External Factor Evaluation (EFE)

&
Internal Factor Evaluation (IFE)

Costco Versus Tesco

 Background of Costco
 The first Costco store began operation in
Seattle, Washington in 1983.
 In 2008, Costco’s sales totaled almost USD 71
billion at 544 warehouses
 Costco also penerated international market such
as Puerto Rico, Canada, United Kingdom,
Taiwan, Japan, Korea, and Mexico.
 In 2008, Costco generated revenue for USD 1.5
billion merely from membership card fees
 Background of Costco
Costco is very sucessful in engaging the
warehouse
Costco merchandising strategy is to provide
members with a selection of only about 4,000
items compared to typical supermarkets stocked
about 40,000 items
 EFE MATRIX - COSTCO
External Factors Weight Rating Weighted
Score
OPPORTUNITIES
1 Potential penetration into international market – falling trade 0.05 4 0.2
barriers in foreign market
2 E-commerce internet based marketing Positive outlook for 0.03 4 0.12
internet sales
3 Intensive use of RFID for inventory By automating the 0.02 3 0.06
inventory tracking process, stores can keep costs down by
maintaining optimal inventory levels (Exploiting new
technologies)
4 Increases in home improvement expenditures 0.05 3 0.15
5 Expanding electronic equipment 0.05 3 0.15
6 Acquiring rival firms 0.1 4 0.4
7 Expanding into new geographic areas 0.1 4 0.4
8 Warehouse clubs and supercenters have grown in popularity 0.1 4 0.4
over the last several decades.
THREATS
1 Intense competition with leading hypermarket such as Wal- 0.1 4 0.4
Mart’s Sam’s Club and BJ’s Wholesale Club
2 Uncertain economy 0.1 4 0.4
3 Decline in housing market- 0.05 4 0.2
4 High interest rates in the 0.05 4 0.2
5 Loss of sales to substitutes 0.05 3 0.15
6 New regulatory requirements 0.05 3 0.15
7 Growing bargaining power of suppliers 0.05 3 0.15
8 Growing bargaining power of customers 0.05 4 0.2
9
10
Total 1.0 3.73
 MATRIX - COSTCO
Internal Factors Weight Rating Weighted
Score
STRENGTHS
1 Strong brand and scale of operations Costco is known to be one of the
largest chain of stores.
2 Efficient store management- Costco’s inventory turnover rate is
known to be one of the highest in their industry
3 The beauty of shopping at the clubs is not having to wait for a sale,
because everything is sold at really good prices every day, unlike
other local supermarket, where only specific items are on sale

4 Financially strong
5 Economies of scale
6 Cost advantages over rivals
7 Price advantages over rivals
8 Inexpensive advertising
9 Excellent supply chain management – low inventory turnover
10 Excellent customer service
11
WEAKNESSES
1 Slow growth of private labels- Costco has their own private label
which is known as Kirkland Signature.
2 Limited choice for customers- Even though Costco is a successful
company, one of their problems that could set their competitors ahead
of them is that they offer a considerable less amount of products.

3 Anti union
4
5
6
7
8
Malaysia retail suffers overexpansion and the GRDI has dropped for
the last couple of years.
Some of the shopping malls that saturated major cities now have
occupancy problems and the downturn forced some retailers to curb
expansion plans.
Multinational retailers are growing through convenience stores.
Global Retail Development Index
2010