Executive Summary Key Problems Costco has built its business strategy around its membership subscriptions. While the approach has proven successful in terms of revenue generation and customer loyalty, it is not without flaws. One of the main drawbacks of Costco's reliance on membership subscriptions is its limited customer base. By requiring customers to pay an annual fee for access to its stores, Costco automatically excludes a sizable portion of the population who may not be willing or able to commit to a membership. This exclusivity prevents Costco from tapping into a larger market potential and potentially limits its growth opportunities. Moreover, the membership model creates a dependency on retaining existing members. Costco must …show more content…
Strong Distribution Network: In 2020 Costco operated about 750 warehouses across the U.S. and Puerto Rico, Japan, Mexico, Spain, China, Taiwan, France, Iceland and South Korea. Weaknesses: Limited Product Selection: While Costco offers a wide range in products, they offer a limited selection of individual products. Slow eCommerce: Even with their website and partnership with insta cart they are slightly behind than the average retail store. With them being behind, it has become difficult for them to attract millennials who prefer a quicker shopping experience. External Analysis Opportunities: Global Expansion: Costco has a great opportunity to continue to expand globally, especially adding more stores in Europe and Asia (specifically China). Expand: Costco can expand into related areas like delivery services by acquiring smaller established companies in that sector. In 2020, they acquired Innovel Solutions for $1 billion, they serve third-party retailers (Reuters …show more content…
The company engaged in unrelated diversification by expanding into Costco Travel, exclusively for members to book vacation packages, including international and domestic vacations, cruises, rental cars, and flights at a discounted price. Regarding their geographical diversification, the company operates in multiple countries, with a total of 852 warehouses worldwide, and an international strategy of offering top-quality travel services at the lowest price possible. Costco is considered to have a matrix structure as it combines two different types (functional and multidivisional). Through the functional organization structure, Costco groups employees into different departments based on skill and knowledge; through the multidivisional organizational structure, Costco employees are divided into departments based on geographic regions and product/service