Costco wholesale is the second largest retailer corporation after Walmart. In the year 2016, Costco was the largest retailer of choice and prime beef organic foods and wine and currently operates a total of 729 warehouses that are spread in more than 13 countries. Costco Wholesale can choose from many different models, type of growth and styles of operation; however, the business is still structured and directed by the government regulation. The business being in retail industry faces unique regulatory challenges, even though it is affected by the countrys labor imposition such as the minimum wage law and overtime pays. Just like any other companies in other sectors, the government regulation is costly since the company needs to pay compliance cost and probably legal liabilities (Giroud & Rauh, 2015).
Tax is one of the legal and regulatory factors that influence the operation of Costco. The laws were controlling how the firm should report its financial status to the government. In the united states, retailers pay the highest corporate tax since they have virtually no obvious tax loopholes and discrete lobbying interest and hence Costco pays highest corporate tax. Payment of taxes is costly to the company, and the same cost is transferred to consumers who are forced to pay more for the products that they could have paid less. The retail sector is much competitive, and one way of competing is cutting prices on some commodities to attract price sensitive customers, as such, Internet-based retailers such as Amazon are pricing their products much lower as since they are not charged state sales tax which is an enormous advantage. Costco can not compete with Amazon regarding price dust to large corporate tax that they pay to the government.
There are other sorts of regulation that affect Costco Wholesale is the environmental regulation that aims at securing different interest outside the corporate world. The environmental protection Agency requires every organization including Costco to redesign equipment and utilize the more costly procedure to environmental impact. Costco has been forced to change equipment and procedures to meet the imposed standards, which is expensive. Costco on a yearly basis pay for the protective and proactive environmental measures and transfer this expenses to consumers with the aim of recouping the cost that it incurred (Giroud & Rauh, 2015).
Risks that Costco encounters when dealing with traditional litigation.
When managing traditional litigation, Costco looks at misfortunes since litigation is costly and harm to the business. The company spends a lot of money in paying lawyers to represent them in courts and sometimes the company might be fined if it loses the case. Another risk when dealing with traditional litigation is that it interferes with the reputation of the company. For instance, in June 2012, the united states district court in California determined that it was suitable to award attorneys fee to Costco as the party that prevailed in the copyright infringement action. Sometimes, businesses are faced with the serious allegation that might affect their operation since the continuation of the case does not allow the business to continue until the case is determined. The management should focus on making this process quickened due to dangers of information break and the waste of time (Hurford, 2010).
A global/international business dispute
In 2012, a legal battle emerged between the Swiss company Omega and US based firm Costco. Omega claimed that Costco is not an authorized retailer of omega watches and imported its watches that that bears a copyright globe design that was engraved on the bottom face of its watches. Omega filed a suit against Costco claiming that the move by the retailer constituted copyright infringement work. On the other hand, the retailer filed a cross-motion arguing that importation of watches through the third party was protected by first sale doctrine as stipulated section 109(a) of the Copyright Act. The district court determined that it was appropriate to award reasonable attorneys fees to the retailer as the part that prevailed in the copyright infringement action according to the copyright act. After the ruling, some appeals followed whereby the appeal court nullified the district court ruling. The battle continued until it returned to the district court that later determined that the actions of omega constituted copyright misuse and gave Costcos motion for summary judgment regarding the misuse defense. Traditional litigation is the best way of resolving such disputes since it has an avenue whereby laws can be interpreted to ensure that all the parties are satisfied with the ruling. If the decision is not satisfactory as it was in this case, the parties have an avenue to appeal and seek fresh interpretation (Staff,2017).
Giroud, X., & Rauh, J. (2015). State taxation and the reallocation of business activity: Evidence from establishment-level data (No. w21534). National Bureau of Economic Research.
Hurford, R. L. (2010). SMART Dispute Resolution Processes. Michigan Bar Journal.
Staff, A. (2017). Supreme Court Rules Against Consumers in Costco vs. Omega. AOL.com. Retrieved 24 July 2017, from https://www.aol.com/2010/12/13/supreme-court-rules-against-consumers-in-costco-vs-omega/
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