Developing & Implementing a Global Strategy: Costco's Turkey Expansion

This report analyzes Costco Wholesale United Kingdom Ltd's global strategy and implementation plan for expanding its business into Turkey. It explores the reasons for internationalization, including market diversification and increased profitability, and examines various internationalization strategies such as transnational, multi-domestic, global, and international strategies. The report justifies the selection of an international business strategy for Costco's expansion. It further analyzes Turkey's attractiveness as a market using PESTLE and Porter's Five Forces frameworks, considering political, economic, social, and legal factors. The report also discusses potential entry methods, managerial challenges, and provides strategic advice for Costco's successful operation in the Turkish market, emphasizing the importance of adapting to local market conditions and leveraging technological advancements.

Global strategy and
Implementation

TABLE OF CONTENT
INTRODUCTION ..............................................................................................................3
1. Reasons for internationalization- ..............................................................................3
2. strategies of internationalization-...............................................................................5
3. Reasons for choosing turkey to expand and operate the business of Costco..........7
4. Methods of entry and the possible consequences ..................................................11
5. Managerial and organizational problems operating in new market.........................12
6. Strategic advice........................................................................................................13
CONCLUSION ................................................................................................................14
REFERENCES................................................................................................................15

INTRODUCTION
Global business strategy play a vital role for the company, this strategy develop
by the company to expand business and launch new products or service into the global
market. Every company use different methods to expand business such as
international, global, standardization and multinational strategies (Akkermans and Van
Wassenhove, 2018). The present report will be based on Costco Wholesale United
Kingdom Ltd, a popular grocery store providing varieties of products or service such as
electronics, furniture, appliances and many more to meet customer needs. There are
273000 employees working in the firm and have 828 locations worldwide. In the year
2020 the firm sales grew to $192.05 billion and now wants to expand its business in
turkey. The present study will highlight the methods of entry, managerial problems,
external environment, strategies of internationalization and reasons for internalization.
1. Reasons for internationalization-
There are many reasons behind internationalization: Nowadays, trade barriers
and tariffs have decreased in a foreign countries and this gives opportunities to go
international. Every business is seeking opportunities for growth and development
through market diversification. By adopting internationalization companies can easily
earn higher margins and increase profitability. By adopting this strategy, the firm will be
able to stay competitive in the business world (Park, 2020). The main reason to adopt
internationalization includes: it helps to improve a brand image and reputation. By

having this, the firm can enhance productivity and ability to gain competitive advantage.
Costco Wholesale United Kingdom Ltd is situated in UK holding 5th largest retailer in the
world. The firm is holding good market position and is performing well at global level.
The company offers services like photo services, business service, home insurance,
food services and varieties of products to attract customers and satisfy them. The
company has limited presence in the European country thus, wants to expand its
business in turkey.
Porter diamond model- this model is established by one of the popular expert
Michael porter, it explains the factors that can improve and drive competitive
advantages for one national market over another (Erboz, 2020). With the help of this
model, Costco Wholesale United Kingdom Ltd can easily focus on fact such as why
certain industries in the particular nation are competitive globally and other are not.

SOURCE: (Fang and et.al., 2018).
The country’s national diamond is well-developed and it gives brief about the
country's high levels of competitiveness (Vlados, 2019). The country has strong market
position in the world and weakness includes: factor conditions in which it suffers from
low labour skills, low levels of innovation and poor infrastructure. In addition to this, the
country needs more improvement in research and development. Hence, the company
has chance to expand its business by adopting technology and innovation in the turkey.

Firm strategy, structure and rivalry- Due to heavy competition in industries,
the pressure on companies to expand its business to international company is more
since it forces and pushes companies to develop unique service and capabilities. In
turkey businesses are focusing on increasing qualified workforce and this is the biggest
competition among companies.
Factor conditions- In a certain country factor conditions means availability of
capital natural and human resources. It is important to upgrade these factors through
the skills development and the creation of knowledge level. In addition to this, turkey
has been suffered from trade deficit, due to this, it becomes a major bottleneck for
macroeconomic stability for the country.
Demand conditions- A Large market means more risk, more issues, more
challenges but it also provides good opportunity to business for growth and become a
better competitor. The presence of demand conditions from local clients also provides
opportunity to improve in a better way and also focus on growth. Years ago, foreign
direct investment and external income level turned out insignificant in Turkey. Due to
this export performance of the company has been affected from economic crisis. This
has provided a great opportunity for exports expansion and increased demand for new
marketers.
Government – It has been said that companies can create competitive
advantages not government. The government has increase education spending as a
GDP percentage from one of the lowest in the industrialized world. More progress will
be required if the companies in the country wants to improve its business operation
globally. It is essential for government to encourage and push firms to raise their
business operations to gain success and higher levels of competitiveness. They should
promote domestic rivalry and motivating change, therefore in this way they should
provide benefit to certain industry in country. In turkey, government has taken some
measures in order to manage export policy through export incentives. Now, companies
can expand its business and do their stress free business just because of elimination of
multiple exchange rate. They can easily run their business by paying a uniform rate.
The above mentioned forces together form the national environment in which
companies are born and learn to compete easily. with the help of this model, cited

