SWOT Analysis / TOWS Matrix for Costco Wholesale DRC (Brazil)
Based on various researches at Oak Spring University , Costco Wholesale DRC is operating in a macro-environment that has been destablized by – wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Costco Wholesale DRC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Costco Wholesale DRC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Costco Wholesale DRC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Costco Wholesale DRC 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 DRC can be done for the following purposes –
1. Strategic planning of Costco Wholesale DRC
2. Improving business portfolio management of Costco Wholesale DRC
3. Assessing feasibility of the new initiative in Brazil
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Costco Wholesale DRC
Strengths of Costco Wholesale DRC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Costco Wholesale DRC are -
Low bargaining power of suppliers
– Suppliers of Costco Wholesale DRC in the sector have low bargaining power. Costco Wholesale DRC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Costco Wholesale DRC to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Costco Wholesale DRC has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Costco Wholesale DRC have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Costco Wholesale DRC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Costco Wholesale DRC staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Costco Wholesale DRC has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Costco Wholesale DRC 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.
Learning organization
- Costco Wholesale DRC 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 DRC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Costco Wholesale DRC emphasize – knowledge, initiative, and innovation.
Training and development
– Costco Wholesale DRC has one of the best training and development program in industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Costco Wholesale DRC is one of the leading players in the industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Costco Wholesale DRC 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.
Organizational Resilience of Costco Wholesale DRC
– The covid-19 pandemic has put organizational resilience at the centre of everthing Costco Wholesale DRC does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Costco Wholesale DRC 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.
Superior customer experience
– The customer experience strategy of Costco Wholesale DRC in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Costco Wholesale DRC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Costco Wholesale DRC 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.
Weaknesses of Costco Wholesale DRC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Costco Wholesale DRC are -
High cash cycle compare to competitors
Costco Wholesale DRC 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.
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 DRC supply chain. Even after few cautionary changes, Costco Wholesale DRC is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Costco Wholesale DRC vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in industry
– because of the regulatory requirements in Brazil, Costco Wholesale DRC 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.
Lack of clear differentiation of Costco Wholesale DRC products
– To increase the profitability and margins on the products, Costco Wholesale DRC needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Costco Wholesale DRC strategy
– From the outside it seems that the employees of Costco Wholesale DRC 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.
Aligning sales with marketing
– From the outside it seems that Costco Wholesale DRC 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 at Costco Wholesale DRC can leverage the sales team experience to cultivate customer relationships as Costco Wholesale DRC is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Costco Wholesale DRC is slow explore the new channels of communication. These new channels of communication can help Costco Wholesale DRC to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Costco Wholesale DRC 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 DRC 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.
No frontier risks strategy
– From the 10K / annual statement of Costco Wholesale DRC, it seems that company is thinking out the frontier risks that can impact industry. 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 operating costs
– Compare to the competitors, Costco Wholesale DRC has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Costco Wholesale DRC lucrative customers.
Slow to strategic competitive environment developments
– As Costco Wholesale DRC is one of the leading players in the industry, it 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.
Costco Wholesale DRC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Costco Wholesale DRC are -
Better consumer reach
– The expansion of the 5G network will help Costco Wholesale DRC to increase its market reach. Costco Wholesale DRC 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 DRC can develop new processes and procedures in 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.
Loyalty marketing
– Costco Wholesale DRC 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Costco Wholesale DRC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Costco Wholesale DRC can use the latest technology developments to improve its manufacturing and designing process in sector. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Costco Wholesale DRC is facing challenges because of the dominance of functional experts in the organization. Costco Wholesale DRC can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Costco Wholesale DRC has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Costco Wholesale DRC to build a competitive advantage using analytics. The analytics driven competitive advantage can help Costco Wholesale DRC to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Costco Wholesale DRC 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 Costco Wholesale DRC to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Costco Wholesale DRC 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Costco Wholesale DRC 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Costco Wholesale DRC can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Costco Wholesale DRC has opened avenues for new revenue streams for the organization in industry. This can help Costco Wholesale DRC to build a more holistic ecosystem for Costco Wholesale DRC products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Costco Wholesale DRC can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Costco Wholesale DRC can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Costco Wholesale DRC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Costco Wholesale DRC are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Costco Wholesale DRC in industry. The 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.
Technology acceleration in Forth Industrial Revolution
– Costco Wholesale DRC has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Costco Wholesale DRC needs to keep up with the evolution of technology in the 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.
Consumer confidence and its impact on Costco Wholesale DRC 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 industry and other sectors.
Stagnating economy with rate increase
– Costco Wholesale DRC 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 industry.
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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Costco Wholesale DRC can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Costco Wholesale DRC 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 Costco Wholesale DRC prominent markets.
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 DRC 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.
Increasing wage structure of Costco Wholesale DRC
– 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 DRC.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Costco Wholesale DRC with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Costco Wholesale DRC 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.
Shortening product life cycle
– it is one of the major threat that Costco Wholesale DRC is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 DRC in the sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Costco Wholesale DRC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Costco Wholesale DRC 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 Costco Wholesale DRC 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 Costco Wholesale DRC 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 DRC 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 DRC needs to make to build a sustainable competitive advantage.