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Introduction
Growth and organizational excellence are among the prevalent objectives of all companies regardless of the sector of operation. That is why developing a unique business strategy, which focuses on specificities and dynamical complexity of the whole organizational system, is an indispensable element of successful performance. Although strategies differ, as the choice and design are influenced by the sector of operation, available technologies, budget, and company and team size, there are some generally recognized types of business strategies (Lustigman, 2015).
Most of them center on cutting expenses, attracting investments and human resources, accessing financial and other resources as well as new markets, and avoiding liabilities (Radulescu, Ioan, & Nastase, 2016). Nowadays, green and knowledge or information business strategies are gaining momentum. Still, companies are free to choose techniques, which meet their needs and satisfy peculiar requirements. In most cases, the design is unique, incorporating elements of all business strategies mentioned above.
This paper will focus on the analysis of business strategies used by three companies – Microsoft, Expedia, and Costco. Emphasis will be made on investigating techniques aimed at winning markets and ruling industries as well as commonly deployed competitive strategies. Furthermore, some recommendations for strategic value innovation will be drawn. Finally, the paper will conclude in comparing and contrasting companies and finding commonalities in references for their further development.
Microsoft
Microsoft is a multinational corporation. Founded in 1975 in New Mexico, it has grown into a worldwide leader in the development of software and solutions as well as the production of devices and offering a great variety of services (Facts about Microsoft, n.d.). The company focuses on customers and businesses’ needs, making participation in the realization of their potential its mission.
Company Profile
Microsoft operates in several segments of the global market such as personal computing, productivity and business processes, and cloud services. The personal computing segment is related to video games, phones, tablets, accessories, and computers purchased for private use and designed to satisfy end consumers whether they are ordinary people or software developers. Products and services designed for entrepreneurial use and performance improvement make up the productivity and business processes sector. Finally, the cloud services segment is connected to an array of cloud-based services and platforms for storing and managing personal and business information and processing it with analytical tools (Reuters, 2016c).
Operating in more than 190 countries of the world, it specializes in manufacturing numerous products such as operating systems, software development, and desktop management tools, business solution and server apps, video games, cross-device productivity applications, etc. Also, Microsoft is known for its devices including tablets, phones, personal computers, entertainment and gaming consoles, and an array of accessories.
Moreover, the company offers different services such as training and certification in system design and development, cloud-based solutions for individual consumers and businesses, online advertising, support, consulting, and communication platforms (Reuters, 2016c). Microsoft Office, Skype, Xbox, Office 365, Bing, etc. are the most recognizable products designed by the company.
Microsoft works for helping realize the potential of “individual consumers, small- and medium-sized organizations, global enterprises, public sector institutions, Internet service providers, application developers, and original equipment manufacturers” (Reuters, 2016c, para. 2).
Most influential business rivals are Apple, Google, Facebook, Cisco, BMC, Amazon, Nintendo, Sony, Oracle, Adobe Systems, and other global corporations (Reuters, 2016c). Nowadays, the company employs more than 118,000 people worldwide – 60,000 in the United States and 58,000 across the globe (Microsoft, 2015a). They are involved in operations related to sales, marketing, consulting, support, manufacturing, distribution, and administration.
Market and Industry Strategy
Accessibility is the foundation of Microsoft’s market and industry strategy. It can be viewed from different perspectives. First of all, stress is laid on the intuitive interface and usability of products and services developed by the company. This option is supported by integrating various functions that are beneficial for personalizing the experience of using Microsoft products into software and hardware so that both individual and corporate consumers are satisfied with the end product.
Moreover, it is supplemented with the introduction of assistive technology products, which focus on consumers with special needs, and interoperability of both hardware and software. Another aspect of the accessibility strategy is the company’s pricing policy, as Microsoft is devoted to becoming more innovative remaining, at the same time, affordable for people of all ages, abilities, and social status. That said, the major emphasis is made on reducing complexities and enhancing a people-centric approach to designing products and services (Microsoft, 2015b).