company can develop business clusters which is important industrial zones where
businesses operate with their suppliers.
2. strategies of internationalization-
Internationalization- It is the process or practice of designing goods or services
to facilitate expansion into international markets. The major purpose of business
strategy is to increase market position, satisfy needs to customers by providing them
good service, increase sales across the world. In today's business environment almost
all companies want to expand its business and consider to grasp opportunities
presented by globalization (de Wit, 2019). However, global operations are more
challenging and full of risk so the firm must do proper market research and make
effective action plan before taking any decision such as engaging in international
operations. In order to accomplish this, the manager must choose a strategy that
matches their objective, goals, vision-mission and capabilities. It is important to make
appropriate strategic choice for the company then only they can make right choices for
Internationalization.
There are four common types of strategies that business must take into
consideration to expand internationally:

It has been justified that consider each of the above mentioned strategy on a spectrum
between two major elements such as global integration and local responsiveness.
Local responsiveness means how firms serve a specific need or requirement of
market. This will includes change from payment process to choice of product to
customer experience. While on the other side, global integration means the
standardization firms achieve as they scale.
Transnational- Here, the company sell its services and products to a brand-new
market. According to Nandonde, (2019), this strategy is a combination of multi domestic
and standardization strategy. This strategy is action plan whereby a company decides
to conduct its business operation and activities across international borders. By having
this method, the firm will be able to expand its product or services overseas. Basically,
this method is by company when they face cost pressure from international competitors
but must also provide services that achieve local customer requirements. It is very
difficult to maintain because the firm needs to accomplish economies of scale through
standardization.
Multi domestic- This strategy ranks low on global integration and high on local
responsiveness. With the help of this method, company can change their product,
customer support and go to market which is based upon each market they want to enter
(de Wit, 2019). By having this method, business entity can easily access local
competitive advantages and rapidly gain good position in a local market.
Global- with the help of this strategy, firm can develop its product and focuses on
standardization such as operation's, messaging and services. They can easily build
scalable processes, systems no matter which international market they operate in. By
using this method, business can streamline product development with one product line
or service. This method requires a strong and positive global presence and requires
good universal appearance that will ultimately create demand for customer market
preference and tastes.
International- This strategy is used by company when they expand to secondary
markets and this is the most effective method among all options available (Alon and
et.al., 2018). It is an extension of company's domestic strategy, which says that

company can operate with a central or head office in home market and can easily
export its services to target markets or countries.
The chosen strategy is international business strategy for Costco Wholesale
United Kingdom Ltd, because the firm wants to expand in Turkey. By using this method,
the firm can build a standardization and also improve management process. They can
manage their product or service portfolio based on what went well or what went wrong
globally and make necessary changes while operating with head office in home market
that is Watford, UK.
3. Reasons for choosing turkey to expand and operate the business of Costco
Turkey's total areas is 302455 squares miles and it is one of the popular country
adopting 36th largest country title in the world in terms of population which is more than
83,614,362 people.
Gupta, Gupta and Gupta, (2019) says that By having country environmental
analysis, macro environmental factors that can affect the business operation and growth
can be easily evaluated, it can be known through using PESL analysis:
Political- This factor can impact the business operation because a small change
in government policy and actions can affect the business activities (Koshesh and Jafari,
2019). Turkey used to follow strictly the parliamentary democratic system, presidential
democratic system and other important policy. Due to change in government policy the
related to trade restrictions, tax and other policy Costco Wholesale United Kingdom Ltd,
need to keep track on factors like security issues.
Economical- A small change in country's GDP will impact the business of
company. As per the recent survey, it has been evaluated that due to pandemic lock
down the turkey have faced a lot of challenges related to GDP (Achinas and et.al.,
2019). The country has 22% of corporate tax and income tax rate is 15%-40%
depending on the income of people. As per the latest survey, purchasing power parity
for turkey was 2.2 LCU per international dollars in the year 2020. A slight change in this
rate and export import trade will impact the business operation so the cited organization
needs to keep track on changing economic policies and condition before implementing
any strategy or decision. In the year 2020, Tukey GNI was $9,050, there is a decreasing
trend as compared to 2019 which was $9,690.

