Costco is an American based wholesale and retail company which operates a global chain of membership warehouses across US, Canada, UK, Australia, Mexico, Spain, Taiwan, Korea, Puerto Rico, Japan. It offers various kind of international and private label goods and merchandising which includes food, furniture’s, home appliances, sundries, fresh foods, clothing, pharmacy etc. (Costco wholesale Corporation, Company Overview, 2017). It was first introduced in 1976 in San Diego, California by the Entrepreneur Sol Price and Price club was the first membership warehouse club which was only exclusive for business members, that can buy the products in wholesale. In 1993, two mega retailers joined together (Price club and Costco wholesale) which soon made the Costco world most successful wholesale and retail company. The company offers best value products at low price keeping quality, features, brand in consideration as compared to any other superstore. The thing which makes Costco different from any other superstore is that it is only accessible to its members and customers have to buy its membership once for a period of 12 months. Membership is open to both businessman’s and as well as individuals. (The Costco story, 2018)
There are four pillars of international trade such as-
· Risk mitigation
The two pillars I have chosen for Costco are Risk Mitigation and Payment.
The company’s foreign subsidiaries operate their transactions through some non-functional currencies which helps them to manage the fluctuations of foreign exchange rates by the use of foreign currency exchange contracts. These contracts are planned mainly to bound exposure to US dollar stock catalog costs made by their international subsidiaries whose functional currency is different then US dollar. At present, these contracts are not authorized for imitative hedge accounting. The company desires to avoid risk by the use of these contracts and do not mean to engage in hazardous and risky transactions. And also, these contracts do not have any credit-risk related accidental attributes. The company attempt to control counterparty risk related to these contracts by restricting less transactions to counterparties with which they have banking connections. (Costco SEC Filings, 2013)
Costco has a different kind of payment option for its consumers. In order to purchase goods and services, Customer’s have to buy a membership card which has certain requirements such as
· Membership is available for the individuals who are more then 18yrs of age.
· Membership card can only be used by the person to whom it is issued and hence it is non-transferable.
· The membership is paid once for a period of 12 months.
· All payments are done in Cash, Debit and Credit card, Costco gift certificate, Costco cash card, Preprinted personal cheque. (Membership, Conditions and Regulations, 2017)