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Going Global & Inclusion Analysis of Costco

Goal Diggers

College of Integrative Sciences and Arts, Arizona State University

OGL 355: Leading Organizational Innovation and Change

Dr. B

November 17, 2021

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Going Global & Inclusion Analysis of Costco

Costco has gained a large segment of the retail market with a low-cost strategy

that offers its members significant savings by buying items in bulk. They have become

one of the world’s largest retail chain companies and the largest American membership-

only warehouse club. They have many warehouses internationally, but most of their

warehouse stores are in the United States and Canada. Like any large organization, they

have begun opening warehouse clubs globally to reach previously untapped international

markets. This is an important move for Costco because it can help the company’s growth

and profits. Customer response has been impressive in the international markets that it

has entered and even surpassed the response for openings in the United States. With the

success in previous international openings, what would be a target market country for

future expansion and growth?

When entering new markets, there can be many challenges and strategies to

consider before moving forward. There are many political, economic, and cultural issues

that need to be addressed before moving forward. It is important to understand the

possible advantages and potential drawbacks for each country. It is also important to

figure out what mode of entry into a new country will be strategically successful for your

organization. Organizations need to identify the political and economic issues which

exist before entering a new global market. You need to consider the laws, regulations, in

the political environment as well as the currency exchange rates, inflation rates, and tax

policies in the economic environment. Lastly, it is important to consider the key cultural

differences and similarities between the U.S. and the expansion country. Through

observation and study of these cultural differences, you can develop cultural action plans
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that require consideration, as well as activities and attitudes that will need to be

demonstrated for cultural inclusion. It is important to have a plan that helps identify the

values and beliefs that help shape the countries’ behaviors and beliefs.

India

India is one of the fastest growing and attractive markets in the world right now.

It has become the fifth-largest and preferred retail destination globally and is among the

highest in the world in per capita retail store availability. There are many reasons why

Costco should expand their business to India. “Healthy economic growth, changing

demographic profile, increasing disposable income, urbanization, changing consumer

tastes and preferences are some of the factors driving growth in the organized retail

market in India” (IBEF, 2021, p. 2). The government has introduced reforms in

legislation that attract Foreign Direct Investment (FDI) and it has made it easier for

retailers like Costco to do business there. India’s e-commerce business is expected to

increase by about 84% to $111 billion by 2024 (IBEF, 2021, p.2) which gives Costco

excellent opportunities for growth. This has caused many other retail competitors to

make investments and create competitive pricing in India’s retail industry.

Costco’s low-price strategy would give them a substantial market advantage in

India. It would also allow them to increase sourcing and gain additional warehousing

locations for their supply-chain. Costco’s history of global expansion in other countries

has been so successful that new overseas store openings have membership sign ups that

are generally 10 times greater than openings in the U.S. (Farfan, 2019, p. 1). The market

opportunities and potential for profits in India seem strong. Although Costco’s domestic

position is already strong, expansion in India is a solid long-term international strategy.

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Mode of Entry

Costco’s ideal mode of entry into India is to start a wholly-owned subsidiary

within India. Doing this will require a significant amount of investment on Costco’s part,

but will allow the company to maintain a significant amount of control over how

operations are conducted in this new market. When it comes to existing wholesale

retailers in India, the dominant player so far is a company called Metro Cash & Carry.

Although Metro Cash & Carry is already entrenched in the Indian market, there is still

ample opportunity for Costco to take control of new market share. There’s still ample

opportunity for Costco, which is open to regular consumers and businesses, because

Metro Cash & Carry only provides memberships to businesses (METRO, n.d.). Unlike

China, where Metro Cash & Carry and a number of other competitors controlled all of the

market share for retailing ventures, India has a growing middle class that presents more

opportunities for market penetration (Xiao-Morris, 2016).

The wholly-owned subsidiary mode of entry is the best option for Costco in India

because there is still ample opportunity to establish itself as a dominant player in a

country where, “the retail market is still largely unorganized” (Chandra, 2021, para. 6).

