TAYLOR’S BUSINESS SCHOOL

DEGREE PROGRAMMES
TAKE HOME EXAMINATION
MARCH 2021 SEMESTER

MODULE NAME : STRATEGIC MANAGEMENT

MODULE CODE : MGT60105
DATE : 8th JULY 2021
TIME : 10AM-6PM
DURATION : 8 Hours

This paper consists of TWENTY-FIVE (25) printed pages, inclusive of this cover
page and case.

Candidate Name
Candidate Number Table Number

Instructions to Candidates:

1. This examination paper contains ONE (1) section with FOUR (4) questions. Answer
ALL questions.
2. This is a take-home examination. You are required to work independently on your
examination paper. Two or more students working together on the take home
examination is called collusion and is an inappropriate collaboration. Once you have
the exam questions you are not allowed to discuss with anyone else.

3. Collecting your exam paper

 You have 8 hours to complete the task given in the paper. The paper will be made
available on TIMES on the module exam date.
4. Returning your completed exam paper

 Your answers should be submitted to the Turnitin link on the TIMES page. Please make
sure you have read through your final submission before you electronically submit your
paper.

 The answers should be word processed. Please ensure to submit the word format
softcopy to Times.

 Your attention is drawn to University regulations and School guidelines regarding

plagiarism. These do apply in examination situations and will be enforced. Please note
that your work will be submitted to the Academic Integrity Committee if your work is
found to be in violation of the plagiarism requirements.

 If you fail to submit your report at the end of the examination period (without a
good cause, which will need to be certified in the usual way to be considered),
you will be deemed to have failed to complete the exam and will be awarded a
mark of zero.

5. Technical difficulties with computers will not be accepted as a reason for late
submission.

 You are responsible for ensuring that you save your written work on a regular basis and
that you keep backups in separate locations to protect against hardware failures. You
are also responsible for ensuring that you have adequate time and access to Wi-Fi
facilities.

 In the event you have difficulties submitting your work through Turnitin through TIMES,
please send an email to elangkovan.narayan@taylors.edu.my for assistance.

 The primary option for submission is through the Turn-it-in via TIMES. If this is
impossible for you because your home country does not allow access to TIMES, you will
be allowed to make an email submission. Once I receive your word document, I will
submit it into Turn-it-in for plagiarism on your behalf.

6. Module learning outcome:

MLO1: Critically evaluate the core concepts and theories for strategic approaches to form
sustainable competitive advantage.

Strategic Management
MGT60105
Dr Elangkovan
202103FE
MLO2: Interpret and evaluate the effectiveness of strategy application, using relevant
strategic management models and analytical tools towards organisational operating
performance.

MLO3: Critically craft competitive strategic knowledge & judgment to improve organizational
competitiveness in the domestic and international markets.

MLO4: Illustrate ability in self-reflection on the importance of good strategy execution with
the support of company’s resources, capabilities, and organisational structure.

Strategic Management
MGT60105
Dr Elangkovan
202103FE
Based on the case study – “Costco Wholesale in 2016, C26-C46, in Thompson, A.A. et
al., (2018), Crafting and Executing Strategy: The Quest for Competitive Advantage:
Concepts and cases, 21st ed., McGraw-Hill, New York. Answer ALL FOUR (4) questions.

Question 1 – MLO 1

Based on the case study, critically evaluate the business model and strategy for Costco.
Analyze using the five-force model to develop an industry attractiveness for Costco.

(25 marks)

Question 2 – MLO2 & MLO4

Critically discuss how should Costco utilize its resources and capabilities to establish a
distinctive competence over rival companies.

(25 marks)
Question 3 – MLO2 & MLO3

Analyze from the case study with reference to Porter’s diamond model, advise Costco’s
senior leadership team to anticipate upcoming trends and formulate competitiveness in the
global market.
(20
marks)

Question 4 MLO 1 & MLO4

(a) What recommendations would you make to Costco’s Wholesale to create a winning
strategy in the rapidly changing environment? Provide three (3) recommendations to
support your answer.

(15 marks)

(b) Evaluate critically the three (3) key philosophies for Costco’s management to sustain
the business model in the future.

(15 marks)

TOTAL MARKS: 100 MARKS

Strategic Management
MGT60105
Dr Elangkovan
202103FE
Industry Competition
Several factors intensify the rivalry among wholesale competitors. First, Costco's main
competitors, Sam's Club and BJ's Wholesale, are similar in their capabilities. All three are
similar as they have low prices, have multi-level memberships for both individuals and
businesses, limited but high-quality brand products (e.g., appliances, electronics, clothing,
jewelry). They all also offer specialty services (e.g., gas stations, pharmacies, food courts,
photo centers, etc.). As there are so many similar features of the wholesale club competitors
that there is a weak differentiation between them that increases the risk of members
switching between and among the wholesale club competitors. Members may switch based
on convenience and which wholesale club is offering the best deals. To combat the odds of
members leaving Costco for its competitors, Costco should differentiate itself by possibly
offering a better selection and lowering prices of individual items and more in-store
promotions.

Entry Barriers
The entry barriers into the wholesale industry are relatively high. This industry is a large-
scale operation and has sizable economies, and thus for a new entry, it would require a
large amount of capital to be able to compete with Costco, Sam's Club, and BJ's Wholesale
Club. The incumbents have cost advantages against new entries as well (e.g., exclusive
suppliers and fixed costs). However, as will be discussed in question five, there are new
entrants, who have found a foothold in the niche market of online wholesale clubs that are
prospering using a focused low-cost strategy. It would be recommended for Costco to
strengthen its competitive advantage against these new entrants and current competitors
by increasing its online sales presence (e.g., offering exclusive online promotions).

Availability of Substitutes
The products sold at the wholesale clubs are comparable and readily available among each
other and at other stores and with a large selection of products to choose from (e.g.,
supermarkets and convenience stores). Therefore, a customer will compare the price of a
product that is precisely the same or similar at other competitors to get the best price as
the price for switching is low for customers. It would be recommended for Costco to
monitor its main competitors to ensure that the company has better deals and promotions.

Bargaining Power of Suppliers

Suppliers, even large companies in concentrated industries, do not have strong bargaining
power for wholesaler clubs, especially Costco. Costco does not depend on a specific
supplier. As mentioned in the case, if one item became unavailable from a supplier, Costco
would have no problem switching to another supplier as it would not have a substantial
effect on business (Thompson, C-35). The supplier switching costs are low for this wholesale
industry. There is no recommendation for this competitive force.

Strategic Management
MGT60105
Dr Elangkovan
202103FE
Bargaining Power of Customers
Members do not have the power to leverage better prices from the wholesale club industry
as the buyer demand is strong. Even though product differentiation is weak, and the cost of
switching is low, the members are relatively small and do not have strong bargaining power
in the wholesale club industry. If a member decides to switch to one of Costco’s
competitors, it will not negatively affect Costco. There is no recommendation for this
competitive force.

Strategic Management
MGT60105
Dr Elangkovan
202103FE