Table of ContentsIntroductionCEI FrameworkMethodologyQuick Win MarketsChileFranceHong KongNew ZealandLong Term MarketsChinaIndiaNordic CountriesRecommendationsIntroductionIn this report, we have developed a concise market expansion strategy for COSTCO Corporation considering its markets existing described in the case. First, we developed a framework to limit ourselves to countries most suited to international expansion. Subsequently, after shortlisting the potential candidates, we further analyzed their market attractiveness using Porter's Five Forces, cultural and operational barriers to entry, key challenges and financial data. We then compared countries to select which ones we propose as their highest priority. Finally, we recommend the market entry strategies for the selected countries. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essayCEI FrameworkThe COSTCO Expansion Indicator is a framework that includes both grocery retailing-specific factors as well as COSTCO-specific factors to rank countries based on their suitability for international expansion . Our framework is based on the top 50 countries in the world in terms of food retail market size. Next, we score each country from 0 to 100 based on market size, country risk, market saturation, overall retail growth rate, and doing business index. We assigned each of them the following weighting respectively: 25%, 30%, 15%, 10% and 20%. For COSTCO's specific factors for global expansion, we considered house size, cultural distance, geographic distance, operational feasibility, industry attractiveness, and risk standardization. These factors were inspired by the CAGE and ADDING frameworks for internationalization strategies. The weights assigned to each factor were 10%, 20%, 5%, 20%, 25% and 20% respectively. We assigned relative scores for each factor and then ranked countries based on their total weighted average score. Finally, we compared the results of industry-specific weighted scores against COSTCO-specific weighted scores. Methodology The results of the framework we followed not only provide us with the best markets to enter, but also validate the current markets in which COSTCO exists. We are looking at the Nordic countries. falling in a similar very attractive area from an industry and COSTCO perspective, while developing countries in Africa are at the other end of the graph. It is also essential to note that the result not only skews developed markets but also shows the potential of emerging markets like Hong Kong, China and India. In order to further segment, we divide the graph by choosing the area of ​​high industrial and high COSTCO attractiveness. Countries included in the zone are New Zealand, Chile, Denmark, Sweden, Iceland, Finland, France, Hong Kong, India, China and Norway. However, these countries cannot be looked at in the same way. Markets like India and China are very different from New Zealand and France. That's why we think COSTCO should follow a dual strategy: quick-win markets and long-term markets. We categorize Quick Wins as countries where COSTCO does not need to reinvent the wheel and can apply several concepts from an existing market. ByFor example, New Zealand and Australia share very similar values ​​and culture. Their PPP, consumer preferences and adoption of foreign brands are similar. Given the huge success of COSTCO in Australia, the company can use existing knowledge and build a new market based on it. Although it will take 3-4 years to gain traction, the efforts and challenges will be much less than in other countries. Based on this, we classify New Zealand, Chile, Hong Kong and France as quick-win markets. India, China and the Nordics are classified as long-term markets due to the high ambiguity surrounding consumer preferences, political and economic stability.Quick Win MarketsChileChile is the largest market in Latin America for U.S.-based consumer products. It enjoys a consolidated position as the most developed and advanced economy in Latin America. Thanks to strong and constant growth after the 2008 crisis, the purchasing power of Chileans has increased considerably. Despite sluggish economic growth from 2013 to 2016, due to low copper prices, which led to a decline in domestic consumption, spending in retail channels increased and foreign investor confidence was high. Chile's GDP per capita was $15,346, which is well above the Latin American average. The total food retail market size was $16. 4 billion in 2017, it is expected to grow at an average growth rate of 3% over the next five years. Since 2013, the Chilean food retail sector has seen a huge expansion of stores, especially hypermarkets. Major retail chains are also present in grocery stores like Falabella and Cencosud. Walmart Chile is the largest food retail player by revenue, with a 42% market share and multi-format stores catering to different types of consumers. Cencosud also has two different types of supermarkets, one for price-sensitive customers and the other for quality-conscious customers. Chileans' consumption preferences are shifting from locally produced products to imported and premium products, especially from the United States. According to a Nielson report, 8 out of 10 Chileans are willing to pay for high-end, sophisticated imported products with high quality standards. Despite all the factors that make Chile a very attractive market, COSTCO could face many challenges. in case it decides to enter the retail market. First, it is a highly saturated market dominated by four major retail players. Although there are no warehouse clubs available, there are many warehouse-style hypermarkets in major locations in Santiago and other metropolitan cities in Chile. According to a CERET study, 81% of Chileans choose a supermarket based on its location. This means that COSTCO could set up the first store in a prime location, but this would also incur a high land cost. As a short term goal over 3 years, COSTCO could open 2 stores in prime locations in Santiago de Chile and achieve a market share of approximately 1.9% of the food retail market. COSTCO's target customer would be upper-middle class consumers who are not price sensitive and look for experience-based purchase of premium products. FranceWith a gross domestic product (GDP) of around 2 dollars. With 58,000 billion in 2017, France is the sixthindustrialized economy in the world and the third largest economy in the European Union after Germany and the United Kingdom. Its grocery market in 2018 was worth $275 