Another aspect of the market/industry strategy chosen by Microsoft is diversification. It comes down to long-term investment in broadening the assortment of goods and services to win more customers and enter new markets. As for Microsoft, some appropriate examples include the introduction of Xbox and taking aggressive steps to become a monopolist in the video games segment of the entertainment market (Daidj, 2016). Moreover, the company is actively involved in designing new cloud-based services as well as inventing more products. The focus is made on both online and physical aspects of the computer industry to increase influence and combating competitors.
Finally, Microsoft promotes research and development within the company itself and the whole industry. The motivation for selecting this strategy is the focus on accessibility, usability, and diversification, which cannot be achieved without R&D projects. For example, in 2015, the company spent more than $12 billion on supporting these projects, and this figure is constantly growing. R&D facilities are dispersed all over the globe including the United States, China, France, Denmark, India, Germany, Finland, Canada, Japan, the United Kingdom, and other developed and developing countries (Microsoft, 2015a).
Competitive Strategy
Competitive strategy, designed by Microsoft, is complex and multilayered. First of all, it is proactive. Being an influential global corporation, Microsoft has enough resources to affect the global market and competitors. For instance, Internet standardization procedures are often used for protecting the interests of the company and supporting its technologies.
It means that competitors cannot enter new markets because Microsoft creates artificial entrance barriers that are usually connected to its monopoly in some countries or institutions due to the power of the brand (Hill & Jones, 2010). It is no secret that Microsoft Office is used by numerous governmental institutions. So, it is almost impossible for less powerful companies to compete with and outweigh Microsoft.
Even though the company is rather aggressive in building relations with its competitors, nowadays, there is a new trend in its competitive strategy. There are numerous instances of cooperation with other companies working in the same industry. This strategy is usually chosen when it is more economically beneficial to cooperate with competitors in order to compensate for the lack of necessary resources and innovate in significant segments of operation than invest in training new employees.
The same can be said about combining efforts to design outstanding products. This strategy is known as coopetition. It is based on the recognition of the practicality of cooperation between competitors if they can supplement each other with lacking skills or resources such as organizational architecture or business solutions (Dagnino, 2012). Some examples of competitive projects are cooperation with IBM, Intel, and Adobe for reaching mutual gain (Dagnino, 2012; Tovstiga, 2013).
To sum up, Microsoft’s competitive strategy is complex and ambiguous. The company is driven by own interests while conducting its operations. This statement can be backed by its monopoly and creating artificial entry barriers for other companies. However, senior management recognizes the significance of cooperation, thus enhancing the competitive strategy.
From a social perspective, this combination is limiting, as an end consumer is affected by the power of the brand and its monopoly. In some cases, Microsoft’s products and services are the only option available. So, although the company is successful, there is no freedom of choice due to the absence of alternatives.
Recommendations for Strategic Value Innovation
Even though Microsoft is a powerful global corporation, there are still some recommendations for strategic value innovation. First of all, the company should focus on the further diversification of manufactured goods and offered services. Although it invests in research and development projects, more effort should be made for introducing new products that are even more accessible and usable, especially when compared to Apple and Google that are major competitors. The motivation for coming up with this recommendation is the fact that it is one of the options for competing and remaining a leader in the industry.
As for now, Microsoft’s operations from manufacturing to distribution are conducted based on outsourcing (Chew & Gottschalk, 2013). Even though writing software codes is the initial specialization of the company, it should focus on involving talented people to design more outstanding products. The rationale behind this recommendation is the belief that because Microsoft got involved in producing hardware, it should constantly improve to preserve its leading positions and power. Guaranteeing continuous improvement is easier if people responsible for generating appropriate ideas work within a company and are controlled by it.
Expedia
Expedia was founded in 1996 as a division of Microsoft. Initially launched as a small online travel booking site, it has grown to become one of the most influential online travel agencies, incorporating most recognizable travel brands.
