Essays on Costco: Moving to China is a Strategic Move for Expansion of Target Market Case Study

Download full paperFile format: .doc, available for editing

The paper "Costco: Moving to China is a Strategic Move for Expansion of Target Market " is a good example of a marketing case study. The company under consideration in this business proposal is the Costco Wholesaler. Costco is a well renowned American retail store that plans to extend its current target market by launching its operations in the vibrant Chinese market. Financial analysts at Costco have evaluated the profitability of this move to China after considering all the advantages that this retail store enjoys in the U. S market.

Costco management is ambitious that the relocation process will be a viable venture for the retail giant. Costco has enjoyed immense dominance of the American wholesale market since it controls almost half the market of all wholesale distribution services in its home market in the United States (Euromonitor International 2011). This proposal highlights critical market entry elements best explained through the SWOT and the PESTE business analytical tools. The choice of SWOT analysis in the Costco new market venture project was necessitated by the need by the company strategists to fully comprehend the organization’ s status and its environment.

This is the primary tool that would aid planners for entry into the Chinese market to focus on key issues. Additionally, the PESTEL analysis was considered in this context for its ability to audit the macro-environment that would influence critical investment decisions by Costco managers. Situation Analysis SWOT Analysis Strengths Costco is a well-established distributor, a status based on which it is hoping to secure a location in the Chinese market that will give it a competitive edge over its already established competitors in China. Market analysts at Costco have selected Shanghai as their preferred location in order to compete fairly with other competitors in the same market region (Marketwatch, 2009).

The company plans to outdo other competitors by providing products and services founded on the following company strengths as highlighted by Helms and Nixon (2010): Experienced sales and marketing personnel who can integrate the business with the community through creative customer catching approach, for instance, the membership program that will harness loyalty from the Chinese consumers, The firm’ s high position in the U. S. (Euromonitor International 2011) distribution chain forms a formidable source of synergy for Costco to weather teething issues during the new Chinese market entry, Costco offers high-quality products and services at consumer pocket-friendly prices (Datamonitor 2008), and this is a unique power for the company to attract small business owners, and families of all consumer classes, Being a famous brand, Costco will lure many customers from the adventurer's Chinese consumers who have preferential taste especially for new products from the West (Yong 1996), The availability of verity of the American product that Chinese consumer may be looking for, Having ventured the Taiwanese market successfully (Andria 2010), Costco can capitalize on that initial Asian recognition Weaknesses Costco expects to perform below their expectation due to the current economic downturn that has affected the world’ s economy and weaker elements in terms of: Tough competition from China-based distributors while it will be launching its services Challenges in appraising prices in order to maximize profits under the stringent Chinese government’ s price controls and exorbitant tax rules (Marketwatch 2009). Problems in popularizing products to the Chinese locales owing to apparent social cultural and regulatory constraints that vary across the Chinese communities (Zu, Zhou, Zhu & Yao 2011b), The packaging regime that makes Costco’ s products appear bulky may present the Chinese consumers with storage difficulties, There are likely challenges with the introduction of the membership programs that the Chinese are not used to unless innovative strategies are adopted.

References

Andria, C. 2010. ‘Corporate news: Costco cracks Taiwanese market--- U.S. wholesale club builds sales by tailoring big box retailing to local tastes,’ Wall Street Journal, from http://search.proquest.com/docview/399083586?accountid=36155 (Accessed 14 July, 2011).

Business Wire. 1999. ‘U.S. computer products are still preferred by Chinese consumers; survey of 300,000 consumers and vendors also shows domestic Chinese products gaining market share,’ Business Wire, from http://search.proquest.com/docview/446743664?accountid=36155 (accessed 14 July 2011).

