Costco Wholesale Corporation’s Strategic Analysis

Paper Info
Page count 12
Word count 3520
Read time 14 min
Topic Business
Type Critical Writing
Language đŸ‡ș🇾 US


Any business in need of a competitive edge might gain from tactical planning. Tactical thinking establishes a vision for an organization’s possibilities and focuses on continuous progress, facilitated mostly through innovation. Most firms invest time and money in creating competent leadership committees, defining the company’s goals, and devising business strategies to achieve those priorities. Nonetheless, despite the effort, they fall short of meeting their organizational plans for various reasons. A corporate leader’s capacity for strategic thinking is crucial to generating excellent outcomes. In conjunction with other institutional aspects, the internal dimension can either aid or hamper a person’s cognitive performance essential for intelligent thought. As innovators of a company’s inner atmosphere, leaders have the potential to reinforce the link between corporate functions and the group’s desire to think strategically. According to the literature, most companies design and implement policy according to a variety of theories, typically following a preconceived blueprint.

Literature Review

Critical Theories of how Strategy is Developed and Implemented

For many years, mainstream strategy administration literature largely overlooked the science of strategy formulation and implementation. Strategic management based on solid management techniques is at the heart of wealth development in contemporary industrial societies and, progressively, in emerging countries. Strategic management professionals are primarily concerned with acquiring the knowledge necessary to reveal discrepancies in corporate performance (Andrews, 1987). Strategic management assessment has uncovered a great deal of knowledge and realistic insight on business productivity and competitive protection in a rapidly changing marketplace. A plethora of operational and organizational processes underpin the formulation and execution of strategies.

These assumptions are discoveries, recommendations, or systematic ideas intended to shed light on strategic government’s origins, history, philosophy, and practice. According to Lasserre (2017), decisive administration is a collection of tactical process elements, conceptualization, implementation, and appraisal. It comprises developing and analyzing the corporate strategy concerning the firm’s strategic center, diplomatic adoptions, and company policy of operation both within and outside the business. The strategic function considers external environmental regulations, an institution’s strategic capabilities, stakeholder goals, influence, and historical and cultural significance. Strategical decision-making requires an awareness of fundamental ideas for future legislation at the organizational unit, functional, and global level and plans for strategy execution regarding all preparatory methodologies. The improvement plan is geared toward ensuring that a sophisticated approach is adopted.

Profit optimization and rivalry theories, survival theories, agency theories, resource-based theories, contingency theories, and human capital theories are examples of traditional strategic management principles related to current businesses. Financial performance and strategic doctrines are predicated on the premise that an institution’s principal objective should be to deplete all long-term profit prospects to establish sustainable economic benefits and over-aggressive opponents (Damodaran, 2017). This notion regards the entity’s external orientation as critical to attaining and sustaining monetary profit. The survival hypothesis is predicated on the idea that firms must continuously adapt to their market situation to prosper (Gao et al., 2017). On the other hand, the human asset paradigm emphasizes the critical importance of the human component in the development plan process of the business.

Additionally, the Agency theory emphasizes the vital importance of the investor-agent connection in assuring operational effectiveness. Ultimately, the contingency framework is predicated on the premise that there is no obvious best option in business administration. According to the concept, businesses can use successful management approaches centered on common circumstances. These critical ideologies of strategic leadership apply to the management of companies as resources that aid in the development, implementation, and evaluation of policies.

Michael Porter, the other significant modern strategist, has written numerous notable works on corporate strategy. He has concentrated on institutional and administrative competency as well as rivalry. Moreover, he developed several widely used methodologies and approaches, including his five forces and value chain frameworks (Berisha Qehaja et al., 2017). The Five Forces study identifies a business’s strengths and weaknesses and the significance of the firm’s existing strong position, and the competitiveness of a market into which the business wishes to expand (Berisha Qehaja et al., 2017). Igor Ansoff is another well-known figure who has contributed significantly to company management thought and practice evolution. He was a leading proponent of the management school of thought and was universally regarded as one of the founding fathers of strategy implementation. Ansoff established his now-famous Matrix (Ansoff’s Matrix), another strategic projection methodology that is still widely used today (Loredana, 2017). Leadership is responsible for establishing and implementing corporate and decision-making mechanisms that are competent.

