Essays on Costco Entry into China Case Study

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The paper "Costco Entry into China" is a perfect example of a business case study.   The Chinese market has gained increased interest from supermarket companies intending to introduce their businesses in the global market due to the country’ s rapidly growing economy (Hu, Reardon, Rozelle, Timmer & Wang 2004). The growing economy, as well as the large Chinese population, has presented great opportunities for multinational corporations although significant challenges remain eminent in venturing into the Chinese market (Khana, Palepu & Sinha 2005). Despite the increased opportunities in China, entry and establishment of a successful business has remained a great challenge for many multinational companies.

In this case, companies intending to venture into the Chinese market must ensure a proper analysis of the market situation in order to establish the appropriate strategies capable of yielding a successful venture. Companies venturing and operating in the Chinese market face several challenges including negative foreign brand perceptions, negotiation setbacks, and business environment (Wu 2008). Therefore, the management of Costco must have a proper understanding of these market challenges in order to formulate the best approach in its entry to the Chinese market that guarantees a successful venture. This critical analysis explores Costco’ s strategic entry into the Chinese market based on theories underpinning the concepts of perception, competition and segmentation.

Careful synthesis of the company’ s competitive positioning strategies and analysis of competitors is done to feed Costco with reliable planning information. Background Information Costco as one of the successful retail stores in the U. S. market plans to extend its operations into the potential Chinese market. Costco Wholesale Corporation currently has the largest membership warehouse club with its stores operating in most parts of the United States (Boyle 2006).

In 2009, Costco ranked third amongst the largest wholesale chain stores operating in the U. S. market, and ninth in the global market. The enterprise takes pride as one of the best wine retailing shops around the globe. Costco has its headquarters in Issaquah, Washington, despite having established its first offices in Kirkland, in the same region. The company established its first warehouse in Seattle and has over the years ventured into the global market opening new branches in Australia, Canada, South Korea, Japan, Mexico, United Kingdom, and Taiwan.

Jeffrey Brotman and James Sinegal founded Costco on September 15, 1983, in Seattle, Washington, DC. With the two founders had started dealing with retail distribution at their tender age, they brought together their expertise to establish what has now become a globally recognized enterprise. One of the greatest milestones achievements in the company’ s history revolves around its business merger with Price Club, accomplished in 1993. The merger was driven by the similarities between the two companies in terms of the business size and model.

Sol and Robert Price in San Diego, California, founded Price Club in 1976. This merger saw the company change its name to PriceCostco as the merger resulted in doubling the parent company’ s operations hence the need for an umbrella name. After successfully securing this merger, the new company’ s operations extended to about 206 locations as well as an increase in its annual sales to approximately $16  billion. Management of the company under the new umbrella name remained under the company executives from the two firms. However, after some time the owners of the Price Club existed from the company to start another company known as Price Enterprise (Costco Wholesale 2009).

Following, the tremendous growth in China’ s economy that confers a potential market for the global enterprise, Costco has expressed increased interest in the Chinese market. The company management has evaluated its strengths in the mother country market and concluded that a venture into the Chine would most likely increase its profitability. However, the company has to study the Chinese market situation in order to put up proper strategies to ensure a successful venture.

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