billion, making it extremely lucrative for new entrants. It is also a country with a large number of large urban areas and a high-income population. Hypermarkets, supermarkets and convenience stores accounted for 75 percent of the country's food retail market, suggesting strong demand for a store like COSTCO. Additionally, due to its geographical proximity to the United Kingdom and Spain, COSTCO's existing markets give it an advantage over others. But France is also faced with multiple challenges. One of them being the strong presence of Carrefour and Auchan in the Hypermarket space. The two players hold a huge share in France and dominate the sector. The e-commerce market is also growing substantially, which is not COSTCO's main selling point. There are also heavy product and pricing regulations, making it difficult for foreign companies to have the flexibility to choose their own assortment. However, these challenges could be overcome if the right partner is chosen to enter the market. Expanding into 3 cities in the first 3 years can help achieve the target of 0.26% market share. This would translate to $765 million in annual revenue and a net profit of $8. 94 million.Hong KongHong Kong is a major commercial and financial center in the world. It is a country that blends Chinese and Western cultures and, more importantly, shares cultures and values ​​with Taiwan, where COSTCO is enjoying enormous success. Hong Kong residents are known for admiring and consuming products from the Western world, especially the United States. The country also attracts huge investments into its markets. According to Hong Kong government statistics, "there are 1,328 subsidiaries of American parent companies in Hong Kong, making the United States the largest source of subsidiaries in Hong Kong." In terms of ease of doing business, Hong Kong is ranked 4th in the world, making it an attractive destination for investors. The retail market is also strong, with average sales of $62. 2 billion, an increase of 8% compared to the previous year. Tax rates are also attractive, with 16.5% being the maximum company value. All of these factors, coupled with the cultural and geographic similarities with Taiwan, make Hong Kong a viable option. However, it is also important to note the challenges. Most of Hong Kong's population does not own a vehicle and prefers to shop on a daily basis rather than in bulk. But given that COSTCO has successfully addressed these challenges in Taiwan, we believe the same could be done in Hong Kong. Starting with opening a store in Kowloon, Coscto is expected to establish an online presence and partner with third-party delivery companies to make deliveries. In this scenario, we hope to reach 0.8% market share within 3 years to achieve a turnover of 500 million and a net profit of 4.4 million.New ZealandNew Zealand has the big advantage to be highly consistent with the Australian market, where COSTCO has proven to be very successful, which could enable COSTCO to apply a “Six Sigma” (measure and analyze) approach to its entry and operations into Australia and to improve and control entry into New Zealand. Additionally, New Zealand's macroeconomic environment is quite promising. considering a food market of 18.5 billion, aconsistent annual GDP growth of 3%, a CAGR of 5%, a strong preference for quality American products, low tariffs on imported products, flexible regulation and low corruption, which have given New Zealand first place in the Doing Business index. The main challenges are the strong presence of offshore online traders, high real estate costs and market concentration, which could be mitigated by: 1) an online presence during construction and shipping from Australia; 2) enter with a rental model to reduce CAPEX; and 3) differentiate COSTCO wholesale from the traditional supermarket model carried by its competitors. Additionally, the average median disposable income of Auckland, Wellington, Christchurch and Hamilton makes its potential target markets host a warehouse, through a wholly owned subsidiary, as it was made in Australia and a partnership with a local courier service for national transportation. Considering the aforementioned 4 locations, COSTCO could achieve a turnover of 523 MUSD and a net profit of 8.34. Long Term Markets China China is the second largest retail market in the world and would soon surpass the United States as the largest market. The food retail market is expected to reach $1.637 billion11 by 2022, larger than India, Japan and Indonesia combined. The market is expected to witness a CAGR of 5.8% over the next five years. Around 35.3% of total retail trade is conducted through online channels, making China the world's largest market for online retail. Online retail is expected to see double-digit nominal growth. Retailers with national networks like Sun Art, Yonghui, Walmart, CRV and Carrefour are reaping the benefits of this expansion by partnering with e-commerce giants. Tencent and Baidu have already taken stakes in Carrefour China in order to enter the retail market. Walmart China has entered into a partnership with JD.com, the second largest online retailer after Alibaba. Walmart Sam's Club has a similar business model to COSTCO and has recently changed its strategies due to a trend away from brick-and-mortar stores. Due to the rapid growth of China's economy, an ever-growing middle class has disposable income. to spend on high-end and imported products. Despite the enormous potential that the Chinese market offers, there are many challenges to consider for a market entry strategy. First, Chinese consumers prefer low-price, low-volume, and high-frequency purchases. Due to nationalist protection regulations, international retailers must adopt localization which can affect their product quality and business model. Given the failure of many U.S. retailers in the Chinese market and the high uncertainty due to regulations and political risks, we view China's entry as a high-risk but high-reward strategy. COSTCO could enter into a partnership with Alibaba to foster the online-to-offline platform and become a supplier of high-quality imported products for wealthy Chinese customers as well as B2B convenience stores. The offline presence would further strengthen COSTCO’s already existing online store. India With a food market of over $600 billion, estimated to grow to $1 trillion in 2020, India is currently one of the most attractive markets in the world. The rural FMCG market in India is estimated to witness a.