Costco Wholesale Corporation is one of the largest multinational corporations which is doing business in the retail industry. It is a membership-only warehouse club. It was founded by James Senegal and Jeffrey Brotman in 1976. Hamilton E. James is the current chairman and W. Craig Jelinek is the CEO of the company. Its Headquarter is in Issaquah Washington, United States. It is providing service as merchandise cash & carry Warehouse club. It has one brand under its ownership named as Kirkland Signature. [1]
The company is a public listed corporation and registered under the NASDAQ Stock Exchange. The current stock price of the company is 295.55USD as per 17-Dec-2019.[2] The total worth of assets of the company is US$45.40 billion (2019). The total revenue of the company in 2019 is US$152.7 billion. There are 98.500 million members of the company as per the year 2019. 254000 employees are working in this organization. The company is operating in 782 different locations across the world. It is serving in the following countries: United States, Canada, United Kingdom, Australia, Mexico, Japan, China, Taiwan, Spain, France, South Korea, and Iceland. It is ranked 14 on Fortune 500 for the largest corporation of the United States according to revenue. [1] [2]
Threats of New Entrants
Same as every other industry, there are certain barriers in the retail industry. Like startup cost, the most common barrier in every industry. In the retail industry to compete in the market against stores like Walmart and Costco, huge investment is needed. Similarly, economies of scale are another barrier, most of the stores have this competitive advantage due to which stores can sell the product cheaper than the competitor. So, to compete in the market one has to adopt it. In this industry, the switching cost of the customer is quite low. It means customers can easily switch from one store to another store due to any factors such as price difference, quality, and other benefits. When a customer can easily move without bearing any cost, it can help the new entrant to influence by providing better services. Therefore, all of these factors show that threats of new entrants exist in the market.
Threats of Substitutes
In the retail industry, most of the products are common. Like different goods such as food-related products. There is a low switching cost in this industry, as customers can move from one store to another for buying similar products without paying extra value. So, there is a lot of substitutes available in the market that can satisfy a similar need of customers. It is one of the factors that can influence the Costco profitability. Therefore, threats of substitutes exist in the market.
Bargaining Power of Buyers
As there are many companies doing business in the retail industry. There is immense competition in the market. It makes it difficult to increase the price by any business because the switching cost is low and the buyer can easily move to another store for the same products. In this situation, a buyer is the leading force that can lead to the sale trends of any store. In this regards businesses in this market are dependent on the buyer’s choice, so every business tries to create extra value so that the buyer prefers them among others. Therefore, all of these factors show that the bargaining power of the buyer is high in this market.
Bargaining Power of Suppliers
As these stores are large and the number of outlets also shows a large network, Costco has 782 outlets across the world. It means they are targeting a large portion of the market. To fulfill all the needs of the buyer business needs a lot of diversified products. So, a single supplier can’t fulfill all the demands of these stores. There are many suppliers which at a time deal with this store and provides the needed product. So, a single supplier cannot influence the store, as there are many other options available in the market. Therefore, all of these factors shows that the bargaining power of supplier is low in this market.
Competitive Rivalry
In this market where Costco wholesale is doing business, there are a lot of other stores targeting the same customers. As the products are the same, the needs of the customer are the same. Customer has the option available in the market to choose. Shift of customers from one store to another store can affect the profitability of the business. So, every business tries to create a competitive advantage to increase the customer base. Therefore, it shows that there is high competitive rivalry among the existing players of the market.
References
1 Costco, 2019, about, [online], Available at: https://www.costco.com/about.html
2 NASDAQ, 2019, Costco Wholesale Corporation Common Stock, [online], Available at: https://www.nasdaq.com/market-activity/stocks/cost