Is Costco’s Business Model Better Than Walmart’s?

I came across this article highlighting Costco CEO Jim Sinegal and the business model that has helped make his company, Costco, the nation’s fifth largest retailer.  Sinegal has taken measures to make sure that prices are kept at rates just as low, if not lower than, Walmart’s while still managing to pay his employees a living wage (the average Costco employee makes $17 an hour, versus just $9 an hour at Walmart).  Even part time employees are eligible for health insurance and dental after six months with the company.  Sinegal himself makes just $350,000 per year, versus a salary of $35 million for Walmart’s CEO.  What that means is that Walmart’s CEO makes more in an hour that the vast majority of Walmart’s employees will earn in a year.

Despite the generosity of Costco’s pay and benefits, Sinegal claims that these measures are not altruistic.  They are, as he puts it, “good business sense.”  Happy and healthy employees are generally more productive.  Costco does not have the problem of internal theft that plagues many Walmart stores, and turnover rates are far lower.  All of these things save the company money, which they can then spend on expansion and keeping prices low.  Sinegal also claims that his relatively low salary (from a CEO perspective) helps increase morale, that it isnt’ healthy to have a person leading a company who makes more than five times what the average employee on the floor makes.

Coming off of Black Friday, if you were watching the news you probably heard about Walmart employees going on strike, and the general dissatisfaction that many Walmart employees face.  Such stories were not reported of Costco, which is growing to become one of Walmart’s chief competitor’s in the market.

In spite of Costco’s generous pay and benefits package, the company’s stock is still doing quite well, gaining 10 points in the past year, while Walmart stock slipped by five points.  Despite this, however, some retail industry insiders are warning Sinegal that he should reduce employee benefits and pay.  They say that stock prices would be better served if Sinegal were to take these steps, however, looking at companies such as Walmart that have been notorious for low wages and skimpy benefits only to continue to see dips in stock prices, it seems that Sinegal is outsmarting industry insiders every step of the way.

What do you think?  Is Sinegal’s business model, which puts customers, employees, and expansion before personal profits and gain a good strategy?  Is it something you would like to see more of in this country?

My answer is definitely a resounding “Yes!”

http://www.nytimes.com/2005/07/17/business/yourmoney/17costco.html?_r=3&pagewanted=all&

Get Ready For Some Pure Stupidity. . .

Once again this week, I’m returning to my hometown of Pennington Gap for inspiration in this blog.  The local government there is gearing up for the biggest waste of tax-payer money I’ve ever witnessed, not to mention the tackiest idea I’ve ever heard of, all in vain hopes that they will be able to attract tourism to the community.

Ladies and gentlemen, I give you Mount Racemore, the latest and greatest idea from the Pennington Gap town government.

Basically, the proposed idea would have a a giant statue built on the side of a mountain near the local park and fairgrounds in the image of four Nascar legends’ heads, similar to Mount Rushmore.

You may be asking what this has to do with business, economics, and solar power.  Keep in mind that Lee County is the same place that saw strong opposition to the proposed recycling center a couple of months ago.  This is government waste, plain and simple, that will be likely to not pay off.  Not to mention, they might as well be giving Lee County a permanent tramp stamp if they go ahead with this.

Some of us have started a facebook page to oppose the project.  You can check it out here:

 

http://www.facebook.com/#!/DoNotBuildMountRacemore?fref=ts

 

Service Industry Claims Healthcare Reforms Are Bad For Business, But Are They?

Yes, yes.
The election is over and another season of presidential politics has sadly come to an end.  With the end of the season, though, are other consequences besides which of the two candidates we’ll be frequently seeing on television for the next four years, unless of course, Mr. Romney scores a place on “Dancing With the Stars.”  One of the biggest consequences of the election is that the Affordable Healthcare Act, otherwise known as Obamacare, will be the law of the land.

My own personal complaint when it comes to Obamacare is that it doesn’t go far enough in reforming the healthcare system.  Some businesspeople, however, have complained that the moderate insurance reforms and the rules in the law that force any business that has more than fifty employees to provide health insurance are a step too far, and they’re going to do whatever they can to avoid providing health coverage to their employees, including lay-0ffs and hiring freezes if necessary.
One such business owner is John Schnatter, better known as Papa John, who has said that the cost of providing healthcare to his employees would cost a whopping fourteen-cents per pizza.  Other restaurants such as Applebee’s and Darden, which owns Red Lobster and Olive Garden, have also said that they will cut staffing and freeze hiring to avoid paying healthcare costs.  This is particularly disturbing to me in the case of Darden, Inc.  I worked for Olive Garden back in 2008, and for Applebees throughout most of 2006 and 2007.  The average server salary is only $2.13 per hour, which is why tipping is so important.  On average, cooks and kitchen staff bring in about $8.00 per hour.  Meanwhile, the corporations themselves bring in billions of dollars in profits each year.
It seems only right to me that if you have a business, chances are, you have had the help of your employees to thank for your success, at least to some degree.  Don’t businesses, particularly large and profitable ones, owe basic necessities like living wages and healthcare coverage to their employees?  Personally, it seems silly to me that we even had to have a law passed to make this happen.  It seems, from where I stand anyway, that employers should go ahead and figure in things like healthcare costs as part of the cost of doing business from the outset.