Thus, this is seen in executives’ responsibilities to facilitate the effective and appropriate circulation of information, goods, and resources across a company. As a result, this guarantees the productivity of consumers, collaborators, and the steering committee. The plan explains the path to enterprise effectiveness based on the conclusions of the existing literature. According to experts, internal systems, protocols, individuals, and surroundings are critical to establishing strategies (Abd et al., 2019). Even though a tactic’s planned and structured implementation is critical to a business’s progress, many businesses struggle with it. Abd et al. (2019) assert that preserving internal consensus enables businesses to produce outstanding financial performance while boosting performance. Therefore, personnel involvement in strategy design and economic assistance for departments and workers are emphasized.

The Relationship between Strategy, Innovation, and Change

The primary and most difficult job confronting modern enterprises is creating and preserving a competitive edge. A primary worry for administrators of today’s organizations facing challenging times is building and keeping a strategic advantage. Moreover, developing into a successful corporate capable of implementing change, conquering business uncertainty, and assuring the longevity of a disaster presents a problem to executives. Improved innovation enables organizations to maintain a competitive edge in today’s competitive business climate characterized by advancements and technological change. The methodology adopted indicates the degree of innovation required, with enterprises that use proposals and commodity differentiation approaches seeing higher levels of innovation.

The majority of firms attempt to close the divide between strategy and creativity. Generally, the new venues for innovation construction can be found within the mentioned tactics. A strategy justifies selecting one set of possibilities over another that is coherent and well-supported (Gioia and Chittipeddi, 1991). In other words, it is utilized to make decisions that result in execution, whether they concern the general objective of the business, priority setting, or project and process implementation. Innovation is the process of conceptualizing, developing, and developing a new brand, technique, or service to enhance its effectiveness, usefulness, or competitiveness.

Change is a process that entails both substantial functional modifications to operations and distinct emotional stimuli. Harb and Sidani (2019) define change as an institution’s shift from one configuration to another. Change management is a method of directing, maneuvering, attending to, mentoring, assessing, and supporting internal development to achieve the desired change outcome, maintain the status quo, or react to emerging consequences (Hamel, 1996). Numerous businesses seek to address rising performance disparities through invention in today’s competitive markets.

Businesses emphasize the importance of product evolution and improvement while focusing on differentiation strategy. According to experts, a company’s capacity to incorporate novel principles into products that meet changing client expectations and tastes is essential to its long-term survival in intense competitive marketplaces. This sort of innovation is typically associated with a corporation’s drive to innovate, and it is more visible and widely deployed, whereas managerial advancements are harder to integrate and less attractive.

Businesses that place a premium on merchandise distinction must continuously change and improve their commodities to include a variety of unique goods. By embracing innovation, the business can ensure a steady supply of differentiated offers that deliver on the specific attributes of consumers’ value (Nani and Safitri, 2021). Diversification strategies often involve committing money to research, development, and marketing to establish novel product attributes and strengthen brand reputation. Analyzing a business’s internal and external surroundings is crucial for survival and growth. A business’s growth is driven by how it responds to external developments.

The business environment consists of the organization’s operations and various other environmental forces. These components are thoroughly integrated into the business. Therefore, the market situation is exceedingly diversified and complex (Gioia and Chittipeddi, 1991). As a result, forecasting market climate changes is exceptionally challenging. How firms respond to a particular circumstance might determine their fate in the long run (Gioia and Chittipeddi, 1991). Organizations seize chances while avoiding or mitigating threats and challenges in an idealistic situation. The external climate is influenced by demographic, socioeconomic, political, legal, natural, scientific, and ethical factors. Internal characteristics allude to anything included within or influenced by an enterprise, whether material or intangible.

