III. SWOT ANAYLSISStrengths Weaknesses

Management Majority of top management officials are “home grown”

Only 6% of Costco employees leave after the first year, compared to 44% of Wal-Mart’sSection B-1

Simple layout may detract from luxury items offered in storeSection B-1

Marketing Increase in comparable store sales 2004-2005 (8%) and 2005-2006(7%)

“Treasure Hunt” aspect makes shopping fun again

Costco’s philosophy is to keep overhead costs low and pass those savings on to customer’s in the form of low prices.

Section B-2

Costco does little to no formal advertising except in the instance of a store opening, so they may not be reaching their full membership potential.

Section B-2

Accounting / Finance

Costco turns over its inventory nearly once a month, which is more frequent that its competitor BJ’s

Costco has consistent Return on Sales and Return on Assets.

Section B-3

BJ’s has a stronger Asset Turnover than Costco.

Costco’s gross profit margin has declined from 2004-2006, while BJ’s has increased.

Section B-3Production & Operations

Costco operates stores in the US, Canada, Mexico, UK, Japan, South Korea, and Taiwan

Because of Costco’s high inventory turnover we generally have the opportunity to sell and be paid for inventory before we are required to pay many of our merchandise vendors

Section B-4

Costco has not yet opened stores in all regions of the globe

Section B-4

Information Systems

Costco has a separate website for stores in each of its international reasons.

Costco offers special online deals each week dubbed “This Week’s Treasure Hunt”

Costco only offers an online retail outlet to customers in Canada and the US.

Costco’s homepage is overwhelming due to the conglomeration of

Cost4co’s website showcases the quality of the products it offers and lets the customer view products from various different angles

Section B-5

graphics.

Section B-5

Opportunities WeaknessesEconomic Costco operates stores in countries with

high GDP per capita and targets customers with high disposable income. US- $40,100Canada-$31,500Japan- $29,400

Inflation Rates are relatively low:US- 2.5%Canada-1.9%Japan- -0.1%

12% of the US population is below the poverty line and 15.9% of Canada’s population is below the poverty line. These people will not be able to afford a Costco membership and are not in Costco’s target market.

Demographic / Sociocultural

Approximately 67% of the population in the US, Japan, and Canada are between the ages of 15-64 and will fall in Costco’s target market.

Costco will have to expend energy and resources for translation of company materials and websites as all of the regions we operate in have a different primary language.

Political / Legal Constitution based democracy in the US and a constitutional monarchy in Canada and Japan are good types of government for retail competition. Governments should not impose any restrictions unless the possibility of a monarchy arises.

Different laws and legal systems exist in each area, so Japanese workers will be subject to different restrictions that American workers or Canadian workers and vice versa.

Technological 159 million internet users in America and 16.11 million in Canada have access to Costco’s website and can make purchases online.

57.2 million internet users do not have access to online purchases in Japan.