Social- nowadays, turkey is facing some social challenges and issues related to
poverty, unemployment and increasing rate of social trends (Christodoulou and
Cullinane, 2019). The company Costco is offering much better wages than other
competitors, they offer various schemes related to health and other facilities to their staff
members. In today's world, people are more concern about health and safety, and they
are more environment conscious. A slight change in social trends will impact buying
behaviour and purchasing power of customer, before implementing any strategy the
cited firm needs to focus on changing trends and understand the mindset of people.
Legal- turkey's judicial system is independent of all external influences, in
addition to this the constitution of 1982 is active in this country (Nandonde, 2019). It
implements the equal rights and treatment of all the citizen both international and locals.
The country is following all the law related to religion, race and language (Pestle
analysis, 2022). Costco Wholesale United Kingdom Ltd have to follow laws prohibits
discrimination in terms of gender and political views and keep track on changing legal
factors to run its business smoothly.
Porter's five Forces- This model is used by many companies in order to identify
and analyse forces that shape business and help them to determine strengths and
weaknesses . It can be used to understand the competition level within the industry and
will increase a long term profitability of the firm.
Competition in the industry- This force shows the number of competitors and their ability
to compete the company (Song, Wang and Zhu, 2018). It has been said that the larger
the number of competitors, the lesser the power of a firm. On the other side, if the
competition is low in the market then Costco has greater power to charge effective price
and achieve good profitability by selling products or service.
Power of suppliers This refers how easily suppliers can influence the cost of
inputs. The decision of suppliers can affect the business operation (Min, Liangwen and
Yue, 2018). If the company has fewer supplier, then company would totally depend on a
supplier and vice-versa. Many suppliers offer benefits to the Turkish companies so that
they can easily able to establish more favourable terms with respect to credit.
Power of customers- If the company has many customers then they have easier
way to charge high price to increase their profitability (Irfan and et.al., 2019). On the

other side, if there is small customer base then they have more power to negotiate
product price as low as possible. In Turkey, the entry of new companies has led to the
reduction of prices, due to this the customer power increases more.
Threat of new entry- It has been said that a firm's power is affected by the new
entry into particular market. most of the new firms coming to turkey market receive
loans from governments. As a result, they achieve good position in the market to offer
better services than other competitors who are not protected by the government of
turkey.
Threat of substitution- The Turkish companies faces a stiff competition from other
players in the market and other industries too because they are offering products or
services at affordable price (Min, Liangwen and Yue, 2018). If the customer has various
options available related to service at effective price, then they will buy those services
from other company. Hence, in this way it will impact the power of Costco.
Relevant framework- To conclude, PESL analysis will be beneficial option for
the Costco Wholesale United Kingdom Ltd, because it will provide detailed information
about macro picture and external environment factors which can impact company's
business operation. With the help of this method, the firm will be able to find out
opportunities and threat.
Why the country is attractive:
The strategic location of turkey has made the country the most attractive place
for foreign direct investment all over the European country. The other countries are
investing more in different areas such as telecommunication, transportation, education
and health, technology and biotechnology etc. as they believe it is a good opportunity
for them to invest in growing industry.

4. Methods of entry and the possible consequences
There are several modes of entry which help the organization to expand its market
which are described as below:
Licensing: Licensing refers to the system which is the systematic arrangement
where the organization used to transfer the rights in order to use the products or the
services to another organization. It s the useful entry method for the organization who
has to expand its business activities in the international market (Park, 2020). By taking
the licence it makes the organization to have the big market share in order to enter into
the new market. This is the contractual agreement in which the firm, or the licensor
offers the assets to the foreign company and taken the royalty fees in exchange.
Franchising: Franchising is another best entry mode which helps the company
to expand and start its business in the international market. It is the repetition of the
same firms in the several countries across the globe. The franchiser used to give
permission to the franchisee in order to start the same business in the different markets.
This can only be taken by the organization if they are having the unique and strong
recognition in order to expand the business in international market.
Joint Venture: Joint ventures are the particulate forms of the partnership that
involves the two different firms. The two firms used to have partnership for the particular
period and wind up the venture after the completion of the project. Two different
companies used to have agreement to work in the particular market. They basically start
the work in the new geographic market by bringing something new or by having the
existing product. The risk and profits of the venture are shared equally or on the basis of
the agreed ratio. The investment is done by both the firms in order to have good
profitability in the market. The two entities used to share their raw material and
machines in order to do conduction. By this it increases the productivity dan profitability
of the business.
Merger and acquisition: This is also one of the best entry mode which helps the
company to merge with the another firm. Merger and acquisition is the entry mode that
used to describe the consolidation of the companies or consolidation of the assets
(Wong, 2020). Merger happens when the two separate entities used to merge with each

