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Free Example of Costco Essay

Market entry barriers refers to the term of obstacles determination that must be overcame by company, carrying entrance to a specific market. George Stigler defines market entrance barriers as the production costs, which should be paid by firms seeking to enter the market, but do not have to be paid by the companies that are already in it. At the same time Franklin Fisher defines this term as: it is something that prevents company’s market entry when entry is socially profitable). Joe Bain discuss this term as it refers to all the barriers to entry the market, which allows companies that are already operating at the defined market, to have more profit without average entrance risk. To summarize, market entrance barriers are factors both objective and subjective, because of which for new firms it is difficult and sometimes impossible to start a business in the chosen industry. There is also the term that is closely related to the new market entry barriers and it refers to the non-strategic barriers. This term is defined by fundamental industry conditions factors and the objectives characteristics of the industry part, which are independent from the company or poorly impacted by it.

There are certain barriers that company can face during the new market entrance. The first one is related to the advertising or marketing performance. Companies that are already working at the market can make hardly to appear conditions for new competitors due to the high cost of advertising, which new companies are unlikely to pay. This theory is known as the "theory of advertising market power". Already running companies through the advertising may create consumer perception of differences between their brands and others’ ones, at such extent that consumers could find them a bit different from the goods. This makes it very difficult for new companies to attract buyers. The next barrier that company can face during market entrance refers to the resource management. If the domestic company controls a vital resource of the particular industry, other companies would not have chance to enter the market. Another barrier relates to the ownership of technology and know-how, the preferential access to the materials, the predominant geographical position, and the learning curve of the companies that already operates in the market. The customers’ loyalty level is the key barrier for the company. Large companies in the market can have lots of loyal buyers of their services/products. The presence of strong brand can be a serious barrier for entrance. Arrangements with partners factor is the next barrier that company can face during the market entrance. Exclusive agreements with key suppliers and retailers can create problems for entering the market. Government regulation of the economy can make it difficult to enter the market or even make the entrance impossible. In an extreme case, the government can make competition illegal and establish a state monopoly. Requirements of licenses and permits may also increase the volume of investments required for entry. There are lots of others market entry barriers, but the main of them were already listed. Others become specific for different industries and specific firms conditions.

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Costco Wholesale Corporation

Costco Wholesale Corporation is the world's largest network of self-service warehouse club typed and the fifth largest retailer in the U.S. sales. The company covers 85th place in the Fortune Global 500 (2011). Costco Wholesale is the largest company all over the world in its segment. Although the number of outlets of the company is less than Sam's Club Company has, but by sales volume Costco takes the 1st rank. Costco Wholesale Club system has 57 million members. Overall Costco focuses on selling products of a limited number of manufacturers at the lowest prices. Orientation to the small amount of producers maximizes sales of certain brands of products, which allows manufacturers to receive additional discounts.

Costco is an international company that is operating in the US market, Canada, UK, Japan, Korea and Taiwan markets. Company wants to grow, therefore it is willing to enter the Australian market and to set up their business there. The decision to perform in Australia was made because of consumers’ behavior similarity between Americans and Australians. It was unproven argument that may cause some difficulties for company. Therefore, the Costco would face some problems during the new market entrance. The key problems for Costco successful performance would be caused by customers, because of consumption culture in Australia. The company maintains its performance in the shopping style that is opposite to the Australian one. As a result, some time would be needed in order to smooth these differences. Australian people are conservative ones and they prefer to use local products and to go to the habitual places for shopping. It is another barrier that Costco has to overcome with. This implies that Costco would face strong competition from the local retailers and their brands. Company would have to minimize its prices in comparison to such retailer brands as Aldi. Costco Company would have to fight with both the strong competition and people’s consumption habits. Costco will need a lot of advertising, at the same time it is well known that Australian advertisements market is highly regulated one and has high prices for it. It is the first time that Costco will face the government regulation procedures. Other ones are connected to the taxes and labor policies. In Australia labor costs and expenditures are very high. Therefore, company has to make deep analysis of advertisement and labor policy in order to avoid high government penalties.

Costco is a huge company that has good chances to expense its performance into Australian market. Before doing this company needs to make deep analysis of all spheres that are connected to the Costco performance, to find out and evaluate all risks and problems company can face with.

Code: Sample20

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