Costco Wholesale Corporation – External and Internal Environmental AnalysisExternal and Internal Environmental AnalysisCostco Wholesale Corporation (Costco) operates a membership-only warehouse that sells quality products and services at an affordable price. This paper identifies and analyzes external environmental factors in the remote, industry, and external operating environments. The identification and analysis of internal strengths and weaknesses of Costco includes an assessment of Costco’s resources. A review of Costco’s competitive position and possibilities includes an analysis of the organizational structure and the effects of Costco’s performance.
External Environmental FactorsAccording to Pearson and Robinson (2013), external environmental factors include “factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes” (p. 87). For example, changes in the law or regulation include factors that remain beyond Costco’s control. Examples of a remote environment include economic, social, political, technological, and ecological factors (Pearson & Robinson, 2013). The Affordable Care Act is an external factor affecting large organization includes the Affordable Care Act. Competition from Sam’s Club and BJs Wholesale Club threatens Costco’s market share and profits.
The Consumer Price Index has been identified as an external measure of the cost of goods, services, and facilities. As of October 2003, the Consumer Price Index includes a composite of: cost of goods, goods or services for use in the marketplace, cost of income (in the case of services, not paid), the supply of goods or services on the market, and cost of goods or services produced in the marketplace. Factors related to the quality of goods or services are included in the index. In order to evaluate the use of external factors, analysts and economists are required to identify such external factors as: the nature and scope of the factors, their causes, and the effect of the factors on the performance of the cost of goods or the supply of goods or services in the marketplace. Internal factors may also be identified on a separate basis, because economic factors are highly correlated; while external factors may not be separately identified, they may be identified and correlated. For example, a public health measure that uses government-subsidized health insurance to monitor the quality of a hospital has a higher cost for quality, whereas public-health insurance typically covers only part of the costs and could be considered a government subsidy. Some factors that are more closely related to external factors, such as government subsidies affecting a government-subsidized provider, may also be compared to external factors. Because of its role as a political instrument, external factors cannot be measured directly when the government intervenes. To evaluate public policies or actions with external information about the source or use of external factors, analysts frequently use internal research (see Table 3). Examples include assessing public policy options based on external information, examining information that supports policy decisions, and exploring information on how such policies or actions are determined. Analysts consider information about such internal research as a useful means of determining its relative relevance to policy development. For example, the National Center for Science and Health Policy (NCSIP) makes assessments of environmental, food, and product risk from data for 20 agencies, including the National Academy of Sciences (NAS) and the Centers for Disease Control and Prevention (CDC), in order to determine which agencies (and when) are subject to federal, state, or local environmental laws (see also Table 1 for a description). However, there may be other other agency-dependent factors that could cause analysts to draw different conclusions concerning agency-related factors. For example, analysts may not be able to accurately evaluate whether an agency has adopted new policy or regulations as a result of internal research conducted on them—even if many such changes occur concurrently. Therefore, analysts may rely on information collected by an organization that has taken part in public policy. Internal research is also more often used to analyze whether agency-related information is relevant to policy decisions, in which case analysts do not evaluate those agencies directly, but
The Consumer Price Index has been identified as an external measure of the cost of goods, services, and facilities. As of October 2003, the Consumer Price Index includes a composite of: cost of goods, goods or services for use in the marketplace, cost of income (in the case of services, not paid), the supply of goods or services on the market, and cost of goods or services produced in the marketplace. Factors related to the quality of goods or services are included in the index. In order to evaluate the use of external factors, analysts and economists are required to identify such external factors as: the nature and scope of the factors, their causes, and the effect of the factors on the performance of the cost of goods or the supply of goods or services in the marketplace. Internal factors may also be identified on a separate basis, because economic factors are highly correlated; while external factors may not be separately identified, they may be identified and correlated. For example, a public health measure that uses government-subsidized health insurance to monitor the quality of a hospital has a higher cost for quality, whereas public-health insurance typically covers only part of the costs and could be considered a government subsidy. Some factors that are more closely related to external factors, such as government subsidies affecting a government-subsidized provider, may also be compared to external factors. Because of its role as a political instrument, external factors cannot be measured directly when the government intervenes. To evaluate public policies or actions with external information about the source or use of external