Company Profile
As it was mentioned above, Expedia was created as a division of Microsoft. However, it separated and became Expedia, Inc. in 2005. This online travel company is represented in more than 30 countries worldwide employing more than 18,000 people. As for now, it is a network of around 200 booking websites launched in 75 countries around the globe and more than 150 mobile phone applications translated into 35 languages and supported in 70 countries (Expedia, Inc. overview, 2015). Its services allow booking journeys with almost 500 airlines and dozens of cruise lines as well as renting car companies.
Expedia specializes in making travel services available. It is a platform for cooperation with airlines, destination service providers, car rental and cruise lines companies, and other travel agencies. Some other travel-related services such as online advertising or consulting are also provided by the company due to its popularity and vast media resources (Reuters, 2016b).
Its success and influence are devoted to the developed network of connected websites both local and international ones. The specificity of the company is that its services are provided either from the primary website or from connected ones, which are specialized in specific traveling services. That said, it either sends referrals to travel providers or offers options for online search. Hotel booking and discounts for journeys are also offered as separate projects (Reuters, 2016b).
Expedia focuses on satisfying the needs of both individual consumers and corporate clients. It offers not only vacation packages and luxury travel solutions but also business-to-business options and travel management services. Finally, transportation, concierge services, and related experiences are provided. Some incorporated brands are Egencia, HomeAway, Trivago, Hotwire, Venere, Classic Vacations, Travelocity, Orbitz, Hotels.com, etc. (Global network of brands, 2015). Priceline and its Booking.com are Expedia’s major competitors.
Market and Industry Strategy
Because Expedia was launched as an online company, the primary emphasis is made on Internet-related aspects of market/industry strategy. Optimization and constant design improvements are among the most commonly used tools in the travel industry. Furthermore, Expedia lays stress on launching mobile phone applications because they grow more popular and younger generations prefer using apps instead of websites (Taneja, 2016).
As it was mentioned, the company has 200 websites and 150 smartphone apps. The correlation between these figures points to the fact that Expedia recognizes the significance of online marketing techniques. Still, additional effort should be made to make these figures equal so that every user is free to choose whether they want to surf a website or use a mobile phone application
Another marketing strategy used by Expedia is an active promotion of its services using social networks such as Facebook, Twitter, Instagram, and LinkedIn. Except for the career-centric focus of posts made on LinkedIn, other social networks mentioned are chosen for attracting new customers and becoming more popular around the globe.
The basis of this strategy is posting bright high-quality pictures of different destinations, thus evoking a desire to travel. The primary advantage of social networks is the fact that they are effective for appealing to younger travelers, who actively use them in everyday life (Minazzi, 2015). Moreover, it is easier to stay in touch with customers and find out what is trending among them by deploying this tool.
Still, this strategy comprises of several constituents. For example, Twitter is often chosen for sharing links to longer posts about recommendations for taking journeys or shaping social opinion regarding best destinations for vacations. These objectives are achieved by activating 90-minutes chats on Twitter signaled by corresponding hashtags.
As for Facebook, it is a tool for communicating the most important news or recent development and informing followers of promotions (Abramovich, 2013). Finally, Instagram appeals to emotions because posting bright pictures does not require long descriptions, as people do not spend time reading them. However, it can still evoke their desire to travel and see the shown places.
Finally, Expedia often falls on e-mail newsletters as marketing tools. This strategy is often selected for both attracting new customers and informing them of the most important news. There are two major ways to deploy it. First, these letters may be purely informative and contain details about discounts or special offers.
Otherwise, they serve as invitations to online chats launched by Expedia. These chats are used as platforms for exchanging experiences of traveling with the company and collecting customer feedback (Strauss & Frost, 2014). That said, it can both persuade people to choose its services for planning their journeys and identify gaps to fill or ways to improve.
