Business essay (link to The Prince by Machivallie)

Suyanto 9

Stephanie Suyanto

Pavinee Kulsamrit

BUS 100W Section 28

6 June 2015

The Guide to Costco’s Success

In order to become successful, companies will follow a certain business plan and abide by specific guidelines. Each company obeys its own set of rules and no particular rule is deemed to be correct. This is because success can be earned in several ways, and one method that may work for someone may not work for another person. In Niccolo Machiavelli’s The Prince, the author provides a strict guideline that businesses may follow when first starting out and hiring employees. Machiavelli compares new states to “limbs joined on to the heredity possessions of the Prince acquires them” (Machiavelli 7) and mentions that a prince “wins them either with the arms of others or with his own, either by fortune of by prowess” (Machiavelli 7). In comparison to this example, Costco is the governing body or “prince” that oversees its new employees or “newly acquired states”. Although Costco might not agree with all the guidelines listed in The Prince, it has adopted some of them as its own. Costco follows Machiavelli’s guide for the qualities of a benevolent leader but disagrees with the prince’s stingy habits. A combination of Machiavelli’s more passive strategies along with its own humble ones has allowed Costco to become one of the world’s most profitable retailers today.

The prince exemplifies several positive traits that a true leader must possess to successfully rule a body. One of these qualities is by being knowledgeable, which is necessary for business leaders to govern their companies and make sure that everything is operating smoothly and correctly. Machiavelli mentions that the prince “must read history so that he can do what eminent men have done before him: taken as their model some historical figure who has been praised and honored; and always kept his deeds and actions before them” (Machiavelli 49) for intellectual training. By reading history, the prince wisely makes the most out of his resources so he can learn from past mistakes and improve from them. In addition, he does this to study the actions of those who were once successful so he can essentially mimic them. This trait is necessary for leaders in the business world, since they could avoid major complications and seek improvement if they carefully study past failures and the reasons behind them. Furthermore, leaders could study the traits and actions of those who owned prosperous companies and adjust them to guide their own business. Machiavelli’s strategies for being knowledgeable are essential to becoming a good leader today, since one can perform to the best of his or her ability when using available resources.

Jim Sinegal, the co-founder of Costco, can relate to Machiavelli’s teachings and agree that being knowledgeable is a useful quality for leading a company. He admits that Costco has faced several challenges and that the company was able to solve these issues after self-examination. Sinegal states, “once you make a mistake, you’re not going to make it five more times” (The Seattle Times). He uses an example of the time Costco attempted to get into the home-improvement business and decided to have a paint department, but it was a failure because customers were not impressed with the small selection of paints (The Seattle Times). The company eventually listened to what its customers had to say and broadened its variety of paints to increase sales. Costco’s strategy of learning from past mistakes closely reflects Machiavelli’s, in which he gives the example of when the prince studies history to seek improvement. Both Costco and Machiavelli believe that once a person makes a mistake, he or she learns from it so that the mistake is not repeated once again. Although failure is a painful process, it teaches a lesson and enables one to keep improving and growing. It is crucial for strong leaders to learn from past events and apply their knowledge to real-world situations, to guide their organizations and ensure that they are performing well.

Besides being knowledgeable, there are several other traits that strong leaders possess. For instance, the prince’s optimistic and charismatic qualities allowed him to win the hearts of many and instill a sense of hope in his people. According to Machiavelli, “a powerful, courageous prince will always be able to overcome all such difficulties, inspiring his subjects now with the hope that the ills they are enduring will not last long, now with fear of the enemy’s cruelty, and taking effective measures against those who are too outspoken” (Machiavelli 37). And once the prince gains popularity and is liked by many, it is easy for him to “inspire his subjects with determination during a siege, so long as he has adequate provisions and means of defense” (Machiavelli 37). This concept still applies to today’s world, since people tend to favor those who are appealing and inspiring. Once leaders become well liked and earn people’s trust, they are able to govern a body of people with ease. People are more likely to listen to their leaders if they like them, agree with their views, and believe that they want the best for their people. Also, fewer problems would arise and things would run smoother if a group stays on good terms with whoever oversees it. Machiavelli’s teachings are still relevant today, since people are more willing to obey those who are well liked and respected.