factors, analysts frequently use internal research (see Table 3). Examples include assessing public policy options based on external information, examining information that supports policy decisions, and exploring information on how such policies or actions are determined. Analysts consider information about such internal research as a useful means of determining its relative relevance to policy development. For example, the National Center for Science and Health Policy (NCSIP) makes assessments of environmental, food, and product risk from data for 20 agencies, including the National Academy of Sciences (NAS) and the Centers for Disease Control and Prevention (CDC), in order to determine which agencies (and when) are subject to federal, state, or local environmental laws (see also Table 1 for a description). However, there may be other other agency-dependent factors that could cause analysts to draw different conclusions concerning agency-related factors. For example, analysts may not be able to accurately evaluate whether an agency has adopted new policy or regulations as a result of internal research conducted on them—even if many such changes occur concurrently. Therefore, analysts may rely on information collected by an organization that has taken part in public policy. Internal research is also more often used to analyze whether agency-related information is relevant to policy decisions, in which case analysts do not evaluate those agencies directly, but
The Consumer Price Index has been identified as an external measure of the cost of goods, services, and facilities. As of October 2003, the Consumer Price Index includes a composite of: cost of goods, goods or services for use in the marketplace, cost of income (in the case of services, not paid), the supply of goods or services on the market, and cost of goods or services produced in the marketplace. Factors related to the quality of goods or services are included in the index. In order to evaluate the use of external factors, analysts and economists are required to identify such external factors as: the nature and scope of the factors, their causes, and the effect of the factors on the performance of the cost of goods or the supply of goods or services in the marketplace. Internal factors may also be identified on a separate basis, because economic factors are highly correlated; while external factors may not be separately identified, they may be identified and correlated. For example, a public health measure that uses government-subsidized health insurance to monitor the quality of a hospital has a higher cost for quality, whereas public-health insurance typically covers only part of the costs and could be considered a government subsidy. Some factors that are more closely related to external factors, such as government subsidies affecting a government-subsidized provider, may also be compared to external factors. Because of its role as a political instrument, external factors cannot be measured directly when the government intervenes. To evaluate public policies or actions with external information about the source or use of external factors, analysts frequently use internal research (see Table 3). Examples include assessing public policy options based on external information, examining information that supports policy decisions, and exploring information on how such policies or actions are determined. Analysts consider information about such internal research as a useful means of determining its relative relevance to policy development. For example, the National Center for Science and Health Policy (NCSIP) makes assessments of environmental, food, and product risk from data for 20 agencies, including the National Academy of Sciences (NAS) and the Centers for Disease Control and Prevention (CDC), in order to determine which agencies (and when) are subject to federal, state, or local environmental laws (see also Table 1 for a description). However, there may be other other agency-dependent factors that could cause analysts to draw different conclusions concerning agency-related factors. For example, analysts may not be able to accurately evaluate whether an agency has adopted new policy or regulations as a result of internal research conducted on them—even if many such changes occur concurrently. Therefore, analysts may rely on information collected by an organization that has taken part in public policy. Internal research is also more often used to analyze whether agency-related information is relevant to policy decisions, in which case analysts do not evaluate those agencies directly, but
According to Pearson and Robinson (2013), industry environment include “general conditions for competition that influence all businesses that provide similar products and services” (p. 97). The economic downturn affects the entire wholesale discounters. According to Business News (2012), “Costco was the only discount chain that attracted more ultra-affluent — consumers with more than $250,000 income a year — than lower-income shoppers, with income ranging from $100,000 to $249,900 a year” (para 2). Although the poor economy affects the industry, the wealthy clients help during poor economic times.
Operating EnvironmentAccording to Pearson and Robinson (2013), operating environment or competitive environment includes “factors in the immediate competitive situation that affect a firm’s success in acquiring needed resources” (p. 111). According to MarketLine (2013), Costco’s primary competitors include Sam’s Club and BJs Wholesale Club. To avoid any decrease in the market share, Costco must remain price competitive and continue to provide quality goods and services at an affordable price.
Strengths and WeaknessesAccording to MarketLine (2013), Costco strengths include: customer loyalty related to price positioning, a low cost operating model, and high sales. According to Yahoo Finance (2013), Costco’s current profit margin remains less than 3%. Costco can increase prices if needed but the low prices and quality products created customer loyalty. According