After determining these factors, they are classified as the industry’s benefits and drawbacks. A factor is decisive if its effect is beneficial to the firm. On the other hand, a weakness is a constraint on the growth of the business. Strategic management is considered creative when centered on a novel concept that contradicts established management methods. The quest for efficiency and resource utilization flows through all aspects of strategic administration and change led by these principles. While innovation is the fundamental key success factor, companies integrate it with commitment, effectiveness, and the capability of their human capital to improve and develop their management framework.

A Critical Analysis of Strategic Processes at Costco Company

Strategic assessment is the technique of conducting a study on a specific company and its working environment to develop a strategy. A critical review of the tactical administration process focuses on how supervisors develop plans to meet corporate goals. Given that executing the strategy would require the collaboration of the entire firm, they must measure their success in obtaining such authorization (Aliewi et al., 2017). Goal setting, reviewing, planning, implementing procedures, and overseeing and upgrading the executing mechanism are all components of the strategy formulation, guaranteeing long-term organizational targets are reached productively and successfully.

This chapter explores Costco Company’s strategic orientation and its incorporation into its management to ensure its continued success. Costco Enterprise is one of the world’s leading retail wholesalers, with its roots in the United States. The corporation operates under the name Costco. According to Rosete et al. (2020), the business was the globe’s second-largest store, behind Wal-Mart. It has built a great position as a reseller of preference for consumables. As of 2019, the corporation was rated 14th on the Fortune 500 list (Ghosh, 2021). The firm’s particular administrative, advertising, and manufacturing techniques enable it to stay competitive in the sector. In addition, proactive administrative practices and good human resource management are critical components of the organization’s growth.

Costco has succeeded in conveying its corporate strategy to its employees by providing a comprehensive summary of the business plans, product portfolio assessments, and present status, ensuring that all participants are informed of the leadership’s objectives and their role in achieving them. As seen by the employees’ enthusiasm and loyalty to the business, the transparent collaboration resulted in the conception of the concept represented in the thoughts of shareholders. The organization has implemented success measuring tools that alert employees to areas where they need to act and offer data for evaluating the plan’s execution phase.

Additionally, it is an excellent idea to follow up on its progress. In comparison to the institution’s selected course, a feedback mechanism assists leaders in determining the genuine success or failure of their tactical inventiveness. Costco has sufficient financial assets to pursue its research programs. Due to continual research, the enterprise has maintained a high level of inventiveness. As a result of these objectives, Costco has developed a solid reputation for high-quality items, attracting a significant number of buyers.

PESTEL Analysis for Costco Company

Costco’s PESTEL assessment examines the company’s business approaches and measures different external aspects affecting its operation, including political, financial, social, and technical concerns, as well as legal variables. The PESTEL Analysis identifies the various extrinsic circumstances that affect the business’s operations (Christodoulou and Cullinane, 2019). In a competitive marketplace, enterprises are affected by numerous issues, including governmental, intellectual, fiscal, and regulatory elements (Pratap, 2018). They must be well understood for the management to make the necessary preparations.

Political Factors

Costco is a transnational corporation with businesses in nations where the host government enjoys favorable trade relations, except China. Given the political sensitivities between China and the United States, this could be a boon for the corporation in the future (BouĂ«t, A. and Laborde, 2018). The corporation chose not to enter India, where a big market is to be captured. It is exceedingly tough as a result of political influence. The firm’s political ties with the neighboring nations and the home country must be strong for proper functioning. Additionally, the corporation should adhere to the trade agreements of the nations it participates in. Costco should also comply with the states’ post-pandemic regulations, which are vital to the organization.

Economic Factors

Due to the COVID-19 pandemic, individuals’ disposable income has been dramatically reduced, resulting in a reduction in family consumption. Costs have increased as a result of supply chain interruptions and resource scarcity. Therefore, contributing to the decline in their profits during the first half of last year. The virus’s eradication and the United States’ economic initiatives to boost the industry have increased the average person’s income. Foreign currency rates also affect a firm’s earnings. Vaccination also affects the global economy, and the globe is recovering at a rapid speed, which is crucial for any company.

