Root Causes for Specific Problems within Costco

Introduction

Every big company during its developing process tries to not only survive on the competitive market but also stay within the business as a successful long-term leader. It is crucial to analyze the outcomes of the business by identifying the preliminary root causes to the issues that may decelerate the business having a significant impact on the return on investment (ROI). Thus, this essay attempts to analyze the company on the example of Costco as well as provide the recommendations for the potential solutions at Heavy WorX.

Costco Wholesale Corporation

Costco was chosen for the case analysis as it is a unique Wholesale Corporation that positions itself, unlike the other supermarkets having a smaller range and shopping frequency area (“Understanding Costco, 2004). In spite of the fact that the store is open only to its members, it remains one of the most popular retailers within its business. Costco’s CEO and Director Jelinek mentioned that the store could undercut prices by providing still better values comparing to the others. In addition, Costco is associated with tight operations and low overhead, which helps both their customers and members save money (“Costco Wholesale Corporation - Investor Relations – Corporate Profile”, 2016).

Being such an exceptional corporation, Costco still faces problems. On one hand, the membership issue is a good approach to keep the permanent clients (Butler, 2016). However, it is essential to remember that the other competitors who always try to find the ways to attract the customers exist. Thus, the clients choose many on-line stores such as Amazon or Sam’s Club, which weakens the position of Costco. Moreover, the aforementioned fact of buying option can deal with the logistic problems of the products purchased by the customers since not everybody possess the cars to go to the suburbs and shop in spite of affording the attractive prices for goods.

Understanding of Costco

In order to understand the situation regarding the development strategies of Costco, it is pivotal to analyze its strengths, weaknesses, opportunities, and threats. The results of the corporations’ SWOT analysis conducted by Langston et al. (2016) demonstrate that the current Costco’s strategy includes more strengths than weaknesses. Furthermore, the analysis reveals that there are both promising opportunities and some threats in further development of this wholesale business.

The major Costco’s strength as a company is a continuous success within this business compared to the other organizations. They keep maintaining a high market positions with their strong business acumen applied and revenues constantly growing. Moreover, the company substantially contributes to its progress trying to reach its targets. However, there is one significant weaknesses of Costco, which its geographic dependence, where Canada and the U.S. are the main customers Langston et al. (2016).  

The central threat to Costco’s development is the competition market since there are other similar stores that constantly fight for their market share by developing various marketing techniques to attract more customers. Thus, the appearance of online retailers is becoming more and more popular. The above-mentioned concerns can become Costco’s problems in perspective; therefore, the corporation should consider every opportunity in order to prepare the efficient action plan to handle the future of this business correctly.

Costco and ROI

Costco is the second global retailer where the growth profits and revenues are the primary indicators of successfulness and effectiveness. Moreover, there are many chances of further prosperity. For example, it is essential to develop internationally by attracting a younger generation as the main customer base. Additionally, it is of vital importance for Costco to be willing to adjust to mindset of the targeted consumers allowing them to have more customers and position this wholesale corporation for a positive return on investment (ROI).

Furthermore, there is a lot of information about Costco’ minimum wage increase (Sozzi, 2016), especially in California where the number of its consumers is one of the highest. Hence, it is an effective strategy for keeping the workers in the company as well as attracting more customers by being efficient in their operations. Evidently, this can be a good advice for the other organizations to consider making the employees satisfied with their jobs and not open the opportunities to change it.

Costco vs. Others

Every organization has a different approach to the problems’ solutions. Some of them spread geographically, some work on maintaining the permanent customers’ base, whereas the others prefer to find the other alternatives in terms of ROI. For example, such corporations as Amazon and Sam’s club focus on development of the on-line business. Evidently, since more customers do not prefer to conduct a time-consuming shopping, the on-line opportunities are becoming more and more popular especially among younger generation.

Attempting to keep the clients by developing the membership club is a good technique for ROI. However, it is significant to remember that it closes the opportunities for the other potential customers to enter the market. At the same time, depending on the business, it is necessary to explore the nuances within every separate corporation as the same rules or pieces of advice cannot be beneficial for the other businesses.

Recommendations to Heavy WorX

Taking into consideration Heavy WorX within the frames of potential ROI, more accents should be made on the on-line sales’ organization since it is a specialized business that requires a special category of customers. At the same time, good marketing strategies should be applied in order to promote it in various geographic areas. Furthermore, it is essential to set realistic objectives and be able to attain them. Thus, for example, focusing on ROI, it is vital to make a plan measuring the actual financial results of the company. The targets on payback and the total cost of ownership should be also taken into account based on the previous actual financial results measured.