the customer profile of the company. The remaining strategy revolves around the word of mouth theory. The company follows the theory that if the members are satisfied with the product and service of the company, they would advertise and recommend the company to others. This is seen from the fact that Costco does not follow aggressive advertisement strategies.

Costco provides quality and standard goods at lower prices to customer. This is one of the major and primary marketing objectives of the company. The company provides quality goods and cost leadership in order to achieve customer satisfaction and high sales for the company. The company’s core objective is cost effectiveness. The company employs the lowest price possible to attract customers. Increasing membership facility in terms of low priced goods would be ideal for the company. The Company could provide discounting factors along with the membership facility to customers. This allows them discounting facilities and allows the customers and members to avail products at low price. The company needs to amalgamate value with convenience and focuses on increasing sales to achieve its profit maximisation and the objective of the company. The membership club allows financing and refinancing facility, identity protection to customers. The company provides free samples and also utilizes active sales promotion techniques to achieve higher sales value. The company stresses on customer satisfaction and stresses on customer service and after sales service to the customers. The company focuses on sustainability development and stresses on making environmental friendly condition in its production process. The environment awareness allows the company to create goodwill and positive image of the company (Bozarth & Handfield, 2015).

Product

The company follows the policy of offering low price goods on selected and limited nationally branded products. The company deals in 330 products. The company offers only those products that offer great benefit to customers. It is critical for the company that the customers utilise from the product. The company maintains low active stock keeping unit and products shift out of the warehouse based on seasons and other factors. However, the company needs to diversify its products and increase the range of goods that the company offers to its customers.  This would provide an edge over its customers. A critical market research needs to be carried out and the taste and preferences of the customers need to the studied to evaluate the demand pattern and increase more variety to the stock (www.costco.com, 2016)

Place

The company has established warehouses around the globe. The company has 371 warehouses in the United States, 5 in Japan, 5 in South Korea, 4 in Taiwan, 19 in the United Kingdom and 30 in Mexico. The company depends on low price rather than diversified locations in achieving high sales. However, due to aggressive marketing strategies of competitors, the company needs to make certain amendments. The company needs to diversify location in more developed economies. The company needs to adopt aggressive strategies and policies to advertise their goods and forms a strong hold on the new target market to consolidate and expand the new target market (Li, 2013).

Opportunities

Promotion

The company does not follow aggressive advertisement policy and depends on word of mouth of members. However, the company needs to strengthen it advertisement policy and utilize e-commerce sites for diversifying its services and sales through the use of internet retailing. The company needs to use social media platform to create more awareness among customers along with the word of mouth (Li, 2013).

The company allows the members of the warehouses to have a demonstration of the product through sampling and eliminate the risk factors on the part of the customers. The company can increase the membership count in the warehouses and also allow non-members to shop product, which could benefit the company by increasing the customer base. The company needs to expand its generous policy to the customer and provide more refund and guarantee policies on products. The discounting policies also should be evaluated and amended. The company needs to be aware about the perfect relationship it needs to maintain with employees, customers and investors in the company. The company needs to make sure that it looks after the stake of the stakeholders.

The personal selling aspect of the company is impressive. However, the company needs to make sure that the information system is strong and market research allows the company to locate prospective customers. Sales promotion technique should move out direct mail techniques to email marketing, marketing on social media and also indulge in press release. Product launch techniques need to be evaluated so that it catches the eye of the masses.

Price

The company follows a policy of 14% mark up on the price of goods and offers low price. This is a highlighting factor the company as it not only low price to the customers but also cause inflexibility to the price adjustments. The company needs to achieve more economies of scale by increasing the membership of warehouses and buying in more bulk, which could allow increase in mark up to increase profit margin. This would strengthen the economies of scale for the company.

The company utilises strategic locations and use prime location for their warehouse as it can generate significant turnover for the company. The company should continue to strive in diversifying their products and services so that the customers can maximise its benefits. The company should focus more research on customer needs and wants and should do extensive research on current market trend and consumer behaviour. This will allow the company to achieve greater customer satisfaction. The company needs to implement its strategies of providing greater customer satisfaction through strategic location and diversification of products and services

The company, in order to achieve its mission should observe the code of ethics in every aspect. The company needs to observe all legal requirements and rules. The company needs to increase its consideration towards customers and members. More benefit should be given to customers through diversification of products and services and low prices. More care should be given to employees through better remuneration with significant minimum wage and better work environment. The company needs to keep the suppliers satisfied and overall the company provide proper return to shareholders. The stakeholders need to be satisfied from the treatment meted out by the company.  The company has direct purchase ties with many producers of national brand and the company needs to purchase from different and alternative sources without hampering the operation. The company needs to rapidly increase the stock turnover by adopting lean management process, in which the time period involved in deportment of goods to the stores is reduced. The company needs to indulge in purchasing in high quantities, effective distribution and reduce handling of goods. The time period involved in shipment of goods needs to be reduced, which will reduce indirect costs and also increase operational efficiency (www.costco.com, 2016)

The company needs to diversify its locations by increasing the stores in the United States, Canada and Mexico. The company intends to increase the stores in the United Kingdom and establish warehouses globally in most of the developed economies of the scale.

Conclusion

On concluding the report it can be seen that the company has great scope for growth and expansion. The company enjoys business strength in form of market awareness and has strong national brand signature, which draw customers. The company faces weakness in terms of strong rivalry from the firm. The company needs to follow diversification policy to expand its business and achieve growth and success. The company needs to open new warehouses in diversified locations. Overall, the company is a supergiant and needs to follow certain remedial procedures to strengthen its market conditions.

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