This strategic analysis will be devoted to analyze the environmental factors that affect the Warehouse Clubs industry in the US. To develop the business strategies and make recommendations for Costco, it is crucial to examine the internal and external factors that affect Costco. Two most accepted techniques to analyze the environmental factors are PEST analysis and Porters' Five Forces analysis. The first one is related to the political, economic, social and technological factors. Whereas the second one, Porters' Five Forces, is used to explore five im-portant forces that determine competitive power in a business situation. These five forces are: suppliers' power, buyers' power, competitive rivalry, threat of substitution, and the threat of new entry. After analyzing the environmental factors in the industry, we will examine Warehouse Clubs industry's driving forces. The last section of Appendix A. is dedicated to examine the key success factors in the Warehouse Clubs industry. Pest Analysis To describe of the macro environment in which Costco operates, PEST analysis will be used to identify the political, economic, social and technological factors. Political Influences Government regulations and legal issues are essential part of the political factors. These two factors primarily determine the conditions under which companies have to operate. Regula-tions specific to the Warehouse Clubs and Supercenters industry mainly pertain to pricing and size. Some state laws require that operators apply minimum markups to the selling prices for specific goods, such as tobacco products, alcoholic beverages and gasoline. (IBISWorld, 2014). The fact that these laws are enacted by individual states limited the effects on Costco. The indus-try also is influenced by some enacted or proposed laws that aim to prevent or restrict the expan-sion plans of certain warehouse clubs. One the most important political factors that will have an impact on the industry in the coming years is the environmental regulations. Warehouse Clubs industry participants are subject to environmental regulations such as generation, handling, storage, transportation and disposal of waste and bio-hazardous materials (IBISWorld, 2014). There are dozens of environmental regulations that impact the industry. These regulations require the major players in the industry to comply with by adopting internal programs that focus on training employees on the procedures of how to safely handle consumer products that become hazardous waste. Failing to comply with these environmental regulations will affect Costco image for being a leader in social responsibility and environmental issues. Wal-Mart, the Costco's main com-petitors, has been pleaded guilty and fined $100 million for violating environmental regulations by disposing of fertilizer, pesticide and bleach in sewage systems across the country, among oth-er violations. Walmart found guilty of dumping hazardous waste nationwide, para.2). Overall, the level of regulation is light and the trend is steady (IBISWorld, 2014). We decide to postpone the discussion of the impacts of the new Affordable Healthcare Act and the debate over the minimum wage due to the fact that these two laws have far more economic effects on small businesses rather than political ones. Economic Influences The economic influences here refer to the macroeconomic factors that affect the entire economy and the Warehouse Clubs industry in particular. Examples of these factors include, but are not limited to, interest rates, taxes, inflation rate, consumer disposable income, consumer confidence levels, and unemployment rate. One of the main economic factors that impact the Warehouse Clubs industry is the dis-posable income. Disposable income refers to the money available for spending after paying all personal income taxes. It is an important indicator for both the overall state of the economy and individuals' economic state. High disposable income increases the propensity that households will spend liberally on discretionary goods, strengthening overall demand for this industry. Per capita disposable income is expected to increase over 2014, posing a potential opportunity for the industry (IBISWorld, 2014). It is also observed that even when the disposable income de-clines, the industry attracted new value-focused customers, leading to increase the demand. However, the amount of money spent per trip declines as well. The Warehouse Clubs industry has grown strongly in the past, and this is likely to continue in the future owing to the rising popularity of warehouse shopping. (What's Driving Sam's Club's Growth?, Para. 3) Moreover, in the five years, this growth is projected to increase at an average annual rate of 2.1% to $512.0 billion. Profit is also expected to grow slightly, reaching a projected 5.6% of revenue in 2019, up from an estimated 5.5% in 2014 (IBISWorld, 2014). Large number of warehouse clubs customers is small busin