Costco Wholesale Corporation SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Costco Wholesale Corporation managers to do a situational analysis of the firm . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Costco Wholesale Corporation is facing in its current business environment.

The Costco Wholesale Corporation is one of the leading firms in its industry. Costco Wholesale Corporation maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.


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The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Costco Wholesale Corporation to develop four types of strategies:

• SO (strengths-opportunities) Strategies
• WO (weaknesses-opportunities) Strategies
• ST (strengths-threats) Strategies
•  WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The main purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Costco Wholesale Corporation strengths, and eradicate its weaknesses.

Step by Step Guide to Costco Wholesale Corporation SWOT Analysis

Strengths of Costco Wholesale Corporation – Internal Strategic Factors

As one of the leading firms in its industry, Costco Wholesale Corporation has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Costco Wholesale Corporation are –

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• Strong distribution network – Over the years Costco Wholesale Corporation has built a reliable distribution network that can reach majority of its potential market.
• Strong Brand Portfolio – Over the years Costco Wholesale Corporation has invested in building a strong brand portfolio. The SWOT analysis of Costco Wholesale Corporation just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
• Highly successful at Go To Market strategies for its products.
• High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
• Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
• Strong Free Cash Flow – Costco Wholesale Corporation has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Superb Performance in New Markets – Costco Wholesale Corporation has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
• Highly skilled workforce through successful training and learning programs. Costco Wholesale Corporation is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

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Weakness of Costco Wholesale Corporation – Internal Strategic Factors

Weakness are the areas where Costco Wholesale Corporation can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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• The profitability ratio and Net Contribution % of Costco Wholesale Corporation are below the industry average.
• There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
• Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Costco Wholesale Corporation
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Costco Wholesale Corporation is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• High attrition rate in work force – compare to other organizations in the industry Costco Wholesale Corporation has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.

Opportunities for Costco Wholesale Corporation – External Strategic Factors

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• The market development will lead to dilution of competitor’s advantage and enable Costco Wholesale Corporation to increase its competitiveness compare to the other competitors.
• New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Costco Wholesale Corporation. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
• Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
• New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Costco Wholesale Corporation to drive home its advantage in new technology and gain market share in the new product category.
• New trends in the consumer behavior can open up new market for the Costco Wholesale Corporation . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The new technology provides an opportunity to Costco Wholesale Corporation to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Costco Wholesale Corporation to capture new customers and increase its market share.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Costco Wholesale Corporation an opportunity to enter a new emerging market.

Threats Costco Wholesale Corporation Facing - External Strategic Factors

• As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
• Rising raw material can pose a threat to the Costco Wholesale Corporation profitability.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Costco Wholesale Corporation   in those markets.
• Liability laws in different countries are different and Costco Wholesale Corporation may be exposed to various liability claims given change in policies in those markets.
• Imitation of the counterfeit and low quality product is also a threat to Costco Wholesale Corporation’s product especially in the emerging markets and low income markets.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.

Limitations of SWOT Analysis for Costco Wholesale Corporation

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

• Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
• SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
• The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Costco Wholesale Corporation
• SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
• SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

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Weighted SWOT Analysis of Costco Wholesale Corporation

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Costco Wholesale Corporation managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Costco Wholesale Corporation

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

• M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
• A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
• L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)