IndexStrengthsOperationsMarketingFinancialWeaknessesOpportunitiesMarket ControlR and DThreatsDiscussion of FindingsConclusions and RecommendationsReferencesUnder the leadership of Jim Sinegal and Jeff Brotman, the grand opening of the first Costco took place in Seattle, Washington, in 1983. The warehouse club with members was the first the company will be able to grow from 0 to 3 billion dollars in less than six years. Costco has done a phenomenal job of maintaining its entrepreneurial spirit over the past few decades. Under current CEO Craig Jelinek, they have reported gross profit on their financial statements every year for the past 13 years, except in 2009, during the recession. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay We used available resources to thoroughly analyze the company. By performing a SWOT analysis, we have identified weaknesses and threats that can ultimately have a negative impact on the company's performance. Costco's management style is one of the many strengths that sets it apart from its competitors. Although the wholesaler believes that financial performance depends on the ability to control costs, some of these costs are beyond the wholesaler's control. Unlike their competitors, employee compensation is not among the costs they seek to minimize. Costco's philosophy is that to achieve long-term goals, the company must maintain compensation at higher levels than the industry average. As a result, the company expects lower employee turnover and increased employee satisfaction. Essentially, these strengths caused by internal factors can be used to exploit opportunities presented by external factors. After evaluating the strengths, weaknesses, opportunities and threats we were able to process our findings and decide what effects these would have on the company. Our discussion of the information we found led us to provide suggestions that Costco could use to minimize weaknesses and threats within its organization and take full advantage of strengths and opportunities. Costco Wholesale is a multibillion-dollar global retailer with warehouse club operations in eight countries. As a membership warehouse club, Costco is committed to offering its members the best prices possible on quality, name-brand products. With hundreds of locations worldwide, Costco offers a wide selection of products, plus the convenience of specialty departments and exclusive member services. The company's first location, opened in 1976 under the name Price Club, served only small businesses; later, the company also served a select audience of non-entrepreneurial members. In 1983, the first Costco warehouse was opened in Seattle by James Sinegal and Jeffery Brotman. It was the beginning of an extraordinary era for Costco: it became the first company to grow from zero to $3 billion in sales in less than six years. When Costco and Price Club merged in 1993, the combined company had 206 locations generating $16 billion in annual sales. Strengths Operations Costco and its subsidiaries began operations in 1983 in Seattle, Washington. Nowadays, it is engaged in managing membership warehouses in the United States, Canada, United Kingdom, Mexico, Japan, Australia and Spain. It also has majority-owned subsidiaries in Taiwan and Korea. The company's strategy is to offer its members low prices on a limited selection of nationally branded products and select private label products in a broad range of product categories. This will typically produce high sales volumes and arapid inventory turnover. Warehouse-style stores are the main places where Costco sells its products. The primary locations for product distribution are warehouse-style stores, online stores, and mobile apps. Marketing As a large retailer, Costco Wholesale offers a wide variety of products and services. This element of the marketing mix identifies the company's outputs. The company offers very attractive low prices on virtually every good or service offered in its stores and on its website. Some services offered by Costco are photo printing services, life insurance (under Life Services), and payroll services (under Business Services). This element of the marketing mix demonstrates that Costco Wholesale Corporation has expanded its product mix to a significant degree of diversification. Costco Wholesale promotes its products through four primary marketing communications tactics: sales promotion, direct marketing, personal selling, and public relations. Financial Costco Wholesale Corp has a financial strength level of 7. It shows strong financial strength and is unlikely to fall into trouble. COST's high cash coverage means that although its debt levels are high, the company is able to use its borrowings efficiently to generate cash flow. This may mean that it is an optimal capital structure for the company, given that it is also meeting its short-term commitments. Weaknesses Although Costco is an industry leader, weaknesses in their structure can put them at risk for losses. As reported in their latest financial statements, Costco has identified a weakness in its information technology general controls (ITGC). The company relies heavily on information technology to record high volumes of transactions. This weakness not only affects financial reporting but, more importantly, investor confidence and stock prices. Following this discovery, management is working to resolve the issue in a timely and effective manner. Concern about the product range is also mentioned in the 2018 financial report. Costco has a variety of products in each warehouse, but compared to the competition the product range is limited. On average, Costco stocks about 4,000 products in its warehouse, while Walmart stocks about 50,000. This weakness may push consumers toward competitors and away from Costco. Finally, and perhaps one of the pain points that have occurred since the store opened its doors, is that foot traffic is limited to customers with memberships. Despite the fact that subscriptions are sold with the incentive of savings, subscriptions set limits. Opportunities Market Control Costco being the giant of wholesale products, consistently has a competitive advantage. Because Costco offers its consumers electronic products, agricultural products, clothing, alcohol etc.; It will always have areas in which to pursue market control. For example, if one of the markets/industries experiences any type of industry revolution, Costco has the power and capital to invest in the emerging company. If the company tends to prosper and succeed, Costco will already have a stake in the company. R and DCostco have the capital for "research and development" on any platform from which it offers products. Let's say that Costco would like to collaborate with a winery that is not well known but has a quality product; Costco could therefore offer prime space in some of its locations to test its wine products. If it goes well, they can offer more locations for a higher profit, and if it doesn't go well; Costco can eliminate theproduct and