Competitive Sam’s Club operates 620 stores within

Competitive Environment:

The discount stores industry is
highly competitive. Costco Wholesale Corporation directly competes with
Wal-Mart Stores and its subsidiary Sam’s Club, Target Stores, BJ’s Wholesale
Club, and indirectly competes with internet-based business,
Wal-Mart Stores is an American company that was founded in 1945. It operates in
many countries worldwide through Wal-Mart U.S., Wal-Mart International, and Sam’s
Club.68 Target Corporation is also an American company which was founded in
1902 in Minneapolis, Minnesota.69 It operates general merchandise stores in the United
States and Canada. BJ’s Warehouse Club is a privately owned company that
operates within only 15 American states.70

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These stores compete against
each other to offer thousands of products that include a variety of food,
beverages, household essentials, outdoor products, beauty, health, baby,
pharmaceutical, sporting, automobile products, apparel, electronics,
appliances, furniture, and entertainment devices at competitive pricing.

One of Costco’s strengths is
that it is one of the biggest discount warehouse stores with its revenue
growing at an average annual rate of 8% in the past few years.71 However, it
indirectly competes with, which is a rapidly growing internet-based
company that offers price comparison, so consumers can get the best deals using
any computer or mobile device. Amazon’s $79 per year Prime membership provides
customers with free two-day shipping and access to a growing assortment of
household goods.72

Wal-Mart, the largest retailer
in the industry, offers consumers low prices on a large assortment of goods.
Wal-Mart has more than two million employees globally. Their product mix is
tailored to the cultures in which they operate their businesses, offering
consumers’ choice in what they buy. Wal-Mart has developed a reputation for the
mistreatment of their employees; this has negatively impacted their public
relations and corporate image. Sam’s Club, a subsidiary of Wal-Mart, offers
customers a $40 per year membership; while Costco’s competing membership costs
start at $55 per year. Sam’s Club operates 620 stores within 47 states in
America and Puerto Rico. Sam’s Club is the only warehouse club that offers
Apple products and has low membership costs.73

Warehouse Club offers a membership price of $50. BJ’s differentiates themselves
from Costco Wholesale and Sam’s Club by offering differentiated packaging
sizes, and twice the number of products as a typical Costco or Sam’s Club. BJ’s
offers a family-focused atmosphere, attracting buyers who may not fit within
the small business oriented atmosphere of competitor Sam’s Club and Target.
BJ’s has begun to offer organic products at lower prices than competitors,
capitalizing on the growing demand for organic products by consumers.74 Competitor Target Stores has also begun to offer organic and
fresh foods in stores, in a new grocery concept called PFresh.75 In addition to organic foods, Target has started offering
high end products into its mix, attracting high end consumers.


Political-legal Environment:

With Costco being an
international discount wholesaler it brings along more risk legally that the
company has to be aware of. With facilities all over the country and world
Costco has to follow all of the local laws and pay close attention to the zone
that the facility is located.

Depending on the location there
are laws of the products that wholesale companies can provide to the consumer.
For example, some locations will not allow companies to sell alcohol at the
wholesale companies and at gas stations like Washington, D.C. Both of these
products a majority of wholesale companies have available to the consumer which
is a reason the location have a large role in the legal process. To keep a
competitive advantage Costco must find a way to provide all the products and
services they have available to every location. In Washington, D.C where it is
illegal to sell alcohol and gas in the same location, Costco came up with a
plan to split the construction site into two and provide both products with a
wholly owned subsidiary.52

The sale of Tobacco to minors
in the United States is illegal. On April 4, 2013, a Costco establishment
illegally sold Tobacco products to a minor during an FDA enforcement

Federal minimum wage
requirements may change to favor an increase in the United States, causing
retailers to spend more on labor costs, potentially increasing overhead.54

There are several factors that can affect our
company when trying to increase international sales. For example, exchange
rates, adverse tax consequences, and the difficulty in enforcing intellectual
property rights.55 It is harder to enforce intellectual property
rights for signature brands because the trademark registrations vary from
country to country.56 With a company being just based in the U.S or
international there are still strict laws regarding the privacy information of
the members of the company and the vendors that the corporation must abide
could be exposed to legal liability


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