Costco to South Africa Essay

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1.0 Executive Summary Strategically located at the southern tip of Africa, South Africa is considered the economic powerhouse in Africa. Its key investment location coupled with a large population size, the greatest GDP in Africa, free market discipline and low taxes; make it one of the most attractive markets to potential foreign investors. These are reasons why multinationals, including retail giants, vehemently troop in to attain market share. With that, compared to numerous multinationals, Costco can venture into the South African market easier. This can be corroborated by the company’s successful global expansion into countries such as the United Kingdom, Canada and Mexico, as well as being America’s largest warehouse club with annual revenue of over $105.2 billion. This report aims to shed light on the possibility of Costco setting up a joint venture with Shoprite, a leading South African supermarket chain, and the complications that may be encountered during the process. Today, South Africa still faces a lot of challenges. Although there have been immense developments in the country in recent years, poverty, crime, unstable power and unemployment stand high. These mean additional costs for incidences such as alternative power and solid security. In addition, the mixed laws in the country cause confusion amongst foreign investors. This can be seen as political instability which can pose detrimental risks to companies. As a result, Costco may not see the appeal to invest in South Africa. On the contrary, these can be combated since South Africa and the United States execute business in a similar fashion. Furthermore, Shoprite already possesses a 30% market share giving both companies an opportunity to grasp an even larger share. Venturing into a new market in a new continent and a different culture will always be a challenge. Nevertheless, Costco, with an

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