Essays on Costco Entry into China Case Study

Download full paperFile format: .doc, available for editing

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.


“The McKinsey Quarterly” 2006, ‘The value of China’s emerging middle class’, The Mckinsey Quarterly, viewed 28 August 2011: from$27s+Middle+Class.pdf [accessed 28 August 2011].

Boyle, M 2006, ‘Why Costco is so addictive’, Fortune 154 (9), viewed 3 August 2011: from [accessed 3 August 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, viewed 14 July 2011: from [accessed 14 July 2011].

Chow, C 1995, ‘Evaluating small business development in China’s retail sector: an empirical analysis’, Journal of Small Business Management, vol. 33, no. 1, pp. 87-92.

Chu, S & Huang, S2010, ‘College- educated youth’s attitudes toward global brands: implications for global marketing strategies ’, Journal of International Consumer Marketing, vol. 22, no. 2, pp. 129-145.

Chung, M, Haire, J, & Hartel, C n.d. Cultural impact on entry mode strategies into the Chinese market by Australian companies, viewed 4 August, 2011: from [accessed 4 August 2011].

Costco Wholesale 2009, ‘ Costco Wholesale historical highlights’, Costco Wholesale, viewed 3 August 2011: from [accessed 3 August 2011].

Cui, G & Liu, Q2000, ‘Regional market segments of China: opportunities and barriers in a big emerging market’, Journal of Consumer Marketing, vol. 17, no. 1, pp. 55-72.

Datamonitor 2008, ‘Costco Wholesale Corporation: swot analysis,’ DATAMONITOR, Viewed 15 July 2011: from [accessed 15 July 2011].

Datamonitor 2009, ‘Country analysis report: China, in-depth PESTEL insights,’ DATAMONITOR, viewed 15 July 2011: from [accessed 15 July 2011].

Euromonitor International 2010, ‘Costco wholesale corp in retailing-world’, Euromonitor International.

Euromonitor International 2011a, ‘Grocery retailers in China’, Euromonitor International.

Euromonitor International 2011b, ‘Wal-Mart (China) investment co ltd in retailing (China)’, Euromonitor International.

Euromonitor International 2011c, ‘Tesco China co. ltd in retailing (China)’, Euromonitor International.

Fleisher, C.S & Bensoussan, B.E 2007, Business and competitive analysis: effective application of new and classic methods, FT Press: Upper Saddle River, NJ.

Gao, Z & Zhang, H2011, ‘A comparative study of the Chinese and U.S. consumers attitudes towards adverting regulation’, Asia Pacific Journal of Marketing and Logistics, vol. 23, no.1, pp. 72-90.

Gereffi, D & Ong, R n.d., ‘Wal-Mart in China: can the world’s largest retailer succeed in the world’s most populous market?’ Asian Pacific Review, pp. 46-49.

Ghauri, P & Fang, T 1999, ‘Chinese business negotiating process: a socio- cultural analysis’, Journal of World Business, vol. 36, no. 3, pp. 303-325.

Hooper, B 2000, ‘Globalization and resistance in post-Mao China: the case of foreign consumer products’, Asian Studies Review, vol. 24, no.4, pp. 440-469.

Hu, D, Reardon, T, Rozelle, S, Timmer, P & Wang, H 2004, ‘The emergence of supermarkets with Chinese characteristics: challenges and opportunities for China’s agricultural development’, Development Policy Overview, vol. 22, no. 5, pp. 557-586.

Huang, Y 2003, Selling China: foreign direct investment during the reform era, Cambridge University Press, Cambridge.

Huang, Y 2007, Toward an integrated conceptual model of retailer new product evaluation and new product success, ProQuest, Ann Arbor, MI.

Ianchovichina, E & Martin W 2001, ‘Trade liberalization in China’s accession to WTO’, Journal of Economic Integration, vol. 16, no.4, pp. 421-446.

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.

Jiang, N& Kattuman, P 2010, ‘Intensity of competition in China: profitability dynamics of Chinese listed companies’, Asia Pacific Business Review, vol. 16, no. 3, pp. 461-481.

Khanna, T, Palepu, K.G, Sinha, J 2005, ‘Strategies that fit emerging markets’, Risk and Reward in World Markets, pp.60-76.viewed 28 August 2011: from [accessed 28 August 2011].

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.

Max, M & Yuval, A 2010. ‘A better approach to China’s market’, Harvard Business Review, vol. 88, no. 3, pp. 30-31.

Wu, J 2008, ‘An analysis of business challenges faced by foreign multinationals operating the Chinese market’, International Journal of Business and Management, vol. 3, no. 12, pp.169-174.

Yu, J & Zhou, J 2010, ‘Segmenting young Chinese consumers based on shopping-decision styles: a regional comparison’, Journal of International Consumer Marketing, vol.22, pp. 59-71.

Zhang, Y 1995, ‘Chinese consumer’s evaluation of foreign products: the influence of culture, product types and product presentation format’, European Journal of Marketing, vol. 30, no. 13, pp. 50-68.

Zhu, H, Wang, Q, Yan, L & Wu, G 2009, ‘Are consumers what they consume?-linking lifestyle segmentation to product attributes: an exploratory study of the Chinese mobile phone market’, Journal of Marketing Management, vol.25, no.3-4, pp.295-314.

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, pp.7.

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