Costco Wholesale Corporation’s generic strategy (based on Porter’s model) dictates the company’s approach to maintaining its competitive advantage. As the second biggest retailer in the world, Costco follows its generic competitive strategy to directly compete against other giants, especially Walmart. On the other hand, Costco’s intensive growth strategies determine the actions suited to grow the business. The company uses its intensive growth strategies to continue expanding worldwide. In spite of the tough competition with Walmart and local players, Costco remains strong and competitive, thereby showing the effective implementation of its generic competitive strategy and intensive growth strategies.
Costco Wholesale Corporation’s combination of its generic competitive strategy and intensive growth strategies enables the business to grow despite competition with firms like Walmart.
Costco Wholesale’s Generic Strategy (Porter’s Model)
Costco Wholesale Corporation’s main generic strategy for competitive advantage is cost leadership. This generic strategy entails low costs reflected through low prices. Customers expect significant savings when they buy from Costco. However, Walmart also uses a cost leadership generic competitive strategy. To set itself apart from the competition, Costco also partly employs broad differentiation as its secondary generic strategy. This second generic strategy makes the business stand out based on certain characteristics. For example, Costco differentiates based on value or quality through Kirkland Signature, which is the company’s house brand. Thus, the broad differentiation generic strategy leads to competitive advantage and allows Costco to compete based on quality, on top of low prices based on the cost leadership generic strategy.
One of Costco Wholesale’s financial strategic objectives is cost minimization through economies of scale, which relates with the cost leadership generic strategy for competitive advantage. In addition, the strategic objective of keeping superior quality applies to Costco’s broad differentiation generic strategy, especially the Kirkland Signature brand.
Costco Wholesale’s Intensive Strategies (Intensive Growth Strategies)
Market Penetration. Costco Wholesale Corporation’s main intensive growth strategy is market penetration. This intensive strategy supports growth though more sales to markets where the firm already operates. For example, Costco uses aggressive marketing campaigns to attract more consumers to its warehouses/stores. A strategic objective for this intensive growth strategy is to increase customer retention, such as through Costco’s discounts based on membership. Costco Wholesale’s generic competitive strategy of cost leadership supports this intensive growth strategy by attracting customers based on low prices.
Market Development. Costco Wholesale’s secondary intensive growth strategy is market development. This intensive strategy enables the company to grow through sales to entirely new markets or market segments. For example, Costco opens new warehouses/stores in new locations, such as overseas markets, to gain new customers. A strategic objective for this intensive growth strategy is to expand the supply chain to support new warehouse/store locations. Costco’s generic competitive strategies of cost leadership and broad differentiation help attract new customers to newly opened locations.
Product Development. Costco Wholesale’s tertiary intensive growth strategy is product development. This intensive strategy supports the firm’s growth through the introduction of new products. For example, Costco adds time-limited or seasonal products, as well as new products under the Kirkland Signature brand. A strategic objective for this intensive growth strategy is to establish alliances with manufacturers for co-branding of their products with Costco’s Kirkland Signature brand. This intensive growth strategy supports Costco’s generic competitive strategy of cost differentiation through the high quality associated with Kirkland Signature.
References
- Costco Wholesale Corporation (2015). Kirkland Signature Means Quality and Value.
- Costco Wholesale Corporation Form 10-K, 2015.
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