Costco: The Challenge Of Entering China's Mainland Market

Costco Wholesale Corporation (Costco), the world’s second-largest retailer, officially entered the Chinese market in Shanghai in August 2019. The opening day was so jam-packed with customers that the massive influx forced the company to close early, after only five hours of operations. However, after only one week, customers were lining up outside the store, asking Costco for refunds for their membership cards. The warehouse’s traffic declined significantly as well. What caused this situation? Did Costco make the right decision to enter the Chinese market? Does Costco’s membership system fit the Chinese market? What kinds of challenges will Costco face in the future?

This case can be used in a strategic expansion or cross-cultural communication and strategy module of a strategic management course, or it can be used in an emerging markets module of a marketing course in discussions of the globalization strategy of multinational enterprises, their development prospects, and the challenges of emerging markets. It may be taught at the undergraduate, graduate, or executive level.<br><br>This case compares cultural, political, economic, and other differences between China and the United States in analyzing Costco’s entry into China. The case also analyzes the timing of Costco’s entry into the Chinese market and the opportunities and challenges the company confronted there, serving not only as a platform for discussion of Costco’s medium-term tactics and long-term strategy for global expansion but also as a lesson on the international expansion of other members-only warehouse chains at home and abroad. After working through the case and assignment questions, students will be able to do the following:<ul><li>Describe the business features of warehouse membership stores.</li><li>Summarize the challenges that foreign retailers face upon entering the Chinese market.</li><li>Apply the CAGE framework, the five contexts framework, and the new market entry decision-making framework in analyzing an international retail expansion.</li><li>Analyze how foreign retailers can navigate differences in consumer behaviours.</li></ul>

• emerging markets
• CAGE framework
• localization