COMPREHENSIVE ANALYSIS OF COSTCO'S BUSINESS MODEL

Abstract

This research paper examines the distinctive elements that constitute the business model of Costco Wholesale Corporation, focusing on its achievements from 2014 to 2024. The paper attributes Costco's success over this decade to a unique business approach grounded in its mission statement and its “membership-only warehouse club” model, which serves as the framework for its operations. The study utilizes various analytical business tools, including Porter’s Five Forces, the Ansoff Matrix, and Porter’s Generic Strategies, to evaluate the internal and external factors behind Costco’s sustained growth. Findings indicate that within Porter’s Five Forces framework, competitive rivalry, the bargaining power of consumers, and the threat of substitutes are primary concerns for Costco. In contrast, the bargaining power of suppliers is less critical. Costco’s core cost leadership strategy, centered on maintaining low costs and prices, is complemented by differentiation through exclusive membership benefits, distinguishing it within a competitive retail landscape. Market penetration and development emerge as focal points for Costco’s current fiscal strategy, evidenced by discounts, savings offers, and international expansions, including new locations in Jiangning, China, Zaragoza, Spain, and three upcoming stores in Japan. The analysis also emphasizes Costco’s focus on promotion, pricing, and place within its marketing mix, contributing to its steady growth, exemplified by a 7.75% year-over-year increase, even during economic downturns.