OGL 355 Leading Organizational

Innovation and Change:

SWOT Analysis
Objectives:
1. Define SWOT Analysis.
2. Complete a SWOT Analysis Table.
3. Demonstrate understanding of each SWOT Element as it relates to your Case Study.

Complete the following and turn in as a team assignment. There is no need to create any other
document, just complete this one, save as, and post for your team. Everyone earns the same
grade unless consequences of non-participation are enacted (see Worksheet 1b, #2). Make sure to
support your ideas and cite from the textbook and other course materials per APA guidelines.

1) What is a SWOT Analysis?

A SWOT Analysis is a diagnostic tool used to analyze a company’s competitive
position and to develop strategic planning (Kenton, 2022). The acronym alludes
to the strengths, weaknesses, opportunities and threats of a company. The analysis
takes into account both the internal and external factors that affect a company’s
competitive position. The external factors consider both positive (opportunities)
and negative (threats) environmental trends that may help or harm an
organization’s performance (Coulter, 2013, p. 57). The internal factors examine
an organization’s resources, capabilities and core competencies or its strengths
and weaknesses (Coulter, 2013, p. 93).  It is an effective tool for making complex
problems more manageable and helps an organization to focus on its strengths and
turning these strengths into sustainable competitive advantages, minimize
weaknesses, avoid threats and capitalize on opportunities. Having used the SWOT
analysis to diagnose/identify the foregoing factors, the information is then
converted into a strategic plan where effective strategies are created to help
develop strategic goals to improve overall organizational performance. In this
assignment, we will conduct a SWOT analysis of Costco Wholesale Corporation
with supported reasoning of the four key areas; strengths, weaknesses,
opportunities and threats.

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2) Complete the below SWOT Analysis Table
Strengths [Internal] Weaknesses [Internal]
● Low prices ● Limited Product Selection
● Solid supply and distribution chain ● Cost of Transportation
● Loyal customer base ● Caters to smaller customer base
● Generous perks and benefits to ● Lack of Global Presence
employees

Opportunities [External Influence] Threats [External Influence]

● Online Presence ● Price Competition 
● Digital Advertising ● Security
● Health Consciousness ● Competition
● Tax Policy ● Ecommerce and technological
● COVID-19 Outbreak developments

3) Provide reasoning why for two of your strength selections with sourcing for at least
1 to earn excellent.
a. Low Prices – Costco has strategically found cost-cutting approaches that allow
lower prices. These approaches involve membership fees, having less inventory,
checking receipts to avoid theft, spending zero dollars on advertisements, and a
warehouse-style store design (Johnson, 2021). Lower process results in Costco
having only an 11% markup, compared to 24% for Walmart and 35% for Home
Depot (Gupta, 2022).
b. Solid Supply and Distribution Chain – Costco’s supply chain runs smoothly
thanks to its simple approach. There are no distribution centers considering that
freight is moved directly “from one of their depots to a truck headed to the
warehouse that ordered it,” with the warehouse acting as the “point of sale” (Britt,
2020). There are also limited Stock Keeping Units (SKUs), offering about 3,700,
compared to “10,000 unique products at your average big-time retailer (Britt,

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 2020). This approach results in “simpler, leaner procurement operations” (Britt,
2020).

4) Provide reasoning why for two of your weakness selections with sourcing for at least
1 to earn excellent.
a. Caters to a Smaller Customer Base - Due to Costco being a bulk store, it limits
their customer base since it caters to those who rather buy in bulk versus those
who would like to buy smaller quantities (Gupta, 2022). Additionally, because
they offer a more limited selection of products, they are less likely to attract a
customer base as wide as their competitors who offer a wider variety of products.
b. Lacking Global Presence - The majority of Costco’s warehouses are located in
the United States and Canada. Approximately 643 of their 782 warehouses are
located in these two countries (Gupta, 2022). This means that a great portion of
their sales is dependent on these markets. Having such a small global presence in
comparison to their biggest competitors reduces the benefits that the company can
gain from globalization such as having a global competitive advantage.

5) Provide reasoning why for two of your opportunity (external influence on the
organization, not something the organization would initiate) selections with sourcing
for at least 1 to earn excellent.
a. Digital Advertising: With the large number of social media users, Costco has a
big opportunity to reach out to potential new members. Costco had 0 tweets on
Twitter and only 2.15 million likes on Facebook compared to 34 million and 24
million likes of its competitors Walmart and Target consecutively (Gupta, 2022).
Costco can tap into this market to use this platform not only to promote their
products, but the services they offer. They have also opened their first store in
Shanghai, and are planning a second (Gupta, 2022). This widens their scope and
reach of users on a global scale giving them new opportunities to expand their
business.
b. COVID-19 Outbreak: The COVID-19 outbreak has been a big threat to the
economy, but that has not stopped Costco from being successful. As a
consequence of fear of supply shortages, people were stocking up on necessities
like food, water, toilet paper, disinfectant, etc. This allowed for a boost in
business. According to Forbes reports, Costco had a 20% increase in sales (Gupta,
2022).

6) Provide reasoning why for two of your threat selections with sourcing for at least 1
to earn excellent.
a. Security (cyber): Costco gathers and stores customers and employees’
information on a third-party cloud service (Gupta, 2022). Reports have shown that

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 the average number of cyberattacks, and data breaches increased, overall, by
15.1% from 2020 to 2021 (Brooks, 2022). With cyberattacks growing in both
number and sophistication, this can potentially pose a threat to information safety
specifically as it relates to cashless customer’s banking details being breached
which could as well affect customer trust.
b. Ecommerce and technological advancements: While Costco now offers grocery
delivery services, they were slow in offering this service and because of this their
competitor’s technological advancements pose a serious threat (Gupta, 2022).
Another flaw to the delivery service that is offered is that the prices presented to
customers online are twenty-four to forty-six percent higher than in store prices
(Stanger, 2018) where other grocery retailers, like Wal-Mart and Target, do not
change their prices for online shoppers versus in store shoppers (Stanger, 2018).

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 References

Britt, H. (2020, July 29). How the Costco supply chain thinks outside the big box. Thomas.

https://www.thomasnet.com/insights/costco-supply-chain/

Brooks, C. (2022, October 12). Alarming Cyber Statistics For Mid-Year 2022 That You Need To

Know. Forbes. https://www.forbes.com/sites/chuckbrooks/2022/06/03/alarming-cyber-

statistics-for-mid-year-2022-that-you-need-to-know/ 

Coulter, M. (2013). Strategic Management in Action (6th ed.). New York, NY: Pearson. Perusall

Version.

Gupta, S.K. (2022, July 22). Costco SWOT analysis (2022). Business Strategy Hub. 

https://bstrategyhub.com/costco-swot-analysis/ 

Johnson, A. (2021, March 9). The truth about Costco’s really low prices. Mashed. 

https://www.mashed.com/158143/the-truth-about-costcos-really-low-prices/

Kenton, W. (2022, Aug 10). SWOT Analysis: How To With Table and Example. Investopedia.  

https://www.investopedia.com/terms/s/swot.asp

Stanger, T. (2018, October 21). Is Costco's Same-Day Fresh Food Delivery Worth It? Consumer

Reports. https://www.consumerreports.org/food-shopping/is-costcos-same-day-fresh- food-

delivery-worth-it/