Global Business Report: Costco's Strategy, Environment, Implementation

This report provides an analysis of Costco Wholesale's global business operations, focusing on its strategies for international expansion and the associated risks and opportunities. The report begins with an overview of Costco's company background and the global business environment, including political, economic, social, and ethical factors influencing its operations in countries like Malaysia. It delves into Costco's internal business environment, highlighting its core competencies such as research and development, brand management, its unique business model centered on membership subscriptions, and its low-price and treasure hunt strategies. The report further examines Costco's entry strategies into new markets and the implementation of these strategies, discussing the advantages and potential challenges. The conclusion summarizes the key aspects of Costco's global business approach and its implications for sustainable growth and competitive advantage. Desklib provides access to similar solved assignments and resources for students.

Running head: GLOBAL BUSINESS
GLOBAL BUSINESS
Name of Student
Name of the University
Author Note

1GLOBAL BUSINESS
Executive Summary
Global business refers to the trade of the goods or services of the company internationally at a
global level and carrying out its operations across the borders. It is also known as globalization
because it involves carrying out international transactions of goods and services. International
transactions will include: people, resources and other physical resources and services such as
financial services and others. There are various risks associated with the same such as
operational risks, environmental risks, technological and various other risks. The Company
chosen for the purpose of this study is COSTCO wholesale which is engaged in providing
warehouse clubs. The company belongs to the retail industry and carries out the services
provided by the company includes merchandising activities, warehouse club and carry options.
The main aim of the paper is to help the business carry out its operations across the country at
global levels and the risks associated with the same. The paper has discussed about External
business environment, internal business environment, the strategy used by the company for
entering new countries for expanding its operations, implementation of the strategy for entering
new business markets and finally the paper has discussed about the conclusion. There are
numerous advantages and risks associated with the decision of global business. The paper has
discussed about the same.

2GLOBAL BUSINESS
Table of Contents
1. Introduction and Company background...................................................................................3
2. External business environment....................................................................................................3
3. Internal business environment.....................................................................................................8
3.1 Competence: Research and development..............................................................................8
3.2 Competence 2: Brand management.....................................................................................10
3.3 Competence 3: business model of COSTCO.......................................................................11
3.4 Competence 4: low price strategy and treasure hunt strategy of Costco Company............12
4. Entry Strategy............................................................................................................................12
5. Implementation..........................................................................................................................15
6. Conclusion.................................................................................................................................16
References......................................................................................................................................18

3GLOBAL BUSINESS
1. Introduction and Company background
Global business or international business refers to carrying out operations of a company
beyond the national boundaries and includes carrying out operations in many other countries
((Watson et al. 2018). It includes all the international transactions of goods and services such as
transfer of people, physical resources and many others and international services include
financial services and others. There are however many risks associated with the global business
such as the operational risks, financial risks and other risks. There are various modes of entering
in case of international business such as joint venture, acquisition, licensing and various others.
The company chosen for the purpose of this study is the COSTCO Company that is a
multinational Company of US and is engaged in providing services of warehouse clubbing,
merchandising and cash and carry services as well (citeseerx.ist.psu.edu 2019). The company is
ranked as second after Walmart in providing retail services. It belongs to threw retail industry.
The main aim of the paper is to discuss about the internal business environment, external
business environment, the entry strategy of the company and the implementation of the same
strategy (pure.au.dk 2019).
2. External business environment
Political factors
of the country
Laws operating
in the country
Economic
conditions of the
country
Social factors
existing in the
country
Ethical factors
or the existing
norms of the
country
The political Legal factors of a The economic Social factors Ethical factors

4GLOBAL BUSINESS
factors in any
country refer to
support of
government that
is available in the
company and the
political stability
and environment
in the country. it
directly affects
the operations of
the companies in
the country.
Political factors
may affect the
business
positively or
negatively. The
political factors
are providing
good
opportunities for
the company
country
determine the
operations of a
company and
may affect it
negatively or
positively. These
include the
regulatory
frameworks and
other laws for the
same purpose.
The Malaysian
trade and
enterprise a
government
agency of new
Zealand provides
information
about the
opportunities to
companies for
operations in
conditions in a
country refer to
the factors that
affect the
competitiveness
of the country’s
environment and
include factors
such as the
inflation rate, the
employment, the
wage rate and
others. The
economic
conditions of the
country are such
that it supports
the entry of
COSTCO
company into the
Country because
of the high cost
of living of
refer to all those
factors that affect
the personality,
lifestyle and
attitude of the
people of the
country. The
company will
have a difficulty
in operating its
store in Malaysia
due to
subscription
members shop
only model
because people
may not be
willing to pay
such a higher
amount as their
cost of living is
already high in
Malaysia. The
refers to the
beliefs of the
people of the
country
regarding ethics.
Some of the
common ethics
are integrity,
honesty and
others. The same
is to be
maintained by
the company
carrying out the
same. Malaysian
has ethics
committee in
order to look
after the ethical
issues of
corporations,
community and
other fields. The