Social Factors

Individuals’ social conduct is critical to a store chain business like Costco. The retail warehousing business has grown significantly during the last few decades. The public is highly interested in businesses that offer a variety of things in one location. Currently, consumers are enthralled by the e-commerce industry, which could pose a danger to the retail warehouse industry. Additionally, the corporation should explore the e-commerce market with enormous opportunities. Due to the epidemic, this trend has accelerated significantly due to government limitations. The growth of the internet and the dramatic shift in customer behavior accelerated the movement toward e-commerce.

Technological Factors

The retail warehousing industry has developed over the last few decades, and Walmart posed a danger. Due to intense rivalry, a business’s ability to profit requires strengthening its processes and supply chain. Additionally, any retail business should optimize its stock control. The corporation used predictive analytics to optimize logistics operations, and innovation has advanced significantly since then. The advancement of artificial intelligence has created numerous prospects for stock administration and process improvement. In addition, the procurement network has become more durable and adaptable due to advancements in the latest generation of technology.

Environmental Factors

Costco’s processes have a negligible influence on the carbon footprint. However, the organization must implement quality control procedures to mitigate the risk posed by disasters. The frequency of catastrophes has increased significantly in recent years due to fast climate change, and therefore, these calamities damage critical distribution networks for businesses. Thus, the business should guarantee that its participants likewise take steps to lower their carbon footprint and contribute to the battle against global warming.

Legal Factors

Costco operates in several countries, each with its legislation and rules. For example, the labor rules in the United States are much different than those in China. Likewise, the regulations governing corporate operations in China are radically different from those in the United States. Moreover, these policies differ in other nations where Costco conducts business. As a result, the corporation must adhere to the policies and guidelines of the country in which it operates. Additionally, the corporation should consider personnel rules and legislation governing the establishment of warehouses.

An assessment of the extent to which People within Costco are engaged with and Contribute to a Selected Strategy

The world’s economy encompasses all aspects that influence Costco’s transactional, cross-cultural, and cross-border operations. In reaction to the challenging climate, the decision was made to develop a business-level framework centered on a broad differentiation brand strategy by maintaining the lowest prices possible for products with higher perceived quality than the competitors. Brand differentiation is frequently viewed as a vital criterion for achieving a competitive advantage over its rivals in the business context. In addition, utilizing a differentiation strategy is believed to increase a company’s chances of obtaining exclusive or, at the very least improved accessibility to customers and resources.

The firms have invested in innovation and distribution technology to give exceptional customer service through quality technologies and interface design to stay ahead of the competition. While technology innovation drives product differentiation, human capital is essential to successfully implementing the institution’s plan. Within an enterprise, positive employee connections result in increased management of worker engagement and long-term company performance. When businesses have a positive relationship with their laborers and encourage personnel interaction, it is simpler for them to achieve their long-term economic and non-financial objectives. As a renowned wholesaler, Costco places a premium on developing excellent relationships with its employees. Its staff is encouraged by a power-sharing concept that enables them to articulate themselves openly via an engaging communications network. Person loyalty is a metric that indicates how committed a worker is to the firm for which they work. Costco’s founder pioneered the concept of 360-degree personnel empowerment (García-Juan et al., 2019). Due to a solid internal communication program, Costco has surpassed its main competitors of gross margins despite investing less in technology.

Costco recognizes that a motivated workforce demonstrates greater job satisfaction, corporate loyalty, a sensation of responsibility, and work engagement. It demonstrates the link between committed employees and higher customer happiness, which results in increased corporate revenue. Companies can organize employees into diverse teams to facilitate project coordination, raise morale, and illustrate how to assist. Costco’s efficient implementation of Total Quality Management (TQM) helped develop a quality culture among its employees (Abbas, 2020). Due to the business’s commitment to offering superior service, it has been capable of competing, maintaining low prices, and generating brand loyalty and enthusiasm around new product introductions. The typical approach establishes a solid daily engagement between supervisors and workers. On the other hand, the administration makes all suggestions affecting individuals by responding through their elected representatives and labor union representatives.