other in order to create the new organization. On the other hand, acquisition refers to
the takeover of the entity by the other entity. This helps the company to expand its
business in the international market.
From the above modes of entry, the company can use the merger and
acquisition entry mode which help the organization to expand is market in Turkey. By
merging with the another firm the company can have the good capital and can earn the
good profits. By merging with the company makes the new organization by having the
ownership and management. The new company used to have equals profits and risk
sharing which helps the organization to do well in the international market (Palatnik-de-
Sousa and Nico, 2020). This will have the company to have smooth flow, by gaining the
competitive advantage, it also increases the market share and market size in the
international market. By analysing the above three tasks this will be the best method
which will help the company to expand is market by using the merger and acquisition
entry mode.
The cited organization has not opted the franchising entry mode as it requires the huge
capital in order to expand its business in Turkey. The another entry mode that is
licensing has not adopted by the organization because it does not guarantee revenues
in the markets of Turkey (Park, 2020). Costco has not chosen joint venture because in
this it has to share its profits with the another entity by having the partnership for the
particular venture.
5. Managerial and organizational problems operating in new market
As the subsidiaries operates in the international or in the new market they used
to face many problems. The problems faces by the organization is the organizational
co-ordination, organizational culture and the different organizational structure. These
problems are described as below by using the different models for different problems
face by the company:
1. Organizational co- ordination: The lack of co- ordination in the
organization may create the difficulty in order to operate in the new and
international market. The organization used to face problems like
decrease in the productivity, makes the productivity process complex and

have the delay in the completion of the tasks. The subsidiaries used to
face the difficult in order to manage and co-ordinate with the another fie in
the new market.
2. Different culture: By having the different organizational culture it creates
the ambiguity and poor communication with the other organization. Having
inconsistency in the organization it affects the organizational culture
(Akkermans and Van Wassenhove, 2018). By not having the proper
communication with the companies used to affect the organizational
culture and the subsidiary may dace the organizational problem by this.
Hofstede's cultural dimension is the model which used to define and
understand the differences in the culture across the globe. This framework
used to define and makes the difference between the national cultures
and its impact on business activities. The subsidiaries must focus on this
framework in order to manage the cultural differences in the company.
This model used to suggest that the different factors which makes the
organization to improve the culture and manages the work effectively.
3. Different organizational structure: The different companies has the
different organizational structure (Thuneibat, 2019). Some companies
used to follow the centralization policy and some used to follow the
decentralization policy. In the centralization structure, the powers are in
the hands of the single person only. On the other hand, in the
decentralization the powers and duties are distributed in the company. By
this it manages the work effectively and properly (Budevici-Puiu and
Manolachi, 2021). As the parent company has different organizational
structure so it is difficult for the subsidiary company to manage and it
faces the operational problems.
6. Strategic advice
 In order to create good coordination in the company, the leaders must adopt
effective communication system and build relationship between employees
through group assessment or projects van der (Lubbe and Klein, 2019). It is also
essential to have open communication and motivate employees recognition.

 It is recommended to encourage people from other countries and normalize
culture differentiation through good collaboration. By doing so, the company can
easily enhance their productivity and complete task on time (Bosisio and et.al.,
2019). It is advisable to take regular basis feedback from people and listen to
their concern. It is essential to delegate task according to interest and
qualification of staff members and create a good chain of command.
 Make sure to understand the strengths and weaknesses in the employees and
assign everyone a specific project role so that they can easily understand their
roles and responsibilities (Sudharsan, Breslin and Ali, 2020).
The organization must focus on the above solutions in order to enter the new
market. By having the focus on these operational and managerial problems and
solutions, it will help the company to expand its business in the international market. It is
important to maintain organizational co- ordination, having the best models such as
communication system.
CONCLUSION
To conclude, by focusing on internationalization and strategy like international,
Costco can easily enter new country. Before implementing any decision they are now
focusing on macro environment analysis through PESL, as it is the best way to find
opportunities and threat. In addition to this, the firm focusing to follow merger and
acquisition method as a mode of entry. Lastly, in order to solve managerial and
organizational issues like cultural difference and coordination problems the firm is
focusing on adopting effective communication system.

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