International Marketing Analysis: Costco's Market Expansion Strategies

This report provides an in-depth analysis of Costco's international marketing strategies, focusing on its expansion into new markets, particularly Africa. It examines the key international factors shaping the competitive environment, including product and service offerings, consumer base, government regulations, and existing market strategies. The report details Costco's approach to foreign market research, emphasizing market segmentation, trend analysis, and the evaluation of available information. It identifies major competitors like Shoprite and Woolworth and analyzes their market strategies. Furthermore, the report explores Costco's marketing mix (product, price, place, and promotion) and its market entry strategies, including a SWOT analysis. The report highlights Costco's strengths, such as its extensive warehouse network, and provides recommendations regarding compliance with employee agreements and employment rights. The report concludes with a comprehensive overview of the challenges and opportunities facing Costco in the international market, offering valuable insights into its global expansion efforts.

INTERNATIONAL
MARKETING

Table of Contents
1. EXECUTIVE SUMMARY.........................................................................................................1
INTRODUCTION...........................................................................................................................1
2. BACKGROUND.........................................................................................................................2
The key international factors shaping the competitive environment..........................................2
The competitive rivalry in the industry of new market...............................................................3
3. INTERNATIONAL MARKETING STRATEGY......................................................................4
Marketing mix ............................................................................................................................4
Market entry strategies................................................................................................................4
SWOT analysis............................................................................................................................6
RECOMMENDATION...................................................................................................................7
CONCLUSION ...............................................................................................................................7

1. EXECUTIVE SUMMARY
The report evaluated the factors' organisation which helps the company in entering into
international boundaries. It analysed that the new market strategies of leading wholesaler of
United states when entering into foreign market. Researching international factors of competitive
environment when entering into new market act as tonic of the retailers as it assist the company
in determining various changes according international environment. It evaluated 4 factors of
international competitive environment of Africa that is, Products and services, strong Consumer
base, strict Government regulations and Market strategy of existing retailers. Further, it
discovered that in order to expand market Costco focuses some necessary factors of investigation
in foreign marketing research that are, Segmenting market, analysing trends of foreign market,
Effectiveness of marketing, evaluation of available information. The report revealed the two
major competitors of Costco in Africa which are Shopwrite and Woolworth dealing under same
industry and have strong consumer base. Moreover, there are various marketing strategies
implemented by 4 p's of marketing mix which assisted the company in determining the
availability and value of its products and services in its existing market which will be beneficial
for growth and development in foreign market. Apart from this it discovered the major strength
of Costco which lies in its 600 locations because of which it holds the largest membership of
warehouse in US. In addition, this the report stated that the company has an advantage over
expanding its market as it posses all the qualities of fulfilling consumers needs and wants
Hence, the report suggested that the firm need to follow and comply with employee agreement
and employment rights because non compliance with regulation is a punishable offense which
can interrupt the growth and development of company in new market.
INTRODUCTION
International marketing act as the tonic for business growth and development as it assit
the enterprise in promoting its organisational functions across the national boundaries. It
comprises making marketing mix decision regarding expansion of firm (Kraus, Meier and
Schuessler 2016). The report will analyse the international marketing for Costco the leading
Wholesale retailers of United States. Further, the report identify the marketing strategies
followed by the entity to stabilise and expand its market in international boundaries. Beside the
report will outline the competitive rivalry of new market like Africa for Costco. Thus, it will
determine the strategies implemented by the Wholesaler before entering into foreign market.
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Costco is the largest America membership only warehouse club. In the world after walmart its is
the second largest retailer in the world. It is one of world's largest retailer of choice and prime
beef , organic food .This organization is been selected as it is well-known and largest retailer in
the world. In the world it has about 741 warehouses and in UK it have about 28 warehouse. At
low prices this company sells its product .These goods are basically bulk-packages and to large
families and businesses they are marketed . The range of products and varies is been expanded
gradually by this company .Many product such as hot tubs, home appliances , fine wine ,solar
panels and many others are been sold by this company. Costco provide cultural sensitive
products as they know that all the people are not same and also that their lifestyle and culture
also different from each other.
Pestle analysis of Costco
political factors – On the politician influences in its remote or macro environment the
performance of Costco's stores is partly dependent. This company can be faced due to more
complex polices of environment and also the animal right polices. In major markets this
company has the opportunity to grow with minimal disturbance .
Economic factors- With economic situation this company need to align its business. Even though
the economic growth remains low in UK but this company can improve its growth and stability
in UK.
Social factors – Costco wholesaler has the opportunity to enhance its corporate social
responsibility programs .This will also strengthen the image of brad and also the perception of
customers. By implementing polices and strategies for animal rights and environment
performance this company can improve satisfaction among customers.
