Costco PESTLE Analysis

Published by MBA Skool Team, Last Updated: February 28, 2021

PESTLE Analysis of Costco analyses the brand on its business tactics. Costco PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.

PESTLE analysis is a framework which is imperative for companies such as Costco, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.

Let us start the Costco PESTLE Analysis:

Political Factors:

The political factors in the Costco PESTLE Analysis can be explained as follows:

Costco is a multinational company which has its operations in the countries where the host country has good connections except with China. Due to political tensions between china and US may be a treat to the company in the future. The company didn’t enter into the India where there is a huge market to capture. It is very difficult due to political pressure. The company should have strong political connections with the host countries and the parent country for its smooth operations. The company should also observe the trade policies between the countries where it operates. Costco should also observe the policies taken by the countries after the pandemic which is key for the business. The company should also focus on the stability of the government.

Image: Wikimedia

Economic Factors:

Below are the economic factors in the PESTLE Analysis of Costco:

Being a global brand, Costco’s business is driven by many financial factors.

Due to pandemic, the dispensable income of the people has drastically decreased and reduce their family expenditure. Due to disruptions in the supply chain and the resources cost has risen up. This also cause for the reduction of the profits in the first half of the last year. Due to reduction of virus and economic policies taken up by the government to boost the economy which increase the income of the people. The foreign exchange rates also influence the profits of the company. The vaccination also influences the economy of the world and the world is going to recovery in the fast pace which is a key factor for any business.

Social Factors:

Following are the social factors impacting Costco PESTLE Analysis:

Social behaviour of people plays an important role in a retail chain brand like Costco. From the past few decades, the warehouse retail business has increased a lot. The people are so interested in the business where they get many products at one place. Nowadays people are fascinated towards the E-commerce business. This may be a threat to warehouse retail business. The company should also enter into the E-commerce business which has a great potential to tap. Due to pandemic this trend has increased a lot due to restrictions from the government. The rise in internet and drastic change in consumer behaviours also increased the trend towards the E-commerce.

Technological Factors:

The technological factors in the PESTLE Analysis of Costco are mentioned below:

The warehouse retail business has evolved from the last decades and there was a threat from the Walmart. Due to strong competition, to get profits in the industry the company has to improve its process and supply chain. Every retail brand should also improve its inventory management. To improve the inventory management, the company has used the big data analytics and now the technology has increased a lot. Increase in AI, has provide a lot of opportunities to improve inventory management and process.

Due to improvement in new generation technologies, the supply chain network has become more robust and flexible.

Legal Factors:

Following are the legal factors in the Costco PESTLE Analysis:

Costco is situated in many countries which has different laws and regulations. The labour laws in US is far different from the Labour laws in the China. The laws in the operating business in China is so different from the US. These laws are different in other countries where the company operates. Thus the company has to follow rules and regulations according to the country where it operates. The company should also keep in mind about the employee laws and the laws related to establish the warehouses. The company also ensure the exports and imports of the host countries.

Environmental Factors:

In the Costco PESTLE Analysis, the environmental elements affecting its business are as below:

Costco doesn’t have the operations which impact the carbon foot print much. But the company has to introduce the risk management steps to overcome the risk caused by the disasters.

Due to rapid climate change, the intensity of the disasters has increased a lot in these years. these disasters disrupt the supply chains which is key for the business. So, the company should ensure that its stakeholders should also ensure to reduce the carbon foot print and help to fight against the climate change.

To conclude, the above Costco PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.

This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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