Five force analysis

Threat of new entrants (moderate)

Low switching cost basically means that the consumer can easily find other retailers that sells the
same things with the almost the same price as costco. this gives the new entrants a better chance
to survive when the first get in the industry. Second is the cost of entering the industry as a retail
store, it requires an amount of capital to start off, this can higher the entry. lastly the Economies
of scale that Costco has is hard for those who just enter the industry to compete with.

Degree of rivalry
Strong
As we all know there are a lot of companies in the retail industry and therefore the degree of
rivalry is high. And not only that there are high variety of company that competes with Costco
such as Walmart, target other large retailers and they all provide some kind of different service to
attract customers. Lastly it’s again the low switching cost, customers can easily switch to other
retailers without any loss, and therefore degree of rivalry can be one of the biggest threats costco
should be concern about.

Threat of substitute
Strong
again it’s the low switching cost, it just gives the consumer a lot of choices and there’s really
nothing costco can do about it. And also high variety of substitute because of the fact that all the
things you can get in costco you can basically get it in all the other retail stores. And then there’s
high performance to price ratio of substitutes, what it means is that with same amount of money
you can probably get a better product from different retailers.

Bargaining power of buyer

Strong
So like we said before due to the fact that you can all the things you want from costco from other
retailers, it significantly higher the bargaining power of the buyers, and then because of the use
of internet buyers can look up the price whenever they want and find a better deal that suits their
need, which again makes the bargaining power of buyer higher.

Bargaining power of supplier

low
It’s low because that there are a lot of suppliers out there, and that makes it hard for the supplier
to ask more from the costco, Second is the overall supply is high, so one supplier can not really
impact costco’s decisions when offering suppilies. lastly most of costco’s supplier has low
forward integration, which means that they cut out the middle man and now sells directly to the
retail stores, and in this case it makes it easier for costco to control the suppliers.

Pestle

Political
So what’s important is the relationship that the US has with certain countries should be taken
into consideration. When making decisions for costco, and they should also be aware of the trade
policy in different country, lastly environmental policy, people are now more than ever focusing
on the environmental issues, and therefore there has been different policy set for it and it’s
important for companies to know them.

Economic
the economic growth rate is something that costco should take into consideration when deciding
where to expand in the globe. Inflation can have a negative impact on the company. where it
lowers the power of money making the consumers less willing to purchase items from the
reseller. Exchange rate and interest rate are things to be aware of to, they can affect the
company’s profit if not study and research well enough.

Social

Business social responsibility being a impactful company in the world it’s important for costco
as a company to understand its responsibility to not only their consumers but to the society as a
whole. Next cultural and society norms, Different countries has different cultural norms and it
reflects on consumer behavior, therefore international company they have to adapt to research
the culture and truly understand the local market. It’s also helpful for costco to look at the
demographics of each country to see what the age of their major consumer range between so that
they could come up with more efficient market strategy

Technology

Research and development, costco can come up with new products by using the technology we
have today if they put in the effort to research and development. Also to utilise the growth of
technology as a way to promote or even sell their products

Law
Well employment law make sures that the employee are getting paid what they’re suppose to get
and if that they’re working in a safe environment or not so on, so costco as should make sure that
the workers are in a safe environment and that they are no discriminations in the work place.
Intellectual laws is extremely important for big companies like costco, it protects them from
people coping their patents or imitation that will ultimately leads to competition. Consumer
protection laws protects the consumers privacy and their rights when buying things, and costco
should make sure that the consumers are all being treated fairly and should protect their privacy.

Environment
Climate change can affect the operation cost of the company, it can leads to different consumer
behavior when people are trying to be environmental friendly, which leads to the low carbon
lifestyle, this is what costco has to adapt to in order for the success of the company lastly it’s the
environmental policy that i mentioned above, there are more and more regulation concerning the
environmental issues, and costco should be aware of that and make sure that its operations are all
qualify with the standards.