Technical factors – A large market share can be attracted by costco through e-commerce. In
order to enhance its business efficiency the company can also implement new automation
technology.
Environmental factors – This company is faced by climatic conditions as it is hugely dependent
on optimal climatic conditions. In order to satisfy the changing lifestyle of customers this
company mus adapt its product mix.
Legal factors- This company can enchain its employment laws in order to exceed the
requirements of employment laws. To be more accurate GMO labelling in its food products the
company can also impose new polices.
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2. BACKGROUND
The key international factors shaping the competitive environment.
Analysing key international factors of competitive environment when entering into new
market act as tonic of the retailers as it assist the company in determining various changes
according international environment. Costco evaluates factors international competitive
environment of Africa which are as follows:
Products and services: Recognising the existing retail products of market is important as
it helps in identifying the need of market and taste and preferences of international consumers.
Products and services are the reason behind earning of the organisation therefore it is important
for firm to make sure that its product is different from other retailers in order to attract buyers
(Berthon, Plangger and Shapiro 2012).
Consumer base: Entering into new market of tough competition where the customer
base is strong becomes very difficulty for Costco to attract the buyers towards its products.
Therefore, to grab the attention of consumers the organisation need to understand the taste and
preferences of buyers in order to launch some new product different from any other retailers
which can assist in company is attracting individuals and stabilising its base in international
market.
Government regulations: Understanding and complying with all the regulation of
foreign market is the most important function as it provide the base for growth and development
in new market (Zhou, Wu and Barnes 2012). Moreover, the employment legislation of Cost co
are very weak because of which the company lacks the effectiveness of workers so in order to
enhance the spirit and effectiveness of employees the enterprise need to provide healthy and safe
working environment to workers. Moreover, it is important for the business to sell legally
accepted products because the new market condition for outside retailers in Africa are risky and
can harm the existence.
Market strategy: Implementing the use of various marketing strategy to attract
consumers and promote goods and services in new market plays a vital role in growth and
development of business in foreign market (Gabrielli and Balboni 2010). Marketing strategies
act as tonic for the enterprises which are expanding its business operations as it provides an start
to organisational functions. Apart from this, attracting consumers towards new retail organisation
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ins next to impossible there the most important step which assist the company in expanding
business is developing a good customer base (Powers and Loyka 2010).
In addition to this, the International marketing manager of Costco focuses on basic but
necessary factors of investigation in foreign marketing research which are described under:
Segmentation of market: The management first divides the market into sub- groups with
according to features. The division is done keeping in mind the basic factors like gender, choices,
demographics, personalities etc.
Trends in the market: The wholesaler understands the market trends band customer taste
and preferences which keeps on fluctuating that is why marketing team of organisation keeps a
record of marketing trends for specific period to determine the need of goods and services
(Berthon, Pitt and Shapiro 2012).
Information available:The firm collects the pricing strategy and information about the
international market so that it becomes easy for M&S to launch its products at prices which are
easily accepted by the buyers.
Effectiveness of marketing: In this the manager evaluates the risks, product research,
competitors and customers analysis in order to formulate strategies which can stabilise the
functioning of business operation in international market (Berthon, Plangger and Shapiro 2012).
The competitive rivalry in the industry of new market.
The biggest competition in Africa for Costco are, Shopwrite and Woolworth the leading
retailers of Africa.
Shopwrite: The leading retail chain of Africa whose ultimate aim to serve customer
satisfaction at possible lowest pricers. The company as strong consumer base as it offers various
types of products and services and at easily affordable prices. Te ultimate of the company is to
develop a consumer base by earning loyalty points. Further, the retailer focuses on serving
quality goods and services which is major reason behind the strong customer base of Shopwrite.
Woolworth: It is the second leading retailer organisation of Africa serving consumer
satisfaction since ages. The ultimate motive of the business is to serve customer satisfaction and
earning maximum returns. The products of this retailer are sometimes at high prices according to
competitors but on the other and it offers unique goods which can not be easily substituted.
Hence, in order top attain competitive advantage cost co need to make differentiated
strategy by formulating and amending the plans according to rivalries.
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3. INTERNATIONAL MARKETING STRATEGY
Marketing mix
In order to expand its market, the retailer will have to analyse the competitors marketing methods
to attract customers of new market Further, marketing mix plays a vital role in determining and
amending marketing strategies according to new market requirement. The 4p's of Costco
marketing mix are as follows:
 Product : The product base of the company is strong as it offers various kind of goods to
attract customers. The organisation deals in Appliances, grocery, furniture, electronics,
kids, toys, home improvement, health and beauty, optical, travel, jewellery and many
more. Therefore, existence in new market will assist the company in making easy
availability of goods (Kraus, Meier and Schuessler 2016). The products such as photo
printing services is also offered by Costco. In order to consider degree of diversification
this company has expand its product mix. The life insurance services and payroll services
is also offered by this company.
