Brand Story: Costco and Wal-Mart

Competitor Analysis

The primary competitor of Costco is Wal-Mart, which is equally a global retail brand with a strong presence in the US and Canada. The two companies target similar customers and have the same strategies for retailing their products. The competitive matrix between Costco and Wal-Mart is summarized in the table below.

Wal-Mart Costco
Critical Success Factors Weight Rate Score Rate Score
Customer loyalty matrix 0.2 2 0.4 5 1
Current share in the market 0.55 5 0.75 3 0.45
Competitiveness of the price 0.2 3 1 4 0.8
Global market presence 0.15 4 0.75 5 0.45
Unionization of the employees 0.2 1 0.2 4 0.8
Total 1 3.5 3.8

(Source: Costco Wholesale Corporation, 2016)

From the above table, it is apparent that Costco is in a better position to retain customers and win their loyalty since it has very competitive prices besides an annual fee. Costco allows for unionization of its employees, which ensures that their concerns are addressed in a timely manner. This means that Costco is well-positioned to gain from a well-motivated and highly productive workforce.

Unlike Wal-Mart, which is very strict on employee relations, Costco has a better-organized workforce that is motivated to accomplish duties in an efficient and effective manner. In addition, Costco has a better global market presence than its primary competitor, with a store of 0.45 against Wal-Mart’s 0.15. The better global presence in the case of Costco can be related to a well-developed distribution network, diversified inventory, and a structure that has a global appeal (Costco Wholesale Corporation, 2016). However, Wal-Mart seems to perform better than Costco in terms of market share, especially within the local US market. The better market share in the domestic market can be attributed to Wal-Mart’s longer market presence, spanning more than five decades. In summary, Costco has a better competitive advantage in the local and international markets due to better prices, customer loyalty, and well-motivated employees (Cordiner, 2009). Costco has been strategic in overcoming the monster from an underdog in 1983 into a global brand through product diversification, competitive pricing, and constant employee motivation.

Brand Story Assessment

In order to understand Costco’s competitive advantage, the following external SWOT was carried out on the company’s brand. The findings are summarized below.

SW and OT Strengths
1. Strong distribution network
2. Well diverse inventory
3. Well organized global structure
Weaknesses
1. Injunctions due different legal regimes across the globe
2. Very limited flexibility due to excessive concentration on the retail industry
3. Counterfeit and tarnished brands
Opportunities
1. Crowdsourcing
2. Dynamics of diverse income
3. Entry into the organic food market
S & O
1. Direct-to-consumer market place retail (S1,O1)
2. Expanded diversity in inventory on the basis of customer data (O2,O3, S1,S2)
W & O
1.Focused approach to quality of goods and services with each targeted market (W2,O3)
2. Improved employee remuneration for competitive work environment (W1,W2, O2)
Threats
1. Intense competition from Wal-Mart
2. Potential reduction in customer loyalty as a result of changed preference
3. Dynamics of the global retail market
S & T
1. Market diversification beyond the traditional approach of doing business (S2,S3, T1,T2)
2. Diversified supplier network and contract (S1,S3, T3)
W & T
1. Improving internal recruitment and employee motivation(W1,W3, T1)
2. Strategic advertisement plan to sustain the current market leadership position (W3, T1,T2)

From the above analysis, it is apparent that Costco’s brand is at the apex of the competitive matrix when compared to the Wal-Mart brand and can be placed on the overcoming the monster plot presented by Tim Nudd. Costco rose from a single store to overcome the giant Wal-Mart through strategic brand positioning. The company has concentrated on brand diversification and strategic market expansion while maintaining the quality of products and very competitive pricing. The idea of diversification and multiple branding might help in developing my product it appeals to different classes of customers that can be differentiated by pricing, quantity, and quality (Dagnino & Rocco, 2009). This transformation supports the brand story as working progress that is determined by the positioning and target market as a point of differentiation (Cordiner, 2009).

References

Cordiner, R. (2009). Brand story. Web.

Costco Wholesale Corporation. (2016). About us. Web.

Dagnino, G., & Rocco, E. (2009). Competition strategy: theory, experiments and cases. New York, NY: Rutledge.

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NerdyRoo. (2022, June 1). Brand Story: Costco and Wal-Mart. Retrieved from https://nerdyroo.com/brand-story-costco-and-wal-mart/

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NerdyRoo. 2022. "Brand Story: Costco and Wal-Mart." June 1, 2022. https://nerdyroo.com/brand-story-costco-and-wal-mart/.

References

NerdyRoo. (2022) 'Brand Story: Costco and Wal-Mart'. 1 June.

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