Under the power-sharing model, employees have complete responsibility for creating and delivering employee-related policies. Staff can readily communicate with one another thanks to an open information structure. Personnel is encouraged to propose business-related ideas and debate them with senior leadership. This mentality resulted in many individuals earning near-minimum wages while reporting greater job satisfaction. Thus, this is why a never-ending line of prospective employees gathers in front of Costco’s premises, ready to join the company. Employees believe they contribute to the comfort of others’ lifestyles and are also fans of the corporation’s products.

Recommendations on Improving Strategic Processes within the Organization

The administration is accountable for maintaining uniformity in resource distribution, operating processes, and anticipated strategic strategy. Inadequate role alignment and insufficient down-the-line managerial skills and breakthroughs are frequently acknowledged as program implementation inhibitors (Morgan, 1993). Strategic administration is defined as an executive’s ability to anticipate, envisage, and maintain stability to allow others to implement necessary tactical transformations, and it comprises governing via others (Subramony et al., 2018). This technique would enable Costco’s supervisors to assign resources to sustain the policies chosen. The methodology involves many management procedures necessary to implement Costco’s philosophy, implement strategic measures to monitor success, and ultimately realize corporate objectives. Additionally, effective management would foster an environment in which all Costco employees are motivated to make regular voluntary decisions on the institution’s growth and sustainability.

Strategic advice promotes shared values and a single objective for personnel, allowing administrators to focus on the company’s strategic choices. Moreover, Costco’s CEOs may also leverage human capital to enhance their enterprises’ objectives. Leaders make judgments to assign errands to personnel consistent with the organization’s mission. Therefore, it is crucial to engage human resources experts in creating and executing the change in the entity to maximize overall effectiveness. Apart from identifying the appropriate qualifications and persons to match such requirements, such specialists bring a unique perspective that superiors overlook.


Any organization seeking a competitive edge can gain from tactical thinking. Before the sequential manner of developing a business plan, critical planning establishes an institution’s capability and a proactive approach, primarily through innovativeness. Strategic thinking ensures a business’s performance by integrating internal and external data and synthesizing opinions and impressions qualitatively (Mintzberg, 2000). It creates a competitive environment conducive to competitive business value and is conscientious, explicit, and productive. While strategy, invention, and transition all have various conceptions and purposes, they are incorporated into the organizational structure to guarantee productivity. As a result, technology has gained a foothold and is now positively connected with a firm’s desire to enhance its strategic benefits.

According to the PESTEL analysis, enterprises operating in a competitive marketplace are affected by a combination of factors, including administrative, scientific, financial, and regulatory components. They must be well understood for the administration to make the necessary preparations. Enterprises with difficulties with their managerial practices should employ several strategies to better their internal operations while keeping their regional and worldwide competitiveness. Strategic management enables an organization to anticipate, visualize, and create security to motivate others to implement necessary structural initiatives since it also involves monitoring via others.

References List

Abbas, J. (2020). ‘Impact of total quality management on corporate green performance through the mediating role of corporate social responsibility.’ Journal of Cleaner Production, 242, p.1-12.

Abd, K.M.A., Abbas, S.A. and Khudair, A.H. (2019). Impact of strategic management practices on organizational entrepreneurship: Mediating effect of strategic intelligence.’ Academy of Strategic Management Journal, 18(4), pp.1-8.

Aliewi, A., El-Sayed, E., Akbar, A., Hadi, K. and Al-Rashed, M. (2017). ‘Evaluation of desalination and other strategic management options using multi-criteria decision analysis in Kuwait.’ Desalination, 413, pp.40-51.

