13 CRITICAL THINKING PROBLEM The Costco Way (pages 455, 456) Due: midnight 4/22/2012

1. In what ways are Costco’s hidden costs associated with the “cheap-labor model” epitomized by Wal-Mart? (7 pts) Costco revolutionized the perception on which higher wages can produce high returns for investors, which goes against the old motto instituted by one of the most dominate and mega corporations to have ever graced the earth, Wal-Mart, who consistently defends their approach to lower savings by lower costs by way of lower pay wages to their employees. Each corporation has the same goal at the end, which is to generate revenue for stockholders, but the two differ in the approach on what is necessary to accomplish the set task at hand. Costco’s approach to the situation is that if they offer higher living wages upon their workers, that it would generate more productivity and performance from each worker, and at the same time paying those individuals more assures that the living conditions of their employees are very suitable given the consistent increase in the cost of living. At the same time by providing more health benefits to their workforce it validates its commitment to taking care of their employees, the workers see this dedication coming from up top so they perform better and are more dedicated to their job. With more work coming from each individual whom the company brings in, the number of employees is less than their counterparts and competitors in Wal-Mart. Wal-Mart’s stance on the circumstances are that their prices are very dependent on their operations expenses; hence their thinking process is on saving money more for their customers by paying their employees less. Not only does Wal-Mart pay their employees less which lowers the living standards for Americans, they do not provide the same health benefits as Costco to their employees, which in turn bring about social and political issues. By lowering the benefits and providing lower pay wages, Wal-Mart does not bring overall lower costs to its customers, they pass on the bill to everyday taxpayers in other forms while at the same time hurt the individuals who help them.

2. From a strategic perspective, when are the goals of employee, customer and shareholder stakeholder groups the same? Explain and give examples (7 pts) Although stakeholders have competing interests, an organization must minimally satisfy them all.

3. From a strategic perspective, when are the goals of employee, customer and shareholder stakeholder groups the different? Explain and give examples (7 pts) Satisfying stakeholders creates problems due to competing goals, allocating rewards, and choosing a time frame to measure effectiveness. Difficulties arise in measuring organizational effectiveness even if stakeholders have shared goals. An organization must select the best way to achieve goals.

4. As a manager how do you balance the needs of the employee, customer and shareholder stakeholder groups? Explain and give examples (9 pts) Managers coordinate resources to meet organizational goals and strive to invest shareholder money profitably. Top managers are indirectly appointed by shareholders through a board of directors. Managers contribute skills to receive compensation and satisfaction. Managers often leave an organization if contributions exceed inducements.