Pest Analysis of Costco Although Term Paper

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Moreover, controlling laws are in constant flux, making this area a particularly challenging one for the company. Despite these challenges, people always need groceries and Costco is ready to deliver the goods -- literally -- and these issues are discussed further below.

Economic

Although Costco enjoys a healthy share of its market, the company has not been immune from the Great Recession of 2008 as reflected in its historic stock performance shown in Figure 2 below.

Figure 2. Costco Stock Performance: July 2003 to Date

Source: http://charting.nasdaq.com/ext/charts.dll?2-1-14-0-0-5120-03NA000000COST-&SF:1|5-WD=539-HT=395-

Despite this temporary downturn, the company has regained its momentum and has exceeded its pre-Great Recession performance levels. As noted above, though, while Costco is continuing to grow, the 800-pound corporate gorilla in the department/specialty retail store sector is still Walmart, with the company trailing at a distant second followed closely by Target Corporation as shown in Table 1 and illustrated graphically in Figure 2 below.

Table 1

Costco Competitors -- Respective Market Caps: Department/Specialty Retail Stores

Company

Market Cap

Walmart

207,913,354,870

Costco

35,371,251,300

Target Corporation

33,613,429,850

Dollar General Corporation

14,405,891,760

Source: Costco Wholesale Corporation (COST) Competitors, 2012

Figure 2. Costco Competitors -- Respective Market Caps: Department/Specialty Retail Stores

Source: Based on tabular data in Costco Wholesale Corporation (COST) Competitors, 2012

A recent analysis by Zack's Equity Research concerning the company's recent performance indicates that Costco ended 2011 well situated to continue its pattern of growth into the foreseeable future. According to these market analysts, "Costco has battled through a tough economy and exited 2011 boldly. The U.S. economy has been reeling under the ongoing financial crisis, whose rippling effects gradually engulfed the global market. Amid this turbulent environment, Costco has almost been able to overcome the hurdles keeping an upbeat note, and we believe it to continue with its momentum in 2012" (Costco exists 2012 with strength, 2012, para. 4).

Social

Given the enormity of its operations, the highly personal nature of the commercial transactions that are involved, and the numerous countries in which it competes, it is not surprising that Costco is having some profound social influences.

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For instance, according to Smith (2006), "Truly gigantic 'hypermarkets' including U.S.-based Costco built in suburban areas are reshaping both market structure and consumer practices" (p. 188). Likewise, the company is also reshaping the human resources approach used by membership warehouse clubs to its advantage. In this regard, Starr (2008) emphasizes that, "Costco, by virtue of their better workplace practices, can gain market share at Wal-Mart's expense" (p. 52). The company will only be able to gain a competitive advantage in this area, though, if it is able to leverage its existing technological capabilities to achieve its organizational goals and these issues are discussed further below

Technological

The company reports that it is faced with growing competition from competitors that offer online ordering and home delivery services (Form 10-Q, 2011). In this regard, the company's quarterly report cautions that Costco is faced with competition "which is vigorous and widespread, including a wide range of global, national and regional wholesalers and retailers, including . . . internet-based retailers" (p. 21). Despite these challenges, the company also maintains a prominent Web presence at http://www.costco.com / where it markets its entire range of consumer products, including grocery and floral items.

Issues and Recommendations

a.

Key Strategic Issue. Based on the industry analysis and competitive advantage analysis of Costco,.....

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