As Chandra (2021) points out, there is going to be a large growth of India’s middle and

upper-middle class over the next nine years. This is precisely who Costco targets, so it

makes sense to move into the country now, while that demographic is still building rather

than relying on partnerships to build a presence in the country. Shahane and Kurian

(2007) stated that Costco had looked into expansion in India back in the early 2000’s.

Costco originally had made plans for a strategic partnership with Kishore Biyani, but the

potential partner had his own plans for entering into the wholesale retail market, and
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these plans never developed (Shahane & Kurian, 2007). This is the danger of a strategic

partnership, Costco loses some control and risks building up a competitor. Going the

route of a wholly owned subsidiary takes a long time and has the highest cost factor for

international expansion, but if Costco jumps into this fast-growing market now, while

costs are still relatively low, and the retail market is still unorganized, they have a real

chance of achieving dominance once the country matures.

Political and Economic Issues

One of the Indian economic issues is inefficient supply chain management and

delivering the right goods at the right time at the right place is very important . In India,

there is a lack of efficient Supply Chain Management. In India supply chain management

should be improved and more technology need to be used to make the supply chain

management effective and reduce the inventory cost. Savings can be used to provide

extra discounts and benefits to the customers and more money can be spent on customer

retention (Nagpal, n.d.,). Lacking a supply chain in India can be beneficial to Costco.

Because their reputation to expand is based on international markets. For Costco to take

advantage of the gold membership strategy in India, it would be successful to give them a

chance to grow their economy.

The Indian political issues that the public says corrupt officials (66%), terrorism

(65%) and crime (64%) are very big problems. In each case, such concern is down

significantly from 2017 – by 20 percentage points in the case of crime, 11 points for

terrorism and 8 points regarding officials’ corruption. Indians with at least a secondary

education are significantly more worried about corrupt officials than the less educated

(Devlin, 2019). Costco should be seeking out available Indian people with a secondary
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education. To aid in establishing a base for understanding the target market. And

ensuring that the business is focused on honesty. This will enable it to be viewed by its

potential customer as an honest business. Once this is established, Costco can implement

its proven strategies to the Indian market.

Key Cultural Differences Between the U.S. and India

Cultures differ from country to country as well as region to region. Differences

between Indian culture and the U.S. culture are evident in many aspects including,

religion, family views, food, clothing, and politics to name a few. Indian culture is

known for having both collectivist and individualist traits (Hofstede Insights, 2021, para.

4). The collectivist side can be highly influenced by the individual’s family, extended

family, and other influential members within their circle. This confirms the prominent

family values that Indian culture inculcates within its members. Unlike the Indian

culture, the U.S. is encouraged to be independent and take control of their environment.

However, individualism within Indian culture is reflected through their strong religious

and philosophical beliefs (Hofstede Insights, 2021, para. 5).

It is important to highlight the differences between Indian culture and American

culture within a business setting. The U.S. culture accepts opinions by anyone regardless

of age or hierarchy (Cultural Atlas, 2021). Unlike the Indian culture that follows a rigid

hierarchy and caste system indicating a power distance that can be seen as frustrating to

the U.S. Seeing that Costco Warehouses have opened and have remained in business in

Japan, Australia, and Iceland, Costco has been able to acclimate and embrace cultural

differences (Farfan, 2019, para. 5).

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Religion plays a big role in Indian culture. Fostering four major religions,

Hinduism remains the most prominent religion in the region making up 84% of the Indian

population. India also serves as “one of the largest Muslin populations in the world”

(Pandey, 2020, p. 2). With a strong religious presence in India, customs are heavily

based on religion and astrology (Pandey, 2020, p. 9). Wedding dates are not chosen at

random, they are based on the couple’s horoscopes and checked for compatibility

(Pandey, 2020, p.9). “A Pandit, who has selected the day of the wedding based on the

bride and groom’s horoscopes, conducts a prayer with family members to provide the

couple with a happily married life” (Beau-Coup, 2021, para. 2). Economist and author

Vivek Dehejia confirms the importance of culture and religion when making business

decisions, stating that as Indians become more globalized and prosperous they will want

to express their beliefs. Specifying that the younger generation will “...want to do things

in a way that accords with their culture, with their traditions” (BBC News, 2013, 02:54).

