Costco in Colombia SWOT Analysis

Introduction

Costco Wholesale is a multi-billion-dollar worldwide retailer with distribution center club forces in eight nations. The organization's vision is to be "a place where efficient buying and operating practices give members access to unmatched savings" and mission statement "to continually provide our members with quality goods and services at the lowest possible prices." The Corporation effectively applies strategic decisions in operations administration in all its business zones through policies and standards for productivity and regardless of varieties in the economy.

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Costco will enter the Colombian market with the target focused on the middle class. The company will change from the current US business model that typically attracts upper-middle, and high-income households. Notably, the Colombian middle-class population has seen a steady increase, with 54% of Colombians improving their economic status from 2003 to 2009. Approximately 28% of the Colombian population is currently considered middle class. According to the World Bank, a Latin American middle-class can be classified by those living on a monthly income between $1,100 and $5,500. The improvements for the middle class resulted in rising disposable income and increases in the number of middle-class household in Colombia to 3.2 million in 2017, 24.7% of the total households. As middle-class Colombians foster a higher quality life, major improvements are made in the labor market and banking systems. These economic reforms highly correlate with greater financial freedom and demand for higher quality goods.

Bogota has the highest population in Colombia and best potential for the Costco market. Colombia's 'estrato system' is a form of the country's housing subsidies and is divided into stratums 1-6; 1 being the poor urban areas, and 6 is the richest neighborhoods. The ideal locations for Costco to build their brick and mortar stores is in the middle of the 3-5 stratums, North of Bogota. A strategic location will attract the proper consumers that embodies the Costco brand.

SWOT Analysis

Strengths

Costco's reasoning is to give its consumers quality products and no more focused costs. Notably, there is a consumption trend for those with a more disposable income, a shift from basic, subsistence goods to more discretionary items and increasingly, non-tradeable services. Additionally, there is a growing demand for goods and services with high quality.

Weaknesses

The company's execution is exceptionally dependent to its business in North American region. While the company it is more skewed toward more established generation X and has a wide client base as these consumers tend to spend less as they age.

Opportunities

Costco continues to expand its operations both domestically and internationally and Colombia's emerging middle-class has been a key driver for private consumption and an important member of the Colombian economy. The company will have to adapt to the cultural differences in Colombia and make several specific changes to its local business model. Like their entry to Mexico, Costco will convert their language to Spanish for both goods and services to cater the Latin American region.

Threats

The discount warehouse services industry is highly competitive in Colombia and Costco is likely to face significant competition. There are several warehouse operators across the Colombia offering similar product quality, price, and selection.

Conclusion

Costco effectively proceeds grow its activities, because of its solid client loyalty and low costs. The company's capability to deliver quality products, at moderate costs, should interest Colombian consumers globally. While market competition remains high, the administration is coming up with numerous ways to lead the organization into the future.