The Hammers have had a slow start to the season under new manager Julen Lopetegui and currently sit 14th in the Premier League.
That's despite spending £132.5million on transfers including the purchase of Max Kilman from Wolves for £40m and Leeds' £25million star Crysencio Summerville.
Asked by talkSPORT's Ben Jacobs why West Ham haven't lived up to expectations after a productive transfer window, Hammers legend Cottee said: "I think a lot of the fans felt that the club had had a good summer in terms of the transfer activity.
"There was a lot of money spent in the summer and I think there were 10 players that were either signed permanently or brought in on loan. There was a big expectation. It's so hard to pinpoint where things have gone wrong.
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"There's been a change of manager, we all know that. It was a big gamble by the club, and I said that six months ago. I'm not just saying it now because things haven't gone well, but I felt it was a big gamble in the first place.
"It wasn't my choice of manager to take over the club, but I'm not in charge.
"So you respect their opinion and you give them the benefit of the doubt. But I think it's been a very, very tough start to the season, a very slow start to the season."
Despite West Ham's large outlay, former Hammers goal scorer Cottee thinks the Hammers didn't fill every position sufficiently - namely, a striker.
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He said: "In the Premier League, you have to defend properly and you have to score goals. West Ham have certainly struggled defensively.
"When you've got three out of four of the back four are new players, that's probably to be expected a little bit. And then you add in the fact they didn't sign a centre forward.
"That's always going to be an issue and a problem for the club. It has been for, I've lost count of how many times I seem to say it every year. We need a centre forward and they never sign a centre forward.
"Obviously, some real talent behind whoever plays, you know, obviously it's been Antonio, [Niclas] Fullkrug's been injured, but there's real talent in [Jarrod] Bowen and [Mohammed] Kudus and [Lucas] Paqueta and Summerville and there's some top players.
"Those players haven't been on top form. So you add it all into the mix and you get where West Ham are at the moment.
"On a positive, they're not in the bottom three. So that's one positive I can take at the moment. They're not in a relegation battle.
"But when you look at the next two fixtures coming up, if they're not careful, I think they won't be far off at the bottom three."
Long-standing manager David Moyes - who led the club to win the Europa Conference League in 2023 - left the club at the end of last season.
He was replaced by former Wolverhampton Wanderers boss Lopetegui in May, who joined on two-year deal.
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Asked if it would have been a different story if Moyes had got the same financial backing, Cottee continued: "Of course it would. Everything's hindsight now.
"I think with the sequence of events that began with the club winning the Conference League in June 2023, where you can argue that the club was at a peak, the highest peak it's been for 43 years since they won the FA Cup in 1980. Everything was fantastic at the club.
"And then you lose your captain [Declan Rice], who signed for Arsenal. And the board, for whatever reason, decide not to renew the [Moyes'] contract. And more importantly, let it run down, because that's where I've got a problem with what went on.
"You know, you either give the manager the reward that I felt he deserved, in other words, a four or five year contract, or you maybe look to change things there and say, look, we want to go in a different direction.
"We all accept that. But to just let the contract run down, it put everyone at the club in a difficult position. There was £130 million spent in the summer. We didn't need to spend it in the summer.
"We needed to spend it in the January window at the beginning of this year. And people forget West Ham were sixth. I'll say it again, they were sixth in the Premier League. They were in the Europa League and they needed squad replacements.
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"They needed money spent on the squad to build the squad up, to help the players get through what was a difficult campaign, because you're playing Sunday and Thursdays.
"That money wasn't spent in the January. In fact, the complete opposite. They brought in one player, it was Kalvin Phillips, and we all know what happened with that particular loan spell.
"And they got rid of four players out of the squad. I can't get my head around what happened in January. Then you then go and spend a load of money, bring a load of players in, in the summer.
"It was too late by that time it's very easy for a decay to set in, probably the wrong word, but a rot, whatever you want to say, a malaise.
"There's so many words you can use. It can set in very quickly at a football club. And unfortunately, with the decisions made at board level, and I'm not talking about the manager, I'm talking at board level, those decisions led to where the club was.
"And ultimately, they had to part ways with David Moyes because of what they created.
"Then to compound all that, you choose the wrong manager. So to say I'm an unhappy Hammers fan at the moment is an understatement."
West Ham ended up finishing ninth last season, and Hammers fans had been hoping for the club to push up back into the European spots.
But just four months into the season, the Hammers have already been scouting out potential replacements for Lopetegui.
Last week, talkSPORT reported former Borussia Dortmund boss Edin Terzic has been sounded out as a possible option if the team's form under Lopetegui continues.
The Hammers are currently three points off the relegation zone and seven off the top six.
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"Of course they can get results against Newcastle and Arsenal," Cottee said. "But if they don't, I think the board will be in a difficult position."