Case Study : Costco Business Level Strategy

Organisations today find themselves operating in an environment that is changing rapidly. The process of analysing the implications of these changes and modifying the way that the organisation reacts to them is known as business strategy.

Porters Generic Competitive Strategies: The relative position of a company within its industry concludes whether the profitability of the firm is above or below the industry’s average. The above average profitability of the firm is fundamentally showing the sustainable competitive advantage in its long run. According to Michael Porter, competitive advantages originate from the value of a firm and there are two types of competitive advantages, which a company can own. These are low cost or differentiation. For any company, in

According to Slack et al. The corporate strategy or business strategy is the guide lines for the whole corporation’s businesses in relation to its markets, customers, and the competitors (2007). In the same context, the same authors discussed the link between the corporate strategy and

The three generic strategies were identified by Porter (1985), who argues that in order to sustain

Costco is one of the nation’s top three retailers and the world’s largest membership warehouse chain, Costco wholesale Canada operates about 80 membership warehouse clubs across Canada. The company never advertises, charges its 64 million members to shop there and doesn’t mark up any product more than 15 percent, even at this lowest profit margin, 15% for Kirkland private brand, the products were 20% lower than comparable to other brand products. Costco works with this business model and generating $93 billion in annual sales.

Porter's generic strategies describe how a company pursues competitive advantage across its chosen market scope. There are three/four generic strategies, either lower cost, differentiated, or focus. A company chooses to pursue one of two types of competitive advantage, either via lower costs than its competition or by differentiating itself along dimensions valued by customers to command a higher price. A company

Strategy formulation has been acknowledged as one of the most crucial factors of ensuring the long-term growth of the business. However, the manner in which strategy is formulated, and most importantly, the nature of the strategy chosen for the company determines its future position in the marketplace (Grant, 2005).

In order for a business or corporation to grow and expand at a calculated pace, they must be able to strategize the proper business plan to get there. A strategy is a set of analytic techniques for understanding and influencing the firm 's position in the marketplace (Raimundo, 2001). Having a business

I went to Costco one time only but I did not found it good store for me. Only members can buy the stuff from Costco which is the weird thing for me. I bought big bag of chocolates varieties. The bag I bought of mix chocolates did not have much more variety brands. I like to go to Sam’s Club more because prices are very effective and brands are also efficient. I am seeing big bag of mix chocolates have more variety of brands chocolate than Costco. Not only chocolates but a lot of things we can see in variety in Sam’s Club than Costco. I prefer more variety so I don’t like Costco. Factors that influence customers for low-priced stores are that store must be at good location which can be convenient for everyone, must be stock nice and most importantly prices and services should be good.

Costco started in the West Coast in the early 1980s. While it was originally an imitator of the Price Club, which founded the wholesaling business model, it became part of Price Club; Price Club eventually donned Costco as its brand name. There were an upward of twenty-five imitators, the only wholesalers to remaining being Sam’s Club and BJ’s Wholesale Club (Coriolis Research 37). As of 2014, Costco had forty-two million club members, a 37% increase within a five year period (Kalogeropoulos). From September to the end of 2015, eighteen new warehouses are scheduled to open, totaling 487 locations in the United States, 686 warehouses worldwide (Costco). To understand how Costco expanded and became into a flagship retailer known to the public today, one must focus on how it treats is customers, employees and retail as a whole.

In this part, this report focuses on Porter’s Generic Strategies to analysis the strategic positioning of the major play in toys and games industry. According to Dess, Lumpkin and Eisner 2010, Porter’s Generic Strategies include three strategies which are Differentiation, Focus and Cost leadership which a company can use for achieve competitive advantage and overcome five force.

An organisation’s strategy plays an important role of providing direction of where company wants to be and how best to allocate the company’s resources to meet its objectives. The formulation of business strategies has evolved over the years and has been made more difficult in recent by the uncertain operating environments and global financial crises.

Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.

Chapter Five describes the five basic competitive strategy options – which of the five to employ is a company’s first and foremost choice in crafting overall strategy and beginning its quest for competitive advantage.

Porter’s generic strategies describe how a company attains competitive advantage across its chosen market scope. There are three generic strategies-cost leadership, differentiation and