Swot Analysis Costco

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1. The Threat from New Entrants – Moderate The industry has a high level of concentration with the top two players expected to account for an estimated 87.4% of market in 2015. Therefore, prospective operators planning to enter this industry will encounter stiff competition from existing operators. Setting up a full size store and warehouse requires an estimated cost of $3-$5Million with the land acquisition costs running upto another $5-$7Million. Large stores and warehouses can only benefit from significant purchase discounts in purchase, distribution, promotions because of the large volume size. The pre-existence of relationships between operators and suppliers in most cases is viewed as barrier to entry of new entrants. Prominent old…show more content…
Bargaining Power of Suppliers– Low to Medium Threat: Costco has a large volume of suppliers to provide it raw materials at the required cost. Costco needs to keep the bargaining leverage in it’s hands to keep it’s operations cost minimalistic using it principles of low margins, and high discounts. Due to the multiple supplier availability and low cost of selling and operations, the suppliers have to keep their costs low and compete fiercely against each other to keep their contracts with Costco Intact. For an example, Costco stopped purchasing products from the Coca-Cola company in 2009 because they refused to reduce the cost of the products down. They resumed the purchase a month later when the company got their costs down. Thus Costco is ready to lose out on branded suppliers to follow it’s principles and kepp leverage inn their hands. 3. Bargaining Power of Customer - Low Over the last few years COSTCO has seen an exponential increase in the number of new and renewed memberships. Due to it’s low cost and large discounts, customers prefer Costco over it’s rivals. With a minimalistic membership of $55 and an executive membership of $110, customers receive higher discounts on wholesale purchases. Alongwith with low costs, Costco provides on time delivery and quality products to help retain their…show more content…
4. Threats of Substitute Products or Services – High The threat from substitute products and services is very very high for Costco. With players like Walmart in the retail market providing multiple low cost substitutes of major branded products makes it difficult for Costco to pull customers towards it with it’s range of selected niche products. Costco is not focusing much on its online retail service as much as Amazon. Not many customers would like to travel to a warehouse which is far off from the city when they could have the same product delivered at their doorstep by the click of an app. 5. Competitive Rivalry –

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