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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, geopolitical disruptions,
increasing government debt because of Covid-19 spendings, there is backlash against globalization, 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 -
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.
Innovation driven organization
– Costco Wholesale is one of the most innovative firm in sector. Manager in Costco Wholesale Corp. Financial Statement Analysis (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Finance & Accounting field
– Costco Wholesale is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Costco Wholesale in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Costco Wholesale Corp. Financial Statement Analysis (B) firm has clearly differentiated products in the market place. This has enabled Costco Wholesale to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Costco Wholesale to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Costco Wholesale in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Costco Wholesale in the sector have low bargaining power. Costco Wholesale Corp. Financial Statement Analysis (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Costco Wholesale to manage not only supply disruptions but also source products at highly competitive prices.
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 -
Skills based hiring
– The stress on hiring functional specialists at Costco Wholesale has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
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.
Slow to strategic competitive environment developments
– As Costco Wholesale Corp. Financial Statement Analysis (B) HBR case study mentions - Costco Wholesale takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Costco Wholesale has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Costco Wholesale even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B), it seems that the employees of Costco Wholesale don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Costco Wholesale, firm in the HBR case study Costco Wholesale Corp. Financial Statement Analysis (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
Using analytics as competitive advantage
– Costco Wholesale has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Costco Wholesale Corp. Financial Statement Analysis (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Costco Wholesale to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Costco Wholesale in the consumer business. Now Costco Wholesale can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Costco Wholesale can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Costco Wholesale Corp. Financial Statement Analysis (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Loyalty marketing
– Costco Wholesale has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Costco Wholesale is facing challenges because of the dominance of functional experts in the organization. Costco Wholesale Corp. Financial Statement Analysis (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Costco Wholesale can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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 -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Costco Wholesale Corp. Financial Statement Analysis (B), Costco Wholesale may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Costco Wholesale with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Costco Wholesale can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Shortening product life cycle
– it is one of the major threat that Costco Wholesale is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.