Once again, Machiavelli’s principles apply to Costco since Jim Sinegal is a benevolent leader who is highly respected by his employees. He is hardworking, intelligent, caring, and kind, and all of his hard work and positive traits are reflected by Costco’s success. His company has been operating smoothly for years and his employees easily comply to his instructions because they admire him. As stated by Sinegal in an interview, “My view is your first responsibility to protect your customer, to continue to have the best value possible out there for the customer. You have to protect your employees. The last thing I want to do is become a casualty like [some other] companies” (The Seattle Times). This shows that he truly cares about his customers and employees, and wishes for the best shopping and working experience for them. His actions and beliefs have drawn more shoppers and employees towards his company, as shown by Costco’s popularity. He stays optimistic even in times of hardship, since he makes his customers his top priority since he refuses to mark up branded items by more than 14 percent when economic conditions are rough (The New York Times). Other competing supermarkets and department stores might hike up prices by 25 to 50 percent while Costco keeps its prices low (The New York Times). He believes that Costco will stray from its core values of saving money if prices are marked up too high, and he would rather make his customers happy by keeping prices low. Because he cares about his customers and appeals to them, his customers stay loyal to Costco and continue shopping there even when the economy slows down. Sinegal’s beliefs closely relate to Machiavelli’s: a business is more likely to succeed if a well-liked leader oversees it. His actions and beliefs helped Costco stay prosperous and dominate the retail store industry.

Although some of Sinegal’s principles tie closely together with Machiavelli’s, Sinegal does not agree with everything listed in The Prince. Machiavelli actually discourages generosity and firmly believes that strong leaders should not possess this quality. He explains the consequences of generosity:

“If you want to sustain a reputation for generosity, you have to be ostentatiously lavish … squander all his resources, only to be forced in the end, if he wants to maintain his reputation, to lay excessive burdens on the people, to impose extortionate taxes, and to do everything he can to raise money. This will start to make his subjects hate him, and, since he will have impoverished himself, he will be generally despised” – The Prince Chapter XVI (Machiavelli 51).

Generosity is often viewed as a positive trait, but Machiavelli deems it to be dangerous since it comes with risks. He frowns upon generosity because it causes subjects to bear burdens when the prince is unable to provide his people with any more resources. It might even evoke hatred towards the prince when he tries to fund for more sources, and eventually cause him to become weak. He believes that the prince should be stingy and keep to himself instead, so he does not have to risk any consequences. This idea that Machiavelli presents does not apply to the business world today, since there are essentially many companies that are successful due to their generosity — one of them being Costco.

Sinegal’s generous actions have not only rewarded him with the loyalty of his customers, but with the admiration of his employees as well. Although this contradicts Machiavelli’s ideas and has caused people to critique him, this business strategy is effective since Costco continues to grow each year. Sinegal is generous to his customers and has earned many loyal customers, mainly because his company provides high-quality goods that are sold at low prices and in large quantities. Sinegal is also extremely generous to his employees, since he provides his employees an abundant of employee benefits to show his appreciation for all their hard work: “86 percent of them get healthcare and benefits, even though half are part-timers, and the average wage is $19. And Costco hasn’t had any layoffs in the recession” (US News). Costco’s low turnover rate exhibits that his employees are willing to continue working for the company because they are treated well, and the benefits he provides may even motivate them to work harder. It is also likely that his employees speak highly of his company and may even inspire others to apply for a job at Costco. There seems to be a correlation between Sinegal’s generosity and Costco’s success: the more that Sinegal offers, the happier his customer’s and shopper’s are. Being generous has contributed to Costco’s success since both customers and employees are happy with the benefits the company has to offer. His actions defy Machiavelli’s beliefs of being frugal, and demonstrate that he can still own a successful company when being generous.

Costco has become one of the worlds most prosperous and successful companies today, partially because of the business rules it abides by. The Prince outlines the essential qualities of a good leader, and Costco has adhered to some of its more passive standards. Machiavelli emphasizes that a strong leader must be knowledgeable, well liked, and frugal. Costco’s co-founder Jim Sinegal exhibits these knowledgeable and charismatic qualities since he learns from past mistakes in order to improve, and his employees comply to him because he has earned their admiration. But Machiavelli believes a good leader must be frugal since he claims that being generous comes alongside with several risks. Sinegal defies this teaching and does the opposite of what Machiavelli says. His is actually able to gain more supporters by being generous and did not encounter any risks by doing so. These characteristics that Sinegal possesses have enabled him to become a good leader and properly overlook a company. By following a combination of Machiavelli’s passive principles along with Sinegal’s own beliefs, Costco continues to grow each year and has rightfully earned its title of being the nation’s largest wholesaler.

Works Cited

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Allison, Melissa. "Retiring CEO of Costco Takes a Look Back on His Legacy." The Seattle

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ceo-of-costco-takes-a-look-back-on-his-legacy/?cmpid=2628>.

Greenhouse, Steven. "How Costco Became the Anti-Wal-Mart." The New York Times. The New

York Times, 16 July 2005. Web. 5 June 2015. <http://www.nytimes.com/2005/07/17/business/yourmoney/17costco.html?pagewanted=all>.

Machiavelli, Niccolo. The Prince. New York: Dover Publications, 1992. Print.

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