STRATEGIC AUDIT ON COSTCO

Strategic Audit on Costco



Strategic Audit on Costco

Introduction

Economic globalization has increased competition and challenges among companies along with better chances of growth and market share. Many companies are initiating business across borders to increase their reach and demand of products. Additionally, they are able to tap new markets and increase their financial growth and profitability in the long run, Globalization gives rise to integration of economies, politics, products, technologies, trade, business etc (Sribd., 2012).

Discussion

Impact of global economy on Business

It was established in 1983 with it first warehouse in Seattle, Washington. It was found by James Sinegal and Jeffrey Brotman. The company offers different products and high quality brands at wholesale prices. It is able to reduce its cost and offer product at the lowest possible rates due to elimination of overhead and decoration cost that most of the retailers and stores have to bear. Costco is actually a chain of warehouse present in all the important locations and countries to cater to the needs of masses.

It caters only those customers that avail its membership in the form of three membership facilities. They are namely Business, Gold Star and Executive membership. The biggest challenge that the company faces in the process of globalization is it global presence and preference of products in countries other than United States. The preference of it products is highest in United States and is dependent on the economic condition of the country. It needs to initiate its global presence in eastern countries that are emerging as powerful economy like China. The company is currently operating its business in US, Canada, Japan, Korea, UK, Taiwan, Australia and Mexico (Costco Wholesale, 1998).

It has the highest number of locations in Unites States, Canada being the second and with Australia and Korea with the least number of locations. Globalization on one hand increases business and growth opportunities for the company but on the other hand also requires the company to reduce its cost by forcing its supplier and manufacturers to shift from developed nations to developing nations like China for cheap labor. Costco only has 20 percent revenue from outside the United States and needs to reduce its dependence on single economy of United States and increase its location in other emerging economies and countries in Asia. The global positioning of the company must be done and must increase its production massively to meet the needs of global market and demand of the product (Costco, 1998).

Opportunity Summary

The company must focus on increasing its global presence by being competitive and compelling for the customers of other developing countries. It should increase its global presence and market supply in China which has a rising economy and market in the east.

Situation Analysis

Strengths

1.Stable and strong membership renewals

2.Loyal customers and cardholders through memberships

3.Lowest rates and high quality products

4.Hardworking exceptional workers

5.Global brand awareness

Weaknesses

1.High wages and labor cost

2.Leave of its previous owner, James Sinegal

3.Maintaining its profitability and growth

4.Expansion and opening of new stores eating up the profit margin ...