Case Study Description of Costco Wholesale Corp. Financial Statement Analysis (B)
An investor is called on to make a forecast and valuation for Costco. Provides information about the history of Costco as an investment, industry growth drivers, and forecasting models.
Swot Analysis of "Costco Wholesale Corp. Financial Statement Analysis (B)" written by Maureen McNichols, Brian Tayan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Costco Wholesale facing as an external strategic factors. Some of the topics covered in Costco Wholesale Corp. Financial Statement Analysis (B) case study are - Strategic Management Strategies, Financial analysis, Forecasting and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Costco Wholesale Corp. Financial Statement Analysis (B) casestudy better are - – central banks are concerned over increasing inflation, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing commodity prices, increasing household debt because of falling income levels, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion,
wage bills are increasing, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Costco Wholesale Corp. Financial Statement Analysis (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Costco Wholesale Corp. Financial Statement Analysis (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Costco Wholesale, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Costco Wholesale operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Costco Wholesale Corp. Financial Statement Analysis (B) can be done for the following purposes –
1. Strategic planning using facts provided in Costco Wholesale Corp. Financial Statement Analysis (B) case study
2. Improving business portfolio management of Costco Wholesale
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Costco Wholesale
Strengths Costco Wholesale Corp. Financial Statement Analysis (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Costco Wholesale in Costco Wholesale Corp. Financial Statement Analysis (B) Harvard Business Review case study are -
Strong track record of project management
– Costco Wholesale is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Costco Wholesale has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Costco Wholesale has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Costco Wholesale Corp. Financial Statement Analysis (B) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Costco Wholesale has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Costco Wholesale has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Costco Wholesale
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Costco Wholesale does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Costco Wholesale is one of the leading recruiters in the industry. Managers in the Costco Wholesale Corp. Financial Statement Analysis (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Costco Wholesale are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Analytics focus
– Costco Wholesale is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Maureen McNichols, Brian Tayan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Costco Wholesale digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Costco Wholesale has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Costco Wholesale is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Costco Wholesale is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Costco Wholesale Corp. Financial Statement Analysis (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Costco Wholesale is present in almost all the verticals within the industry. This has provided firm in Costco Wholesale Corp. Financial Statement Analysis (B) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Costco Wholesale Corp. Financial Statement Analysis (B) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Costco Wholesale Corp. Financial Statement Analysis (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Costco Wholesale Corp. Financial Statement Analysis (B) are -
Interest costs
– Compare to the competition, Costco Wholesale has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, firm in the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Costco Wholesale 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Costco Wholesale is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Costco Wholesale needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Costco Wholesale to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Costco Wholesale needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Costco Wholesale Corp. Financial Statement Analysis (B) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Costco Wholesale has relatively successful track record of launching new products.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Costco Wholesale supply chain. Even after few cautionary changes mentioned in the HBR case study - Costco Wholesale Corp. Financial Statement Analysis (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Costco Wholesale vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Costco Wholesale Corp. Financial Statement Analysis (B), in the dynamic environment Costco Wholesale has struggled to respond to the nimble upstart competition. Costco Wholesale has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Costco Wholesale Corp. Financial Statement Analysis (B) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Costco Wholesale Corp. Financial Statement Analysis (B) can leverage the sales team experience to cultivate customer relationships as Costco Wholesale is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B), it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Maureen McNichols, Brian Tayan suggests that, Costco Wholesale is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High cash cycle compare to competitors
Costco Wholesale has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Costco Wholesale Corp. Financial Statement Analysis (B) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Costco Wholesale Corp. Financial Statement Analysis (B) are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Costco Wholesale can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Costco Wholesale to increase its market reach. Costco Wholesale will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Developing new processes and practices
– Costco Wholesale can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Costco Wholesale can use these opportunities to build new business models that can help the communities that Costco Wholesale operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Learning at scale
– Online learning technologies has now opened space for Costco Wholesale to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Costco Wholesale can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at Costco Wholesale can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Costco Wholesale to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Costco Wholesale to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Costco Wholesale to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Costco Wholesale can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Costco Wholesale in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Buying journey improvements
– Costco Wholesale can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Costco Wholesale Corp. Financial Statement Analysis (B) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Leveraging digital technologies
– Costco Wholesale can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Costco Wholesale Corp. Financial Statement Analysis (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Costco Wholesale can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Costco Wholesale Corp. Financial Statement Analysis (B) .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Costco Wholesale in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Costco Wholesale high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Costco Wholesale can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Costco Wholesale needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Costco Wholesale in the Finance & Accounting sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Costco Wholesale.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Costco Wholesale will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Costco Wholesale business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Costco Wholesale needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Costco Wholesale can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Costco Wholesale has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Costco Wholesale needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Costco Wholesale
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Costco Wholesale.
Consumer confidence and its impact on Costco Wholesale demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of Costco Wholesale Corp. Financial Statement Analysis (B) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Costco Wholesale Corp. Financial Statement Analysis (B) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Costco Wholesale Corp. Financial Statement Analysis (B) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Costco Wholesale Corp. Financial Statement Analysis (B) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Costco Wholesale needs to make to build a sustainable competitive advantage.