5GLOBAL BUSINESS
because it will
help the existing
local brands of
the country to get
a platform for
sale and enhance
their sales
through this store
in U.S. The
company usually
occupies 60% of
the supplier
market such that
they can have
regular supply of
their products
from them and
therefore these
activities of the
company will
help in
improving the
conditions of the
Malaysia. The
government
looks after issues
related to human
rights,
intellectual
property rights
and other issues
for the
organizations
carrying out its
operations in the
country.
people. The
people of
Malaysia need
stores that will
meet their
requirements at
lower costs and
the company is a
bulk discounter
company through
its wholesale
activities.
Moreover, the
COSTCO
company will
help in
improving the
economic
conditions of the
people because
the company
aims at providing
employment
company is
however aiming
at improving the
customers
experience by
bringing a totally
new way of
shopping and this
will be achieved
through its
warehousing
strategy that will
help in providing
best quality
goods to the
customers
through a frill
free warehousing
option. The
company is also
aiming at
improving the
customers
company may
have to face
some problems
while operating
in the country
Malaysia because
there the people
are not
accustomed to
creating
membership
cards for
shopping and
their culture is to
simply go to the
shop and do their
work without the
need for any
membership
cards. However
this new model
of the company
that will be

6GLOBAL BUSINESS
existing suppliers
and local brands
financially and
therefore the
entry of the
COSTCO in
Malaysia is
favored by the
government of
the country.
COSTCO
company is
provided with
opportunities in
the country due
to these reasons.
opportunities to
about 350 propel
approximately.
The company is
known for
providing goods
at 20-35% lower
cost than the
market prices
through its
wholesaling
activities. The
company is
aiming at
improving the
living conditions
for the people by
providing them
opportunities of
buying high
quality goods at
low prices
through its
experience by
providing them
with a range of
products.
However the
only risk that the
company is
facing presently
is the way the
people will react
to its
membership
subscription only
model because it
many members
do not subscribe
they may go into
losses.
adopted by the
company for
carrying out its
operations in the
new store in
Malaysia
requires people
to carry out the
shopping
activities after
the subscription
membership has
been obtained by
them. The people
in Malaysia
believe in
barging and the
company
provides the
same to its
customers
through its
wholesaling

7GLOBAL BUSINESS
warehousing
strategy.
activities. The
Malaysians travel
a lot and
therefore have
good experience
about overseas
market and
therefore the
company needs
to ensure that it
is providing all
the offers that is
provided in other
countries
otherwise they
will face
problems.
Country has
various policies
and regulations
to ensure that
enterprises
carrying out

8GLOBAL BUSINESS
activities in
Malaysia carry
out the same in
an ethical way
and takes strict
actions any
issues related to
human rights,
illegal use of the
intellectual
property rights
and others.
Figure 1: Table of external business environment
Source: (created by author)
3. Internal business environment
3.1 Competence: Research and development
Research and development refers to the activities undertaken by the company in order to
develop new products and services. Research and development activities provide competitive
advantage to the company. The innovation may be related to products and services or it may
even be related to the processes. COSTCO Company spends huge amounts of money on
research and development. The company is engaged in providing goods and services at lower
prices due to its innovative processes and business model (Azuayi, 2016). The company uses a

9GLOBAL BUSINESS
business model of membership subscription and through its wholesaling activities it is able to
provide high quality goods to its members at lower prices.
Figure 2: VRIO framework
Source: (www.tandfonline.com 2019)
Valuable resources Rare resources Inimitable resources Organized resources
Yes the company has
valuable resources
Company innovates
and produces high
quality goods at low
price and earns
customers loyalty
Yes Yes Yes
The sustained
competitive advantage
of the company is
customer’s loyalty
arising out of product
that is produced at

10GLOBAL BUSINESS
lower costs.
Figure 3: Table of VRIO resources and framework
Source: (Created by author)
VRIO Framework discuses about the organizational capabilities, resources and
competitive advantages that can help the organization in the long term and can differentiate the
company from its competitors (Chung and Enderwick 2001). The company has been capable of
earning the customer’s loyalty due to its high quality goods and services at lower prices.
3.2 Competence 2: Brand management
Brand management refers to the way a particular brand is perceived by the customers.
Brand management helps in value creation. In order to carry out brand management it is
important for the company to enter into good relationship with the customers and to provide
value to the customers. Costco value chain aims at analyzing the activities of the company from
the stage of its introduction to the stage of completion (Morschett, Schramm-Klein and Swoboda
2010). This method helps in providing value to the total cost. The main aim is to provide best
quality goods at minimum cost. The company aims at providing value to its customers through
its information engineering techniques and other technological advancements due to which they
are able to provide high quality goods at lower prices (Emeraldinsight.com. 2019).

11GLOBAL BUSINESS
Figure 4: table showing competency
Source: (created by author)
3.3 Competence 3: business model of COSTCO
The company uses the model of subscription membership sales model under which the
company provides high quality goods to its members at prices lower than the market price on
selected range of products by producing high volume of sales and turnover of inventory
(www.inderscience.com 2019). This technique allows the company to sell its products to the
customers at low prices and the company earns profit by getting subscription of the members and
this allows a competitive advantage to the company. This model is dependent upon the
customer’s membership and renewal of the same. This model therefore shows the customers
loyalty because the satisfied customers will renew their membership through subscription and
therefore it acts as a core competency of the company (Articles 2019). Customers whose cost of
living is high want to buy products and services after bargaining such that they can get those
goods and services at lower prices, the company believes in providing goods and services at 25-
35% lesser than the supermarket price and through this business model of the company can get
their customers coming back to them (Baena and Cerviño 2015).
Primary activities Secondary activities
Information engineering and other
technological capabilities still determine and
prolife the competitive to the company through
information engineering.
Information systems, R&A and others are the
major secondary activities of the company.