Term Paper on "International Strategic Management"

Term Paper 12 pages (5051 words) Sources: 5

[EXCERPT] . . . .

International Strategic Management

Costco business entity is one of the global wholesales focusing on quality and low prices towards the provision of services and products to the consumers. The organization adopts a 25-year plan with the aim of becoming an international leader within the industry of operation. In order to understand the strategy of the organization, it is essential to implement tools such as SWOT and PEST analysis in the evaluation of the conditions. This research exercise will focus on the evaluation of the strategic direction of Costco Company, key strategic issues, elements of the strategy, and factors affecting change within the industry.

Evaluate the strategic direction of the company, Costco's Market strategic vision, mission, and its motto and business model. In your judgment, how well is the company living up to its vision, mission and motto?

The main objective of the organization is to become the fourth largest retailer in the United States and eighth largest retailer organization across the globe. The organization set to achieve this vision through a 25-year plan or continuous process towards the achievement of the objective. The organization's mission in the membership warehouse was to offer a continuous set of quality products and services to the targeted consumers at the lowest possible costs or prices. The strategy model was essential in the essence of providing high sales volumes and rapid inventory turnover through implementation of the lowest prices for the products and services. The organization focused on the achievement of various factors with the aim of achieving profitable operations at significantly lower gross margins in comparison to supermarkets, supercenters, mass merchandise, and traditional wholesalers (Thompson 2008, p. 32).

These factors according to the management include rapid inventory, volume purchasing efficiencies, effective and efficient distribution, reduction in the handling of the merchandise in no-frills, and provision of self-service warehouse facilities. Through this business model, the organization has the opportunity to sell and obtain cash for the inventory prior to paying for the merchandise vendors. The payment to the merchandise vendors was on time with the aim of maximizing the advantage of discounts in relation to early payments. The organization was also capable of financing big percentage of the merchandise inventory with reference to the terms and conditions of the vendors rather than the maintenance of the sizable working capital. This refers to avoidance of the concept of the current assets less current liabilities in order to facilitate the payment of the suppliers of the merchandise. According to my judgment, the organization is living effectively and efficiently towards the realization of the goals and objectives (Thompson 2008, p. 32).

This relates to the vision of becoming fourth and eighth in the United States and across the globe respectively. This is through adoption and implementation of an effective and efficient strategy towards the achievement of the mission. In order to illustrate the success of the organization in relation to the realization of the vision, it is vital to focus on the turnover volumes in 2008. The organization had the opportunity to realize a total turnover of about $71 billion within the context of 544 warehouses in 40 states, United Kingdom, Canada, Korea, Taiwan, Japan, and Puerto Rico. It also essential to note that more than 50 of the warehouses of the organization generated a turnover of about $200 million within the financial year thus the essence of achievement of the vision (Thompson 2008, p. 33).

Two warehouses performed exceptionally in relation to generation of more than $300 million within the financial year thus enhancing the opportunity for the success of the model. The organization also had the opportunity to record an average turnover of about $130 for the warehouses. This was an achievement and reflection of competitive advantage over the chief competitor within the industry in the form of Sam's Club. The average turnover was 75% more than the volume at the competitor, thus an effective and efficient step towards the realization of the vision and mission of the organization (Thompson 2008, p. 33).

Identify and discuss the chief elements of Costco Market strategy.

Costco's market strategy focuses on the illustration of chief elements such as low pricing mechanism, limited product line, limited product selection, treasure, and 'treasure hunt' shopping environment. Other elements include webs site sales, growth strategy, and marketing/advertisement.

Pricing

The organization focuses on the differentiation of the pricing system with the aim of achieving competitive advantage within the industry. This is through provision of consistent national and global prices for the quality products and services in comparison to the traditional wholesale or retail outlets. In order to achieve this differentiation, the organization focused on the stocking of products that could be priced at bargain levels thus the opportunity to the members to enhance their saving costs. This strategy was essential in capping the margins of the brand-name merchandise at about 14% in comparison to 20 to 50%-margins by supermarkets. Another objective of the low prices for the quality products was to increase the consumer base by wowing customers with minimum or significant saving costs. This is a reflection of the achievement of competitive advantage with the aim of eliminating or driving away competitors through implementation of crazy pricing mechanisms. According to this price mechanism, the organization purports to offer value to its members. The pricing mechanisms or ultra-low pricing system was essential in the development of an organization aiming to offer quality services and consistent prices to its members for the long-term basis (Thompson 2008, p. 34).

Product Selection

The organization's merchandise strategy was vital in the provision of selection of about 4,000 products to its members. This compares to supermarkets' 40,000 items and Wal-Mart's 150,000 items for the consumer selection. The product range of the organization covers a broad spectrum. Some of the products by the organization include fresh flowers, digital cameras, ceiling fans, prescription drugs, detergents, canned goods, and soft drinks in bigger containers. The organization focuses on the inclusion of commercial and professional models because of the small businesses as members of Costco business entity (Thompson 2008, p. 35).

Treasure-Hunt Merchandising

The organization practices transformation of the product selection. This is through a reflection of evolutionary quarter of the product selection. This indicates that the consumers or members of the organization were on the constant lookout for the standout products with the ability to sell quickly. The main objective of this element was to entice buyers through provision of irresistible deals in relation to luxury products. In the process of fulfilling this aspect, the organization sought to source luxury items legally from the gray market and other wholesalers/retailers aiming to erode excess and slow-selling inventories. Some of the treasure-hunt products include espresso machines, expensive jewelries and diamond rings, Italian-made Hathaway shirts, and Movado watches (Thompson 2008, p. 35).

Marketing and Advertising

Low costs and concept of treasure hunt were essential in the application and implementation of extensive marketing/advertisement or sales campaigns. The organization focused on the execution of advertisements of new warehouse openings, occasional direct mail marketing for capturing new buyers, and essential regular mail marketing for the existing consumers. The main objective behind the adoption and implementation of the direct mail marketing was to keep marketing expenses at minimum in comparison to the costs by the supermarkets and typical retailers (Thompson 2008, p. 36).

Growth Strategy

The growth element in relation to sales and profits focuses on the implementation of three components. These components include opening of more new workshops, building of a large and fierce consumer or loyal membership base, and application of effective and efficient membership techniques to enhance operations of the organization. In order to achieve this element, the organization focused on the opening of 127 new warehouses between 2005 and 2008. In the process of attracting more members, the organization implements three components. The first component focuses on the provision of facilities to purchase supplies of practical, business, and household commodities. The second component focuses on the implementation of the critical aspects to entice consumers to shop at Costco. This is through making the process rewarding and interesting thus the opportunity to spot appealing products by consumers. The final component was the opportunity to acclimatize members on the available merits in relation to shopping at the warehouses of the organization (Thompson 2008, p. 37).

Web Site Sales

In order to maximize available marketing opportunities, the organization focuses on the application of two websites in the United States and Canada. The main objective behind this development is to increase the volume of sales and profits through provision of various procurement options to enhance the building of the consumer base and image of the organization (Thompson 2008, p. 37).

Given the recent developments and conditions in the ethical, business values, compensation and workforce values segment of the warehouse industry at the time of the case, critically evaluate the strategy, which the firm is pursuing.

The organization engages in the pursuit of an essential strategy enabling the business entity to adhere to the new developments and conditions in relation… READ MORE

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