Three circles analysis

The growth of Costco is attributed to a mix of its marketing strategy and competitive advantage. The company has leveraged on its strengths and reduced its weaknesses to enable it to compete favorably within its market sector. The purpose of this essay is to analyze Costco’s competitive advantage using the three circle analysis method. The three circles analysis method was created to show the relationships within a company that is critical in ensuring their gain and retain competitive advantage. The paper will begin by highlighting the three circles analysis and proceed to use the analysis to describe Costco’s competitive strategy. Currently, Costco cater for two needs it believes are needed for its most important customers. The first is the ability to buy a wide range of products from a single location.

The second need is the chance to purchase goods at discounts to make savings. These needs directly stem from the belief that their customers value their time and money and shopping experience. Costco warehouses have various systems that give their customers the freedom they require when shopping. The Second Circle The second circle focuses on the company's view of how their customers perceive their offerings. Costco has a high regard for the products and services they offer at their stores. The company believes its customers share this level of regard. The company has tested the perception customers have through its membership status. Costco runs its stores as a membership warehouse club. This shows the regard customers have in the company’s opinion on the products it stocks at its stores (Sheehan, & Stabell, 2010).

The Third Circle The third circle represents the perception customers have of products and services offered by other companies. These companies are within the same market segment as Costco and are the company’s main competitors. Walmart is Costco’s main competitor in the retail and wholesale business (Courtemanche, & Carden, 2014). Walmart has a similar business strategy as Costco’s. This is represented through the similarity in the products it, and its competitors, stock. Costco's point of difference is represented in its strategy to change their inventory frequently and provide customers with better value. The company can assess their customer’s satisfaction through the membership program it offers for one to be allowed to shop at their stores. Renewals show satisfaction in the company’s products and services.