Costco's Growth Strategies

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Description of COSTCO’s growth strategies After the analysis of COSTCO, we got a conclusion that COSTCO is a successful company with prosperous strategy. Their position as one of the major retailing leader in the United States allow them to have a powerful position in the industry. Thanks to its internationalization strategy, COSTCO owns more than 600 branches all around the world. Now, we are going to talk about COSTCO’S two aspects of growth strategies: Vertical integration and Diversification. 1. Vertical integration Vertical integration means expanding activities in the value chain. Take COSTCO as an example, COSTCO control its own value chain which contains input, output or both. This involves production of inputs previously provided…show more content…
A firm may adopt such a strategy to have a regular and uninterrupted supply of raw materials, components and other inputs, to ensure the quality of raw materials being used and also to reduce the direct taxes payable on purchase of inputs. When it comes to COSTCO, as a retail shop whose main business is sell high-quality goods to customers with appropriate price, it started to set up its own brand called “Kirkland”. “Kirkland” mainly produce daily supplies with high quality and good price, which earned widespread admiration from customers. "We will always be known for name brands such as Michelin, Sony and Crest," says Craig Jelinek, Costco president and chief executive officer, "but we will continue to augment our product offerings with our own Kirkland Signature items." With the development of its own brand, COSTCO can compete with its suppliers better to earn more…show more content…
As a corporate strategy to enter in a new market, it requires company to create a new product or special service. Not come single but in pairs, diversification also has two types: concentric diversification and conglomerate Diversification. a. Concentric diversification This type of diversification can be achieved by acquiring new businesses, internal start-up which involves building new business subsidiary from scratch or through joint ventures and strategic partnerships. In the past few years, COSTCO started to install bakeries inside the stores, some branches even offer special services like tire repair, refuel and photographic printing. These new products and service make sense in obtaining more market shares and it’s called product-related strategy. b. Conglomerate diversification This type of diversification occurs when a company diversifies into areas that are unrelated to its current line of business. COSTCO has tried several projects to achieve conglomerate diversification. COSTCO was trying to become a car “salesperson”, investment broker and travel agency. What’s more, COSTCO have a partnership with ‘Ameriprise Financial’ to offer insurance service. Recently, COSTCO targeted Chinese market by collaborate with ALIBABA to bring health care products into Chinese market. These projects got risks dispersed and the company can enjoy more powerful
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