Analysis of the Corporate-level Strategy
1. Is the firm vertically integrated such that it gains a competitive advantage in its core business?
2. What is the firm’s diversification strategy? Does it contribute to the firm’s competitive advantage in its core products?
3. Are there potential synergies across businesses? Are they appropriately leveraged?
4. What is your assessment of the firm’s growth mode (acquisition, JV, internal growth)?
5. What and how can corporate-level decisions enhance a firm’s competitive advantage?
Costco Wholesale Corporation is a chain of membership warehouses that sells premium goods at low cost. Even though the profit margin is smaller compared to other wholesale club markets, Costco has succeeded in making this a very successful strategy. The low cost leadership strategy follows selling of superior-quality merchandise at prices below what other wholesalers or retailers charge (Farabhi, 2012). Consequently, most of Costco’s merchandise is private label items enabling them to sell products at prices significantly lower with emphasis on geographic expansion and low operating costs. As a result, Costco has managed consistent financial and operating performance since 2000 and has had the highest sales compared to the competitors.
Costco’s supply chain is partially vertically integrated with a backward integration with the Kirkland Signature Brand (Farabhi, 2012) which is Costco’s private label or store brand trademarked by the corporation. Hence, even though Costco doesn’t do the manufacturing, Kirkland acts as their own label and can be bought only at Costco stores. This kind of integration provides Costco with the competitive advantage as they can make goods available to consumers directly from the manufacturers and that at ultra low prices. Also, a typical supermarket’s diversification strategy was to stock numerous items for consumers to choose from, Costco’s strategy was to provide shoppers with a broad spectrum of product range but with limited selection of fast moving products in each category with branded items comprising 85 percent of the merchandise and the Kirkland label comprising the remaining percentage. The diversification strategy of Costco is a natural protection against risk.
Also, Costco attained market synergies with its decision its decision to make Costco a kind of one-stop destination catering to every need of the consumer. Opening of ancillary departments next to the warehouses including pharmacy, food court, car washes, gas stations and one-hour photo centers has proved profitable for Costco. The gas stations now account for at least five percent of Costco’s annual revenue (Keitner & Cassidy, 2011). The corporate culture of Costco follows five very simple and down-to-earth principles of business including following the law, taking care of employees, suppliers, shareholders and members. The growth strategy concentrated on increasing at least five percent sales in existing warehouses and open more stores both domestically and internationally.
In the rapidly growing and turbulent markets, the competitive edge that a firm holds is unpredictable. In these reality situations, corporate-level decisions and strategy emphasizes strategic market positioning of the firm, building sustainable relationship with suppliers and effective diversification form a basis for sustained competitive advantage.
References
Farabi, Y. (2012). Competition among the North American Warehouse clubs: Costco Wholesalers versus Sam’s Club versus BJ’s Wholesalers. Munich: GRIN Verlag GmbH.
Keitner, R., & Cassidy, C. (2011). Management. South Western: Cengage Learning.
Thompson, A. (2012). Costco Wholesale in 2012: Mission, Business Model, and Strategy. International Strategic Management (Cases).
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order formOnce we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignmentAs soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download