Recommended Strategy Costco needs to adopt market penetration strategy The

Recommended strategy costco needs to adopt market

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Recommended Strategy Costco needs to adopt market penetration strategy. The company needs to focus on expanding its market share as a means of meeting its objective of increasing revenue margins by 0.5 percent yearly. Market penetration entails the sale of current goods in the existing market to carve a large market following and is effected by persuading existing consumers to purchase more as well as attracting new customers (Nagle & Müller, 2017). Given that this strategy does not involve the provision of new products and extensive marketing campaigns, it is the best fit for Costco’s business. What is more, penetration will benefit Costco, which depends on word-of- mouth publicity to sell its products. With this strategy, existing customers will promote the firm by informing other people of the quality, affordability, and value of Costco’s products. Word-of- mouth advertising will result in limited spending on advertising and will have little impacts on the company’s bottom line. Proposed New Business Model Costco’s goal is to generate more sales by turning inventory over quickly. As a firm that provides a limited selection of branded products to its customers, Costco can adopt a low price/vast selection model (Fabbe-Costes & Colin, 2017). Competing with retailing giants like Wal-Mart and Amazon that have some of the planet’s selection of products is difficult. However, infusing Costco’s low pricing and a wide product selection can help the firm curve a large market share and remain profitable in the long run.
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COSTCO 13 References Fabbe-Costes, N., & Colin, J. (2017). Formulating logistics strategy. In Global Logistics And Distribution Planning (pp. 83-104). Routledge. Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. Routledge. Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2017). Crafting and executing strategy. The quest for competitive advantage. Concepts and cases. 22nd edition, New York, NY.
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COSTCO 14 Appendices Internal Factor Evaluation (IFE) Matrix Strengths Weight (%) Rating Weighted Score 1 Low pricing strategy 10 4 0.40 2 Private label brands 9 3 0.27 3 A high inventory turnover 9 4 0.36 4 Loyal employees 8 3 0.24 5 Robust supply chain 7 4 0.28 6 Product quality 8 3 0.24 7 Strong management 8 4 0.32 8 Increased cash flow 7 4 0.28 9 Minimal service complaints 5 3 0.15 Weaknesses 1 Limited access to global markets 9 1 0.09 2 Older consumer base 6 2 0.12 3 Limited graphical concentration 8 1 0.08 4 Limited product choices 6 2 0.12 main strength (4), trivial strength (3), lesser weakness (2), main weakness (1) TOTAL WEIGHTED SCORE 100 2.95 External Factor Evaluation (EFE) Matrix Opportunities Weight (%) Rating Weighted Score 1 Millennial population 10 4 0.40 2 Increase geographical locations 15 3 0.45 3 Reliable suppliers 11 4 0.44 4 Increased desire for digital services 12 3 0.36
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COSTCO 15 5 Demand in overseas markets 9 2 0.18 Threats 1 High Competition 15 2 0.30 2 E-commerce operations 8 2 0.16 Economic influences 13 1 0.13 3 Changing prices of commodities 7 1 0.07 Superior (4), above average (3), below average (2), weak (1) TOTAL WEIGHTED SCORE 100 2.49
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COSTCO 16 SWOT Bivariate Strategy Matrix Helpful Harmful Internal
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