 Price: The price strategy of the organisation depends on the market changes and
requirement. Basically, Costco is wholesaler and that is the reason it offers products
services at lowest possible prices but still in order to maximize profits and to generate
revenue the firm uses high low pricing strategy in which it fluctuates the price of
commodities according to the demand of consumers. The market oriented marketing
strategy is been sued by this company. The marketing conditions is been used by this
pricing strategy in order to set up price. In comparison, with other firms in retail market
this company offer the lowest possible price. The discount is also given to customers
which will help customers to save money.
 Place: Due to availability of various kinds of goods at one place, the company holds
major advantage of customers as it provides easy way of buying products. Further,
Costco sells products and services through online application, stores and online stores
which make convenient buying opportunity to consumer. In order to distribute products
costco's main places are warehouse style stores, the costco online stores and costco
mobile app.
 Promotion: For promotion the enterprise make use of every possible promotional
technique which includes, sales promotion, direct marketing, personal selling and public
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relations (Ruzo, Losada and Díez 2011). Further, in order to attract the consumer
towards services the company make use of attractive strategies like, schemes, discounts,
attractive packaging, labelling and many more tactics which can helps the business in
attaining growth and development. The fours main marketing communication such as
sales promotion, direct marketing ,personal selling and public relation etc are being used
by this company in order to sell out its product in target market.
Market entry strategies
In order to enter in foreign market and establish the stable market, company need to evaluate
investment factors which comprises, licensing policy, franchising, contract manufacture and
management contracts.
Licensing: The grant by the government of international country to the company for
establishing its markets in international boundaries. Costco pays royalty to licensor and this
provides the right of selling goods and services in new market. It is the method which assit the
organisation in attaining rights like, trademarks, patents copyrights and unpatented technology. It
is important for Wholesaler to have licence before expanding its firm in foreign markets because
of following factors which are described under:
1. It is mandatory for the company to have licence because licensor hold the right of
investigating about any firm at anytime (Gabrielli and Balboni 2010).
2. The firm gets benefit at less investment on research and development.
3. It assists the retailer is reducing risk of product failure in foreign market.
4. It provides the opportunity to enterprise to generate royal income and revenue from
existing property.
5. Costco tests situation of international market before entering with the help of foreign
direct investment.6. It is important for wholesalers, because the trade barriers reduce the viability of exporting
which can arise due to government restriction.
Franchising: This provides the rights of marketing of goods and services in which the
company holds legal benefits of using trademarks and branding. Retailer takes training or
assistance from franchiser of sourcing components and analysing control over franchise methods
of operations. Further, the methods assist the company in reducing risk of expanding into
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international boundaries (Buil, Chernatony and Martínez 2013). Marketing manager of Costco
researches about the types of franchise which are necessary for enabling product franchise,
manufactures- retailer, manufacturing franchise, and wholesalers-retailers franchise. It is
important for Retailer to have these franchise rights before expanding its business functions in
foreign boundaries:
1. This provides rights to franchisor which determines like rules of financing, selection of
location, the best methods of operating in foreign market and situation (Kraus, Meier and
Schuessler 2016).
2. When the enterprise holds franchises than it has power over purchasing in foreign market.
3. Franchising will provide management and marketing benefits to Costco.4. Besides, if the organisation have franchises it has to bear less operating capital
requirement (Thomé, Vieira and dos Santos 2012).
Contract Manufacture: The wholesaler need to evaluate the decision over investment on
contract manufacture as it helps the company in stabilising its business functions of selling
products and services in international market (Buil, Chernatony and Martínez 2013). Moreover,
the contract manufacturer arranges local manufacturer who produces goods at lower prices in
accordance to current labour cost of the foreign market. The benefits of contract manufacturer
for Costco are as follows:
Wholesaler do not need to acquire resources for setting up product facilities.
It reduces the chances of risk from investment in international market.
Management Contracts: This enables the company to use the advanced technology of
international market in case if the company lacks advanced equipments (Kraus, Meier and
Schuessler 2016). Further, Retailer holds management contract right when it focuses on entering
into foreign boundaries, in order to have managerial expertise and technical assistance.
SWOT analysis
When expanding the business in new market it is important for the company to analyse
its own strengths and weakness to identify its own short comings and loopholes in accordance to
international market. The analysis can be done by using business strategy SWOT analysis which
is as follows:
Strength: The major strength of Costco lies in its availability of stores and products, the
organisation offers various types of goods and services to make every essential easily available
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for buyers. Further, currently the company has 600 locations and holds the largest membership
of warehouse in US. Moreover, it has approximately 1500000 staff members and it also old
strong market position US, which states that if company expands it markets it can attain growth
and development just by using marketing strategies (Iason, 2015). Apart from this, Costco his
highly popular and large number of loyalty customers.