Competitive Strategy
The foundation of the competitive strategy chosen by Expedia is acquisitions. The company acquired Orbitz, HomeAway, and Travelocity, increasing its market share in the travel industry (King & Rice, 2015). Similar operations strengthen Expedia’s positions in the market. According to Expedia itself, the company is aggressive and the basis of its competitive strategy is taking share from business rivals and focusing on global expansion (Our strategy, 2015).
Moreover, stress is laid on investing in technologies and increasing market share as a major tool for outperforming competitors (Evans, 2015). That said, its competitive strategy is innovation-based.
Another significant aspect of competitive strategy is cooperation with business rivals. This approach was already mentioned above. The so-called competition is appropriate when it comes to entering new markets because, in some cases, it is more economically beneficial to cooperate with a standing leader than invest in creating a new company.
It is especially true about coming into foreign markets that require significant translation and assimilation efforts. Speaking of Expedia, the company chose the coopetition strategy when it started cooperation with Decolar.com, the leader in providing online travel booking services in the Latin American region. This contract benefited both sides because Expedia obtained access to Decolar’s client base while the latter expanded internationally (Hitt, Ireland, & Hoskisson, 2015).
Speaking of Expedia’s competitive strategy, it is also imperative to mention that there are both online and offline tools for doing business. Major online techniques were mentioned above. As for offline strategies, they include cooperation with traditional travel agencies, tour operators, and travel suppliers (Expedia, 2016). Because of this strategic trick, the company has sources for becoming even more influential and increasing market share, as some customers give preference to planning their journeys offline. It means that Expedia targets all customers without regard to their age and technological background.
That said, from the social perspective, the competitive strategy of Expedia is beneficial for consumers because they are interested in finding adequate and detailed information about destinations for vacations and booking tickets, and they are satisfied with the level of services.
Even though a customer may not know that Expedia is the provider of booking services if an operation is conducted by using one of its websites, aggressive policies do not affect them, offering more options for planning and organizing a journey. Besides, because users have the option of choosing car classes and other similar details, their personal information is protected, and safe transmission of operations is assured, they are guaranteed that risks are minimal, which makes Expedia even more attractive.
Recommendations for Strategic Value Innovation
Regardless of Expedia’s success, there are still ways to improve. For instance, the company should focus on promotion in all regions of the world. According to the findings of a recent survey, Expedia is less popular in Europe than Booking.com (O’Neill, 2013). Because the latter belongs to the company’s major competitor, Priceline, Expedia cannot find options for acquiring it. However, it might want to seek some local online booking companies and cooperate with them like in the case of Decolar.
Furthermore, because the company aims at global expansion, it should pay significant attention to launching local versions of websites and mobile applications offering its services. Even though it is present in over 70 countries all over the globe, content is translated into 35 languages. This figure is not enough for becoming a global leader because of the risk of a language barrier. Although most people know English, the possibility of dealing with a problem of misunderstandings connected to language barriers should be addressed as soon as possible because it will point to the customer-centric approach to doing business.
Finally, Expedia is recommended to invest in the further improvement of websites and related applications. Because the online segment is the initial area of operations, it is imperative to guarantee that maximum effort is made to upgrade the design and functionality of websites and apps. One of the ideas is to decrease search time by launching a more detailed and powerful search engine. Furthermore, it is paramount to work on making it the design more intuitive so that even a first-time user could figure out how it works and face no significant challenges or difficulties when surfing a website or using a mobile phone application.
Costco
Costco was created in 1983 in Seattle to evolve into a multinational company operating warehouses around the globe. It is involved in the retail industry. However, the major specificity of the company is that all products are sold in batches and customers are asked to become a member to buy goods and receive services at lower prices.
Company Profile
Costco Wholesale Corporation or simply Costco operates warehouses in the United States and abroad – Puerto Rico, the United Kingdom, Japan, Canada, Mexico, Spain, and Australia with associated companies in Korea and Taiwan (Reuters, 2016a). Nowadays, the scale of operations is 700 warehouses around the globe. Costco specializes in such market segments as “food, sundries, hardlines, fresh food, soft lines, ancillary and other” (Reuters, 2016a, para. 1).
