Question

Using the Mapping Activity System described by Porter describe how Costco's business activities support and reinforce its business strategy

Answer 1

Porter would describe Costco's business activities as having the competitive advantage of cost leadership and developing differentiation through its operational strategies like focus on customer service, developing its private label of food products and vertical integration capacities. Costco has the advantage of low bargaining power of suppliers, low threat of new entrants and threat from substitution. It faces the threat of bargaining power of buyers and industry rivalry. Costco follows the strategy of cost leadership thus operates on low profitability margins. It faces considerable competition with other retail stores like Walmart and Sam's Clubs and needs to develop strategy to supports its operations with sustainability and innovate to developed a sustained competitive advantage. Its business strategy to focus on offering greater value to customers needs to be highlighted in its promotions and marketing so as to strengthen its market positioning and brand image. It can add more value to its products and services by maintaining a close relationship with its customers, offering quality customer service and following customer preferences and needs as per the change in market trends and buying behaviour.