Actions for Inclusion

Inclusion represents the action and practice of including and accepting all

irrespective of one’s race, ethnicity, gender identity, religion, sexual preference, and/or

disabilities. “Costco Wholesale is committed to working with qualified minority and

women-owned suppliers in the communities where we do business” (Costco, 2021). This

commitment aligns with the organization’s overall mission of an inclusive working

environment, free from any inequities and discrimination. The following table highlights

both the do’s and the don’ts of actions for inclusion and what our expectations are from

our employees and our organization.

Actions for Inclusion (DO’s) Actions for Inclusion (DON’T’S)

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- Foster Diversity Training/Development - Exclude/Neglect others

- Celebrate Diversity and Differences - Ignore Exclusion Behavior

- Model Empathy - Conduct Selective Mentoring

- Engage in Structured Team Building - Be Insensitive

The first Do or beneficial action for fostering inclusion from our employees is

through the continued attendance and involvement in diversity and inclusion training.

Inclusion starts from the time someone is hired and the development of inclusion expands

through the duration of employment. This ongoing action raises and maintains awareness

of inclusion and “enables employees to become more comfortable with concepts such as

unconscious bias at work and cultural competency” (Verb, 2021, para. 7). Also, by

incorporating resources for an inclusive and diverse culture and encouraging

collaboration, a wider range of perspective and innovation will emerge. This training and

development will also motivate positive behaviors, build value in each employee

individually and as a whole, and encourage a productive work culture (Minor, 2019, para.

2). Through better-educated staff, enhanced decision-making skills, and awareness of

these inclusion concepts, we will reduce any and all workplace harassment, avoid cultural

insensitivity, and uphold true to our mission at hand (Frankel, 2021, para. 3).

Celebrating an organization's diversity should be considered a privilege and the

acceptance of differences among our peers is a significant action for inclusion which is

why it is highlighted as a second Do. “When done correctly, celebrating the unique

attributes that make your team special can help employees find common ground, deepen
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each person’s appreciation for others’ differences, and create an inclusive work

environment where everyone can thrive” (The Other Side of Sales, 2019, para. 7).

Celebrating diversity in a workplace has the potential to discourage racism and instead

encourage unity. Celebrating and appreciating the differences in others builds cultural

awareness and helps to overcome stereotypes that may get in the way of positive

contributions and efforts that different skill sets and backgrounds can bring (EACS, 2019,

para. 2-5). The celebration of different backgrounds and cultures is crucial to both

personal and community growth and expansion.

Now on the other side of the table we look to what we do not wish to see happen

or our first Don’t in our efforts of inclusion, which would be the exclusion of individuals

and/or groups. Inclusion efforts within organizations often focus on differences of race

and ethnicity, however fail to also include differences of sexual orientations, gender

identities, religious beliefs, physical abilities, etc. “For example, the Center for American

Progress reports that anywhere from 25-43 percent of gay people have experienced some

form of discrimination in a workplace, and 90 percent of transgender employees have

experienced some form of harassment or mistreatment at work” (Duong, 2016, para. 6).

We will not tolerate the exclusion of individuals and/or groups of any kind. The effects

of exclusion can cause absence in employees, decrease in performance or loss in

productivity, as well as potential long-term damage to a company’s reputation. It is

not only important that our employees are aware of exclusion but also

understanding the impacts exclusion comes with.

Additionally, as our next Don’t, we will not participate or condone any

insensitivities. Insensitivity comes around far too often in the form of a joke or a
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comment and is not always known as a concern by the person stating it. However,

“insensitivity can become a source of workplace stress, causing burnout, low morale”

(Holder, 2017, para. 14), and an overall negative impact on the culture of the

organization. As a more serious consequence, insensitivity could bring about timely and

costly lawsuits (Holder, 2017, para. 14). By focusing on the left side of our table, we look

to reduce and eliminate discrimination of any kind.

Out of more than 10,000 employees, Costco has been placed in the top 5% of

companies on a diversity score and they continue to win diversity and inclusion awards to

prove this (Comparably, 2021). Costco has built a foundation of integrity and focuses on

the value and needs of their employees and will continue this through any and all

expansion and growth. The opportunities and actions for inclusion will continue to be the

positive force of our organization.