start over with a different company/product. Costco is sought after for many growth opportunities. Forbes placed Costco fourth on its list of best companies to work for in 2018. With already 231,000 employees, it looks like it will continue to grow if it can keep up with demand from its consumers. Costco pays its employees very well, has excellent health coverage, and pension and compensation plans. It's no wonder why people will continue to flock to Costco in search of opportunities. Threats One of the major threats that Costco will need to identify and overcome is the possibility that they are stores that are too large for people to comfortably want to shop. the wait to pay for your items at Costco can take thirty to sixty minutes. There is a share of people who do not like shopping in such a large space and do not want to queue to purchase only a few items. There's a demand for a “smaller” and kinder Costco experience. At a recent family gathering, I asked 30 people if they would shop at a place similar to Costco but smaller and able to purchase items not in large quantities. Of the thirty people, twenty-five would shop at a smaller, faster Costco. Costco could create “satellite” stores. Stores can be much smaller, with self-checkout and the ability to purchase everyday items not in large quantities. Some Costco members sometimes have trouble getting into the store to purchase smaller items. Costco does not offer a delivery service. Many competitors have already adopted it and grown along with its consumer demand. For many companies, the mobile delivery system is on the rise. It is catching on like wildfire and leaving many companies behind. 7¬11 and Walmart have grasped this technological and logistical innovation. Walmart has introduced “Spark Delivery,” an app that will allow consumers to order groceries and other products from Walmart and have them delivered directly to their homes. 7¬11 introduced “7NOW”. 7NOW will allow consumers to order anything from the convenience store and have it delivered directly to their home. Everything from snacks, to alcoholic beverages and even food, like chef's salad, can be delivered. Discussion of Findings Costco's philosophy is to provide its members with quality products at the most competitive prices. It does not focus its efforts on maximizing short-term prices, but instead focuses on maintaining a perception among its members of “price authority,” or consistently providing the most competitive prices. These bring customers back to the warehouse, as they are convinced that they are actually getting the best price on a wide range of products. The company also uses its gasoline business to attract members to warehouses. Although this business has relatively lower margins than others, it still generates higher volumes than other products with higher margins. Costco uses bulk/bulk discounts as a form of sales promotion to attract consumers to its warehouses/stores. Members are guaranteed low prices for products sold by the pack or in bulk quantities. Additionally, Costco uses direct email marketing to members, as well as The Costco Connection, which is a monthly publication promoting products available at Costco warehouses/stores. On the other hand, personal selling occurs when sales staff persuade customers to purchase certain products in warehouses. Costco applies public relations to strengthen its corporate and brand image. For example, the company has sustainability programs for its supply chain and makes donations to support children's programs,education, health and human services. The lack of advertising is a major factor that separates Costco's marketing mix from that of other retailers such as Walmart. Costco does not advertise and relies more on low prices and product value to attract consumers. Therefore, this element of the marketing mix demonstrates that Costco Wholesale Corporation effectively promotes its business and products even without advertising. Costco has rapid inventory turnover combined with high sales volume, contributing to higher revenues. The high sales volume ensures high revenues despite low sales prices. The high sales volume contributes to high operational efficiency. Greater operational efficiency is achieved by minimizing variable costs, and variable costs are lower when volumes are higher. Therefore, the operational efficiencies achieved by bulk purchasing, coupled with efficient distribution and reduced merchandise handling in a no-frills warehouse, allows the company to operate profitably with lower gross margins than traditional wholesalers, to mass retailers, supermarkets and supercenters. the model has since proven effective the day operations began. However, the weaknesses described above are issues that the company still faces today. Recently, management discovered that the company's information system had numerous flaws. What this means for Costco is that analysis on sales trends and costs related to day-to-day operations may be inaccurate. This could mislead management and result in inadequate annual budgets. The problems presented by this finding not only affect internal users, such as management and the board of directors, but also external users such as investors. As a public company, Costco relies on investor support to continue to grow as a company. Additionally, the company is also aware that its product range is limited compared to other retailers such as Target, Walmart, and Sam's Club. Striving to keep prices low for customers, the company offers Kirkland, a brand they own. However, the variety of products is limited. For consumers who value choice, a Costco membership may not be appealing. The company does not meet customer needs in this aspect. On the other hand, by sticking to this strategy they are able to satisfy the need for low costs of existing customers. The limitation of pedestrian traffic also affects sources of income. Once a member, the warehouse provides each customer with a Costco card. The card is required to enter the premises and is also required at check out. This therefore eliminates the likelihood of a non-member shopping at the warehouse. To illustrate, we can look at the Costco store in Fullerton. Although the city is home to many families, there are approximately 3 colleges/universities within a 4 mile radius. While buying groceries in bulk may be appealing to families, college students don't need it and may not be incentivized to purchase a membership. However, due to the store's convenient location, it is sure to attract a non-member every day. The consumer is then turned away at the door and this is how the company limits potential sales. Although it does not cause losses, it does not allow revenue growth by redirecting traffic to competitors. Conclusions and Recommendations In light of the SWOT analysis presented above, it is up to management to decide what measures need to be taken to continue operating profitably. Costco Wholesale is one of the leading companies in the industry. I am able to maintain such a great position