Weakness: The company do not provide health and safety work environment to
employees due to which its lack the efficiency of workers. Further, the management do not stand
by its employment agreement which can be risky for the business operations in international
market (Berthon, Plangger and Shapiro 2012).
Opportunities: Expanding business in new market can assist the enterprise in enhancing
its growth and development. Moreover, the acquisition with small size retailers is the strategy
which can beneficial for the organisation when launching its product in international boundaries.
Thus, the major opportunity of Costco is its marketing and promotional techniques which are the
reason behind its increasing and stable consumer loyalty (Kraus, Meier and Schuessler 2016).
Threats: The biggest threat to Wholesaler is its labour relation with Canada which are
not at all good. Further, the treat from private labels and branding can be risky when expanding
business into international countries. Hence, the increasing labour wages and demand is risky for
Costco when launching the products in new market.
Marketing strategy of this company is cost leadership. The lowest price is maintained by the
company. This strategy is also used by retail giants such as walmart .The membership warehouse
club business model is also used by Costco's .This will differentiate it from other retail forms.
Strength
 On every good or services that is been offered the company has very attractive low
prices.
 It is also contributing towards high revenues as it has rapid inventory turnover combined
with high sales volume.
 The high operating efficiency is also contributed due to high sales volume.
Weaknesses
 The membership only warhorse buisiens model is one of the drawback of this company.
 At Costco stores this model encourages custormer to buy but non-member feel
unwelcome at this store.
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Opportunity
 To enter new markets such markets of Asian countries this company has opportunity.
 The coverage of e-commerce sites can also be expand by this company.
 In order to attract more number of customers in its stores the company can increase its
goods and services .
Threats
 In the overseas market the entry of new membership warehouse club threatens this
company .
 This company also faced threat due to aggressive marketing of other retails firms.
RECOMMENDATION
In accordance to market strategy and analysis it can be determined that the company will
be able to perform effectively under international boundaries but there are some major factors for
which Costco need to make considerable changes like, the firm need to follow and comply with
employee agreement and employment rights because non compliance with regulation is a
punishable offense which can interrupt the growth and development of company in new market
(Buil, Chernatony and Martínez 2013). Moreover, the wholesaler need to make good relation
with new market manufacturer and small, retailer in order stabilise its growth and promote its
products and services.
CONCLUSION
The report summarized that expanding business in international boundaries assist the
organisation in big time growth and development. International marketing is beneficial for
determining changes in trends and taste and preferences of consumers. Further, it stated various
factors like segmenting marketing, collecting information, division of consumers which helps Te
management of Costco, the leading retail wholesalers of US, to determining the need of change
in order to attract the buyers of new market. Moreover, the report outlined, the marketing
strategies like 4 p's of marketing mix, and licensing, franchising which are necessary to be
evaluated before expanding market. Hence, the report concluded, with the major competition of
Costco in African retail industry and recommendation to overcome the issue which can arise in
foreign countries.
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REFERENCES
Books and Journals
Berthon, P.R., Plangger, K. & Shapiro, D., (2012). Marketing meets Web 2.0, social media, and
creative consumers: Implications for international marketing strategy. Business
horizons. 55(3). pp.261-271.
Zhou, L., Wu, A. & Barnes, B.R., (2012). The effects of early internationalization on
performance outcomes in young international ventures: the mediating role of marketing
capabilities. Journal of International Marketing. 20(4). pp.25-45.
Powers, T.L. & Loyka, J.J., (2010). Adaptation of marketing mix elements in international
markets. Journal of global marketing. 23(1). pp.65-79.
Berthon, P.R., Pitt, L.F., & Shapiro, D., (2012). Marketing meets Web 2.0, social media, and
creative consumers: Implications for international marketing strategy. Business
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Kraus, S., Meier, F., & Schuessler, F., (2016). Standardisation vs. adaption: a conjoint
experiment on the influence of psychic, cultural and geographical distance on
international marketing mix decisions. European Journal of International Management.
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Kraus, S., Meier, F., & Schuessler, F., (2016). Standardisation vs. adaption: a conjoint
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international marketing mix decisions. European Journal of International Management.
10(2). pp.127-156.
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Online
Iason D. 2015. SWOT Analysis: Costco Wholesale Corporation. [Online]. Available through:
<http://www.valueline.com/Stocks/Highlights/SWOT_Analysis__Costco_Wholesale_C
orporation.aspx#.WeXj7-2Y5CU>. [Accessed on 17th October 2017].
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