Attitudes or Activities for Trust

International strategies in business are important for gaining local intel and trust

of similar company industries and ensuring the proper path for progressive business

growth by supporting quality employee attitudes or activities. The table below identifies

key topics pinpointing some of the best “Do’s and Don'ts” when going global or moving

into new territory. Identifying such protocols prior to moving into new territories can

benefit businesses by having a clear understanding of local norms or activities.

Attitudes/Activities to Have (DO’s) Attitudes/Activities Not to Have

(DON’T’S)
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· Have a geocentric business attitude · Have parochial attitudes

· Learn/understand the native language · Have a polycentric work ethic

· Have a clear international business · Believe locals will be as thrilled with

strategy business as we are

Costco has built a name for themselves over the years, especially in the United

States, by working with a geocentric attitude about growth. A geocentric attitude is a

“world-oriented view has put focus on using the best approaches and people from around

the globe” (Coulter, 2010, p.197). To build quality industry work for locals it is important

for Costco to have a geocentric attitude toward opportunity during their move into India

because it will assist executives, management, and employees to leave origin bias at

home. India has many historical and cultural norms just as the United States and having

such a geocentric attitude requires a person to eliminate cross-cultural differences and

biases from the work environment. In doing so, it showcases behavior which locals can

trust or even relate to because without trust it is difficult to build business relationships.

Costco has also excelled in excluding parochialism. Parochialism is “viewing the

world solely through one’s own eyes and perspectives…these people ignore others’

values and customs and rigidly apply an attitude of ‘ours is better than theirs;” (Coulter,

2010, p. 197). With such a minimalized thought process, companies hold themselves

back, because diversity is key to building new business outside the neighborhood block

around it. Costco’s employees must identify and eliminate such bias behaviors to build
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quality, non-narrow-minded relationships. Their retail strategies and ability to see beyond

their hometown norms has opened the door to progressive growth for them and

recognizing that everyone has a unique way of living and “Costco’s international

locations have proven that the Costco formula works just as well with consumers outside

the United States” (Farfan, 2019). Such strategies and formulas are what have given them

such success in other countries.

Another key element to Costco’s successful migration into India is to have a clear

international business strategy. International business is any exchange of goods and

services in any other country than where the corporation resides (International Business,

2021). So, prior to making a move into India Costco must identify their strategic

international business strategy and identify their approach by analyzing the situation,

formulating the strategy, then implementing it and evaluating or changing efforts as

needed. To ensure local support Costco must continue their initiative-taking approach to

gain India’s appeal and backing. With consideration that “unlike other U.S. retail chains

that are opening international locations as a defensive strategy, Costco isn’t compensating

for domestic weakness. . .allowing the company to focus on a long-term international

strategy” (Farfan, 2019). In conclusion, Costco’s international business strategies which

have been utilized previously should assist in their current move into India, but

identifying how their approach will support local attitudes and activities will assist in

growth within the area.

Conclusion

Our team's global analysis is to differentiate and be insightful of what Costco can

establish to gain profit in the Indian market. As Costco is known for their success in
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international markets and their dealing with strategic challenges that can potentially move

them forward in the future. Describing India as a growing and one of the fastest markets

in the world, Costco has an advantage in the Indian retail industries. Although, the metro

cash & carry is a huge advantage for Costco to establish and maintain their way of

thinking. It also can be done if an investor wants to operate the international based

markets to the new level of opportunities .

When it comes to cultural differences, political and economic issues can have

difficulty presenting an ideal strategy. But Costco can figure out how to strategize the

plan to business success. If the possibilities remain intact for business purposes. There

could be room for growth to approach and analyze the situation. Even though Costco is

responsible for ensuring that the inclusions and trust is properly distributed and

implemented to the rules of different human races. But the importance of being aware of

its surroundings is necessary. To know what to expect and bring the business goals to

India would be successful and innovative for Costco’s internal marketing. We feel that

Costco needs to tap into the knowledge of the citizens with a secondary education. After

they understand the new potential customers. They can implement their proven strategies.

APPROVAL:

Breanna Allen Sarahbeth Curtis Evelyn Apple

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BDC AAN CLG ERM AH
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