LED560 SLP #2

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Trident University International *

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Feb 20, 2024

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1 Trident University LED 560: Leadership and Strategy SLP #2: The Socio-Political Compass Dr. Virginia Johnson

2 External Environmental Threats to Costco Wholesale Being the number 12 Fortune 500 company in the world in 2022, Costco is affected by different social-economic pressures and external threats. The company has to deal with political pressures from ten countries around the world while trying to stay competitive in the wholesale business. While the company still makes $5B in revenue yearly, Costco’s executives are able to navigate the business world while dealing with the external threats that come their way. In this paper, there will be a discussion about the most significant environmental threats Costco faces, the most important opportunities face by Costco, do environmental threats outweigh opportunities or do opportunities outweigh the threats, and how the organization should respond to active environmental threats. Most Significant Environmental Threats Costco is a major distributor of wholesale assets and is able to sale things in bulk. One of the biggest environmental threats to the company is the Environmental part of a PESTEL analysis. Toilet paper manufacturing is a consumable that leads to the reduction of trees and forests around the world. According to the Natural Resource Defense Council, Kirkland brand is considered one of the least sustainability toilet papers on Stand.earth’s 2019 scorecard as it does not use products made from 100% recycled content (Vinyard, 2020). Another environmental threat that Costco has is to deal with is political and socio-cultural, the request for the company to go carbon neutral. Climate change has a major impact in a lot the countries that Costco works through which causes these countries to create different laws that can challenge Costco’s decisions. “Business as usual is not an option when the impacts of climate change are getting worse every year… forests remain one of the planet’s best opportunities to limit climate change” (Chetweynd, Folger, & Herdman, 2022). These environmental threats deal a great deal to the

3 political, environmental, social, and legal parts of the PESTEL analysis and are constantly being looked at from external sources. Most Important Opportunities Faced by Costco Costco is a major organization and has the ability to make choices that will affect its status as an organization and its customers. During the Covid-19 Pandemic in 2021, Costco saw a reduction in its stock prices by 12% and a loss of 212 million as they were paying their employees. However, Costco saw an increase of 14% of their sales stateside, 14.3% total sales overseas, 80% increase in sales via E-commerce and 300% increase in online groceries sales (Momin, 2023). Costco has the opportunity to continue to grow as they are people-centric and use their success in the US to continue to grow overseas. One of the biggest opportunities that Costco faces is its ability to leverage their size to get competitors to make changes world-wide. Costco can influence US and international countries to make laws that help affect its customers and economies. The ability to successfully navigate in other markets helps the country as well as it shows that Costco Wholesale is a retailer that is serious when it has to implement changes. Do Threats Outweigh Opportunities or Opportunities Outweigh Threats? As a major retail distributor, Costco has opportunities that it can leverage but also has a few threats that go against it. As Costco is considered a people-centric company, the organization has the ability to leverage its healthy competition to influence change. “Healthy competition is founded in a set of higher values such as improving the quality of something, a contribution to something bigger, or the pursuit of a higher purpose” (Alexandra, Holcombe, & Randel, 2021). The threat of global warming can be looked at in different ways and Costco can implement changes to turn these threats into opportunities. Making changes like using 100% recycled paper

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4 products or creating and implementing a plan to reduce the organization’s carbon footprint is an opportunity that outweighs the threat against the company. This healthy competition allows for the organization to see environmental threats in other companies and the company to update policies to prevent them from affecting the organization. Additionally, Costco has been extraordinarily successful in the United States and able to implement changes effectively when the changes are started in the United States and provided to other countries. The culture at Costco and how they treat their employees also help keep the organization in better shape against external threats. “Costco was one of four companies Ton focused on in the book “The Good Job Strategy” which examined how companies invest in their employees to improve operations and drive products” (Relihan, 2018). Their culture can be used to directly influence how their managers and leaders act in the organization and outside of the organization, which will help in responding to external environmental threats. How Should Organization Respond to Active Environmental Threats Costco Wholesale is an amazing organization and should respond accordingly to threats between retailers like Walmart and Amazon while setting an example around the world. The first thing that it should do is to leverage its stance as a wholesale retailer and implement changes that reduce their carbon footprint. Costco Wholesale has massive stores that they operate out of, and the company imports and exports their products, which impacts their carbon footprint. By making changes like using EV cars, powering the buildings with solar power, and changing how products are exported overseas, they can be the leader in carbon reduction. Additionally, the organization can change its paper and paper products to reduce the amount of need for deforestation. The reduction of selling products like paper and plastic which heavily rely on resources devastated during acquisition will show countries that Costco cases about the

5 environment. By making changes, leveraging its status, and importing leaders that have the right culture, Costco will be able to respond to most of the external environmental threats that it comes across. Conclusion Being a top 20 Fortune 500 company and having an excellent organization, Costco has the ability to influence the wholesale market to better change the world. Costco works at making its employees, managers, supervisors, and leaders’ better individuals and these decisions help when dealing with external environmental threats to the company. Having to work around stateside and overseas locations, Costco can make changes that affect the organization and world. In this paper, there was a discussion on the most significant environmental threats Costco faces, the most important opportunities face by Costco, do environmental threats outweigh opportunities or do opportunities outweigh the threats, and how the organization responds to active environmental threats.

6 Reference Page Alexandra, V., Holcombe, K. E., Randel, A. E. (2021, January). Cultural intelligence, perceived inclusion, and cultural diversity in workgroups. Personality and Individual Differences , 168(110285). ISSN 0191-8869. Access on 7 Sep 2023 from: https://doi.org/10.1016/j.paid.2020.110285 Available in the Trident Online Library Science Direct database. Chetwynd, J., Folger, M., & Herdman, S. (2022, January 20). 69.9% of Costco’s shareholders vote to reduce carbon pollution and deforestation . Environment America Research & Policy Center. Access on 8 Sep 2023 from: https://environmentamerica.org/center/media- center/69-9-of-costcos-shareholders-vote-to-reduce-carbon-pollution-and-deforestation/ Momin, A. (2023, August 16). Costco Pestle analysis 2021: An amazing business with room to grow . PESTLE Analysis. https://pestleanalysis.com/costco-pestle-analysis/ Relihan, T. (2018, May 11). How Costco’s obsession with culture drove success . MIT Sloan. Access on 9 Sep 2023 from: https://mitsloan.mit.edu/ideas-made-to-matter/how-costcos- obsession-culture-drove-success Vinyard, S. (2020, January 22). Costco, don’t be complicit in selling forest destruction . Be a Force for the Future. Access on 8 Sep 2023 from: https://www.nrdc.org/bio/shelley- vinyard/costco-dont-be-complicit-selling-forest-destruction

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