The group labeled as ‘others’ refers to providing services including “photo processing, pharmacy, travel, business delivery, and membership services” (Reuters, 2016a, para. 1). In the United States, Mexico, Canada, and the United Kingdom, online stores are launched. Costco offers services for both individual and corporate customers cooperating with businesses and enterprises. It employs more than 200,000 people – 117,000 full-time employees and 88,000 part-time (Costco Wholesale Corporation, 2015). The company also owns its private label brand – Kirkland Signature.
Its major competitors are Walmart and its Sam’s Club, Best Buy, CVS, Kroger, Office Depot, Home Depot, Amazon, Target, Whole Foods, etc.
Market and Industry Strategy
Costco’s market and industry strategy incorporates both offline and online aspects of doing business. To begin with, the company is known for well-considered policy related to the choice of suppliers. It has a system of numerous suppliers to avoid excessive or undesirable dependence on one of them. The foundation of this system is the idea that once one of the manufacturers of offered goods becomes unavailable, Costco experiences no difficulties in finding alternatives because there are many substitutes (Costco Wholesale Corporation, 2015).
In addition to it, such an approach is beneficial for finding suppliers, offering the lowest prices and identifying the best options for cooperation. Because Costco gives preference to working directly with manufacturers and suppliers, minimal expenses are guaranteed so that later the company has an opportunity to grant advantages to its customers. Furthermore, the company is influential enough to dictate the rules of play and choose the most economically beneficial suppliers to satisfy its needs and meet its standards.
Moreover, it is worthy of mentioning that when marketing for new locations, the company has an outreach program for attracting new customers. It operates based on issuing a magazine for potential members informing of the latest news and offering coupons. This strategy is useful for finding out whether people settling new locations are willing to pay for becoming a part of the Costco family. The company keeps this system operational even when new warehouses are launched. The motivation for preserving it is the desire to point to the customer-centric approach and remind all members of the Costco family of their significance.
As for online services, the central specificity is the fact that they are launched only in four countries from the list mentioned above. Moreover, they offer additional products and services, which cannot be bought in warehouses. The assortment of these products and services differs across countries of operation based on demand and popularity of frequently purchased goods. As for some specific services offered online, they include travel services, photo processing, pharmacy, business deliveries, and membership (Costco Wholesale Corporation, 2015). Another aspect of online marketing is using e-mail newsletters for distributing news and promoting selected merchandise.
Competitive Strategy
Costco selected the simplest competitive strategy. Unlike its major competitors, Walmart and Target, the company does not spend more than it can afford on advertising and marketing. Instead, it lays stress on the quality of goods and provided services making especially significant emphasis on employee service level. This strategy centers on the belief that a happy customer is the best ad (Lutz, 2014). Nevertheless, it is productive for outperforming business rivals and preserving leading positions.
One more determinant of Costco’s competitive strategy is the choice to sell products in bulks. This aspect is beneficial from two perspectives. First of all, it helps sell goods at lower prices, thus attracting customers. Also, this choice is a perfect option for reaching the economy of scale, as more products are sold at once. Here, it is also imperative to note that special emphasis is made on the quality of sold products. Even though Costco avoids dependence on particular manufacturers, the quality of offered goods is exceptional. Together with superior service levels, this is the key to winning customers (Ross, 2016).
Finally, even though the assortment of products is limited, it satisfies the needs of customers because the most necessary and popular goods are sold at lower prices. This detail individualizes Costco among other warehouse operators that make efforts to broaden a range of offered products. Nevertheless, it helps minimize losses connected to leftover stock and guarantee exceptional quality of everything displayed on counters.
Bearing in mind the specificities of Costco’s competitive strategy, it can be said that it is a cost-based approach to doing business. The motivation for making this statement is the fact that all activities of the company are focused on finding ways to delivers products and services at lower prices and decreasing related costs. Attention is paid not only to minimizing advertising costs but also equipment spending, as the design of inventory used in warehouses is simple and any significant expenses are avoided. Nevertheless, the company does not cut expenditures on training and promoting employees because high commitment practices are seen as the foundation of exceptional performance.
