SWOT Analysis
Strengths
One of Costco’s greatest assets is the success of its low-price approach, as presented in Table 1. Warehouse-style shops like Costco stock high-quality products and sell them in large quantities at low prices to generate a profit. Costco is unique in the retail industry by charging its members a $60 yearly membership fee, so it has a strong business strategy (Costco Wholesale Corporation, n.d.).
The lack of an advertising budget is another one of the company’s strengths, allowing it to keep costs low. In comparison, Target’s net advertising expenses across the globe stayed the same in 2021 at USD 1.5 billion (Faria, 2023). Its success rests in preserving a market advantage by minimizing running expenses. As a result, the company can focus less on maximizing its profit from each transaction and offer its clients deeper discounts.
Costco’s philosophy includes offering its members the best possible goods at the lowest possible prices. Buying directly from suppliers allows for the best deals and the highest quality. Similarly, Costco sells its stock via a single-step distribution strategy. Namely, cross-docking is a method whereby incoming products are moved to outgoing transport without needing storage or handling by the receiving business. This usually enables Costco to sell the stock before receiving payment.
Weaknesses
Costco does not have the same breadth of products as some of the larger retailers. As a result, Costco is missing out on potential customers who would shop there if it had a broader range of goods to choose from, both in quantity and variety. Despite having a significant number of warehouses worldwide, the bulk of which are located in the United States, Costco is not particularly well-known outside of the United States.
Costco’s lack of an extensive online store prevents it from attracting a new generation of shoppers. The typical age of a Costco shopper is estimated to be in the mid-50s, suggesting a niche market (Ferris, 2020). As a result, Costco has been working to reduce the median age of its clientele.
Opportunities
The number of individuals using the internet and making purchases from online stores has skyrocketed. This implies that Costco has a fantastic chance to grow its e-commerce business. Every day, more and more people join the ranks of social media consumers. This means that Costco has a fantastic opportunity to expand its membership base through digital ads on social media.
Costco has a fantastic chance to expand into fresh territories, including Asia, and keep opening stores worldwide. Organic food and sustainable practices offer another way to attract new customers. That is significant because Costco’s supermarket and food area can feature and advertise more healthful options.
Threats
A potential threat is security, as Costco has already been the target of a data breach. Costco is at risk of a data leak due to a recent finding of a card skimmer in one of its Canadian distribution centers (Mathews, 2021). Direct and secondary competitors, such as Walmart and Amazon, continually improve their offerings, which poses a risk. For example, rivals have an established online sales network. A company’s image can be damaged if it becomes embroiled in controversy or is found to be marketing knockoffs.
Table 1 – SWOT Analysis
The Ethics of Pursuing a Social Responsibility Program
Ethical Implications
What should be the legitimate business goal has been discussed between the shareholder theory (ST) and the stakeholder theory (SkT). Management’s primary duty, according to ST, is to increase the company’s bottom line as much as possible (How et al., 2019). SkT, on the other hand, promotes the improvement of stakeholder circumstances like the quality of life, job safety, environmental quality, and social justice (How et al., 2019).
Thus, it would be unethical to consider only one hypothesis when choosing a business social responsibility cause. Accordingly, the social responsibility goal should adjust the financial demands placed on investors and the wider social obligations owed to stakeholders. Sustainable business practices and the introduction of more organic food choices would be ideal directions for Costco to pursue.
The identified strengths and opportunities of the business are a perfect fit for this plan. Costco can increase its income and better serve its local community by capitalizing on the growing demand for sustainable products among its target demographics. Therefore, this corporate social obligation initiative would not conflict with Costco’s duties to its shareholders and other important constituents.
Ethical Framework
It is vital to have a particular ethical paradigm when considering the moral legitimacy of organic food and sustainability initiatives. The sustainable development objectives are considered “macro-ethics” in this context, with individual ethics as a key component to the program’s success (Elalfy et al., 2020). In this case, the Consequentialist framework could serve as the individual’s compass, emphasizing the foreseeable consequences of the potential courses of action and the people who will be directly or tangentially impacted.
Moral behavior, from this perspective, is that which results in positive outcomes, while immoral behavior is that which results in adverse consequences (Bredeson & Goree, 2012). When faced with a dilemma, managers should consider what actions would produce the most outstanding results and follow those guidelines. The benefits of this ethical paradigm include the realistic nature of its emphasis on action outcomes. It proves especially useful in this case, where so many individuals are involved.
References
Bredeson, D., & Goree, K. (2012). Ethics in the workplace. Cengage Learning.
Costco Wholesale Corporation. (n.d.). Join Costco. Web.
Cuofano, G. (2023). Business strategy lessons from Costco business model. FourWeekMBA. Web.
Elalfy, A. F., Palaschuk, N., El-Bassiouny, D., Wilson, J. R., & Weber, O. (2020). Scoping the evolution of corporate social responsibility (CSR) research in the sustainable development goals (SDGs) era. Sustainability, 12(14), 5544. Web.
Faria, J. (2023). Target advertising spend in the U.S. 2009-2021. Statista. Web.
Ferris, R. (2020). How Costco makes billions by charging people to shop there. CNBC. Web.
How, S., Lee, C. T., & Brown, D. M. (2019). Shareholder theory versus stakeholder theory in explaining financial soundness. International Advances in Economic Research, 25(1), 133–135. Web.
Mathews, L. (2021). Costco discloses data breach after finding card skimmer at one of its stores. Forbes. Web.