Datamonitor. 2008. ‘Costco Wholesale Corporation: swot analysis,’ DATAMONITOR, from http://web-l4.ebscohost.com.ezproxy.uws.edu.au/ehost/pdfviewer/pdfviewer?vid=3&hid=11&sid=2d08a21a-3cab-4737-b611-dda8e80ef502%40sessionmgr104 (accessed 15 July 2011)

Datamonitor. 2009. ‘Country analysis report: China, in-depth PESTEL insights,’ DATAMONITOR, from http://web-l4.ebscohost.com.ezproxy.uws.edu.au/ehost/pdfviewer/pdfviewer?vid=6&hid=11&sid=2d08a21a-3cab-4737-b611-dda8e80ef502%40sessionmgr104 (accessed 15 July 2011).

Datamonitor. 2010. ‘Costco wholesale corporation: company profile.’ DATAMONITOR, from http://web-l4.ebscohost.com.ezproxy.uws.edu.au/ehost/pdfviewer/pdfviewer?vid=3&hid=104&sid=2d08a21a-3cab-4737-b611-dda8e80ef502%40sessionmgr104 (accessed 15 July 2011).

Ellickson, B. 1993. Competitive equilibrium: theory and applications. Cambridge University Press: Cambridge.

Euromonitor International. 2011, Jan. 11. Costco Wholesale Corp in Retailing (U.S.): competitive positioning,’ Passport GMID, from http://www.portal.euromonitor.com.ezproxy.uws.edu.au/Portal/Pages/Search/SearchResultsList.aspx (accessed 15 July 2011).

Francis, E. 2010, November 15. ‘Piracy: China still in the game.’ ABC World News. From http://abcnews.go.com/WN/China/china-major-player-piracy/story?id=12153389 (Accessed 14 July 2011).

Gerston, L. 2003. The Costco experience: an unofficial survivor's guide. E-reads/E-rights: Miami, FL.

Helms, M.M & Nixon, J. 2010. ‘Exploring SWOT analysis-where are we now?: A review of academic research from the last decade,’ Journal of Strategy and Management, vol.3, no.3,pp.215-251.

Jap, W. 2010. ‘Global brands vs. Local brands in Chinese consumer mind,’ Journal of International Business and Economics, Vol.10, no. 2, pp. 91-99.

Knapp, E. D. 2008. The brand promise: how Ketel One, Costco, Make-A-Wish, Tourism Vancouver, and other leading brands make and keep the promise that guarantees success, McGraw-Hill Professional: New York, NY.

Lantolf, P. J.2004. Sociocultural theory and second language learning, Oxford University: Press:Oxford.

Marketwatch .2009. ‘Company spotlight: Costco Wholesale Corporation.’ DATAMONITOR, from http://web-l4.ebscohost.com.ezproxy.uws.edu.au/ehost/pdfviewer/pdfviewer?vid=3&hid=104&sid=2d08a21a-3cab-4737-b611-dda8e80ef502%40sessionmgr104 (accessed 15 July 2011).

Yong, Z. 1996. ‘Chinese consumer’ evaluation of foreign products: the influence of culture, product types, and product presentation format,’ European Journal of Marketing, vol. 30, no 12, pp.50.

Zimmerman, A. 2001. ‘Tres cheap: taking aim at Costco, Sam’s club marshals diamonds and pearls--- Wal-Mart’s warehouse club, long the no.2, invades its rival’s upscale turf---in this aisle, bronze sculpture,’ Wall Street Journal, from http://search.proquest.com/docview/398945560?accountid=36155 (Accessed 14 July 2011).

Zu, X, Zhou, H, Zhu, X & Yao, D. 2011a. ‘Improving global competitiveness with branding strategy: cases of Chinese and emerging countries’ firms,’ Journal of Technology Management in China, vol. 6, no. 1, p.7.

Zu, Zhou, Zhu & Yao. 2011b. ‘Quality management in China: the effects of firm characteristics and cultural profile,’ International Journal of Quality & Reliability Management, vol. 28, no.8, pp.1-34.

Download full paperFile format: .doc, available for editing
Contact Us