To sum up, from a social perspective, the competitive strategy of Costco is well-developed and consumer-centric. Even though buyers are limited in the quantity of offered products, they are confident that the quality is superior. Moreover, they are attracted to low prices and high service levels. Together with a great variety of services, these determinants of Costco’s competitive strategy make it one of the most appealing and beneficial options for ordinary people, limited in financial resources and time. Even though the company charges customers for becoming a member, these expenditures entail numerous bonuses. That is why most people are willing to pay them in return for enjoying benefits.
Recommendations for Strategic Value Innovation
Costco’s competitive and market/industry strategies have proved to be effective. Nevertheless, there are some fields for improvement. First of all, there is a significant gap in the quantity of online and physical warehouses. Because one of the company’s strategic objectives is further international development, it is recommended to focus on launching online stores in all countries of operation. Even if the currently applied rule of offering more products online is not followed, this step will help attract new customers and improve financial performance.
In addition, Costco might be interested in studying the experience of one of its competitors – Walmart. The idea is to design and launch the system of international deliveries of products offered in its warehouses. Even though most of the assortment is food, hardlines, and soft lines are among goods that could be shipped abroad. Regardless of the fact that bringing this recommendation to life requires investment, it is a beneficial step for finding out potential destinations for developing business activities and opening new warehouses.
Another recommendation for the company is to pay significant attention to adding new products and services to the assortment regardless of all specificities of its competitive strategy. Some country-specific goods might become a perfect option, to begin with, because this step would help investigate the local market and satisfy the needs of local customers. Moreover, Costco might be interested in promoting its private-label brand by producing country-specific goods that would be sold both in stores and online.
One more recommendation for the company is to study stories of success of its competitors and upgrade its competitive strategy. As for now, the company uses simple techniques, focusing only on sales and ignoring marketing and advertising. Once Costco recognizes that advertising is a key to operational and financial success, it would find sources for opening more warehouses and launching online stores. However, it is imperative to note that this step requires conducting a thorough investigation because all expenses related to ads should be well planned and minimize the risk of inflicting damage on the company’s performance.
Finally, Costco is recommended to pay attention to studying the overall trend toward decreasing a negative influence on the natural environment. There are several options for bringing this recommendation to life. First of all, the company might pack deliveries in eco-friendly packages. In addition, it might be interested in introducing products manufactured by its private label brand packed in environmentally friendly bags and containers. These steps might be beneficial for attracting new customers, who support the minimization of human and industry-induced impact on nature.
Conclusion
To sum up, even though Microsoft, Expedia, and Costco are involved in different sectors and use different strategies for reaching success, there are some specific features common for all of them. First of all, all three companies occupy leading positions in their areas of operation. Although Costco and Expedia are less popular in some regions of the world, they are successful in the other.
Furthermore, Microsoft and Expedia recognize the effectiveness of coopetition and apply this approach to building relations with their business rivals. However, it should be noted that there are no options for using this technique in the retail sector due to the specificities of the sector. Finally, all companies are aware of the advantages of accessibility even though their approaches to defining it differently. While Microsoft and Expedia view it as easy handling of designed products and services, Costco reflects this approach in prices keeping advertisement-related expenses at a minimum.
Still, there are some lessons these companies could learn from the experiences of each other. For instance, diversification and introducing some other private label brands might be beneficial for Costco. Microsoft, on the other hand, might become more successful if it invested in generating talent instead of outsourcing tasks.
Finally, focusing on country-specific needs might become a positive experience for Expedia. Nevertheless, regardless of all differences mentioned above, all three companies are recommended to pay significant attention to the newest technologies and research and development projects to improve performance and productivity, although the focus is made on differing aspects of investigation and operation.
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