Andrews, K.R. (1971). ‘Concept of corporate strategy.’ Irvin: Homewood.

Berisha Qehaja, A., Kutllovci, E. and Shiroka Pula, J. (2017). ‘Strategic management tools and techniques usage: A qualitative review.’ Journal of the University of Brno’s Agriculture and Silviculture, 65(2), pp.1-16.

BouĂ«t, A. and Laborde, D. (2018). ‘US trade wars in the twenty‐first century with emerging countries: Make America and its partners lose again.’ The World Economy, 41(9), pp.2276-2319.

Christodoulou, A. and Cullinane, K. (2019). ‘Identifying the main opportunities and challenges from the implementation of a port energy management system: A SWOT/PESTLE analysis.’ Sustainability, 11(21), p.1-15.

Damodaran, A. (2017). ‘Response to how to market the markets: The trouble with profit maximization.’ Eastern Economic Journal, 43(2), pp.368-369.

Gao, C., Zuzul, T., Jones, G. and Khanna, T. (2017). ‘Overcoming institutional voids: A reputation‐based view of long‐run survival.’ Strategic Management Journal, 38(11), pp.2147-2167.

García-Juan, B., Escrig-Tena, A.B. and Roca-Puig, V. (2019). ‘Empowerment in the public sector: Testing the influence of goal orientation.’ Public Personnel Management, 48(4), pp.443-470.

Ghosh, A. (2021). ‘The politics of alignment and the ‘Quiet transgender revolution’ in Fortune 500 corporations, 2008 to 2017.’ Socio-Economic Review, 19(3), pp.1095-1125.

Gioia, D.A. and Chittipeddi, K. (1991). ‘Sensemaking and sense giving in strategic change initiation.’ Strategic Management Journal, 12(6), pp.433-448.

Hamel, G. (1996). ‘Strategy as revolution.’ Nova York: Harvard Business Review.

Harb, B. and Sidani, D. (2019). ‘Transformational leadership for organizational change in the Lebanese public sector.’ Problems and Perspectives in Management, 17(2), pp.205-216.

Lasserre, P. (2017). ‘Global strategic management.’ Macmillan International Higher Education.

Loredana, E.M. (2017). The use of Ansoff matrix in the field of business. Annals-Economy Series, 2, pp.141-149.

Mintzberg, H. (2000). ‘The rise and fall of strategic planning.’ Pearson Education.

Morgan, G. (1993). ‘Imagination: The art of creative management.’ Sage Publications.

Nani, D.A. and Safitri, V.A.D. (2021). ‘Exploring the relationship between formal management control systems, organizational performance and innovation: The role of leadership characteristics.’ Asian Journal of Business and Accounting, 14(1), pp.207-224.

Rosete, J.C.G.P., Barros, R.H. and Blanco-JimĂ©nez, M. (2020). ‘SEM analysis on Global Fortune 500 corporations with green ratings.’ Energy Efficiency, 13(6), pp.1135-1145.

Subramony, M., Segers, J., Chadwick, C. and Shyamsunder, A. (2018). ‘Leadership development practice bundles and organizational performance: The mediating role of human capital and social capital.’ Journal of Business Research, 83, pp.120-129.

Cite this paper


EssaysInCollege. (2023, March 2). Costco Wholesale Corporation's Strategic Analysis. Retrieved from


EssaysInCollege. (2023, March 2). Costco Wholesale Corporation's Strategic Analysis.

Work Cited

"Costco Wholesale Corporation's Strategic Analysis." EssaysInCollege, 2 Mar. 2023,


EssaysInCollege. (2023) 'Costco Wholesale Corporation's Strategic Analysis'. 2 March.


EssaysInCollege. 2023. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.

1. EssaysInCollege. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.


EssaysInCollege. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.


EssaysInCollege. 2023. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.

1. EssaysInCollege. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.


EssaysInCollege. "Costco Wholesale Corporation's Strategic Analysis." March 2, 2023.