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.
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