http://abcnews.go.com/Politics/OTUS/papa-johns-john-schnatter-obamacare-pizza-prices/story?id=16962891#.UKD8UPXUc_8

Election Day Tomorrow: Make Sure You Bring ID

As anyone who hasn’t been living in a cave for the past couple of months should by now know, tomorrow is Election Day.  As a country, we will be deciding which candidates and which vision of America that will carry the nation into the future for the next four years.  In addition to the Presidential race, there are two other important races on the ballot here in Virginia’s Ninth District:  the race between Republican Morgan Griffith and Democrat Anthony Flaccavento to represent the district in the House, and the race between Republican George Allen and Democrat Tim Kaine to represent Virginia in the Senate.

Some of you, like myself, may have taken advantage of early in-person absentee voting which has become more popular in the last two elections.  If you plan on going to the polls to vote tomorrow, however, you’ll need to make sure you have at least one form of ID with you to vote in Virginia.

If Virginia isn’t your home state, and you’ll be voting in one of the surrounding states like Tennessee or Kentucky, you can also use this website to find what forms of IDs are acceptable in all fifty states.

http://www.ncsl.org/legislatures-elections/elections/voter-id.aspx

Administration’s Investments in Green Energy Pay Off–For the Most Part

I’m sort of a political junkie.

So much so that the current Election Season has been very distracting when it comes to my other obligations.  And if you’ve been reading since class started, you probably know that I lean to the Left a little bit.  Okay, maybe a bit more than a little bit.

That said, one thing I have heard repeated, even by Republican nominee Mitt Romney during the first Presidential debate in Denver, is that the current administration’s energy policies have been a disaster.  According to Governor Romney, “Half of the companies that the administration invested in went bankrupt.”

While having a friendly debate with a more-conservative leaning friend of mine on Facebook, I checked into that number.

According to CNN, out of the sixty-three solar and alternative energy companies that were given federal funding, five have gone bankrupt.  That is a rate of roughly eight percent.  The other fifty-eight companies are still in business, and as it turns out, investing in green energy turned out to be a smart decision by the Obama administration.

We are reaching a point in history where fossil fuels are becoming more and more obsolete.  They are expensive, they are non-renewable, and they cause harm to the environment.  No matter who wins the election in a little over a week, I sincerely hope that we will not lose sight of making so-called alternative energy sources “alternative” no longer.

http://money.cnn.com/2012/10/22/news/economy/obama-energy-bankruptcies/index.html

Despite Opposition and Concerns, Lee IDA Approves Sale of Lands to GreenUSA

As I discussed last week, a start-up company called GreenUSA is attempting to build a recycling center in my former home of Lee County, Virginia that is projected to bring as many as two hundred and fifty new jobs to Lee County’s struggling economy. Concerns have been raised by a small yet vocal group of concerned citizens, but according to a Lee County IDA employee with whom I spoke via e-mail, the Lee County IDA has been receiving phone calls in support of the project by a margin of six-to-one. The downside is that getting people motivated enough to come out to town-halls in support of the project has been difficult, and most of those citizens who show up at the meetings do no support the project. After speaking with one of the members of the small opposition movement, again via-email, I now have a better understanding of their concerns. For one thing GreenUSA is a start-up company, and concerns have been raised about the company’s financials. If GreenUSA defaults on their loans, Lee County could be potentially saddled with debt and an incomplete construction project that could be a potential eyesore alongside Highway 58, which runs to the Cumberland Gap National Forest and includes such tourist attractions as the White Rocks Recreational Area and Wilderness Road State Park.

Furthermore, there is a small wetlands in the middle of the industrial site, and some feel that the construction and operations of a recycling center could put wildlife in danger and lead to potential groundwater contamination if not properly handled. The Lee IDA representative assured me that everything that could be done was being done to avoid environmental contamination and catastrophe.

The concerned citizens group, whose website can be viewed here: (http://www.stopgreenusarecycling.com/index.html), also claims that they have attempted to ask questions that have not been answered to their satisfaction by GreenUSA or the Lee County Industrial Development Authority. An open letter with these questions can be found here: http://www.stopgreenusarecycling.com/letter-to-ida.html. The representative from the opposition group that I spoke to said that they would be delighted to welcome GreenUSA to Lee County if they could only get their questions concerning the environmental impact and GreenUSA’s financials answered.

Those concerns withstanding, I sincerely hope that the Lee IDA, Green USA, and the opposition group can work together to make this project a reality. The Lee IDA and Green USA need to take more steps to answer the questions and ease the concerns of the opposition, but at the same time I would hate to see political in-fighting lead to a potential major economic loss to an area of the region that has already been dealt one economic blow too many.

As of the time of this post, the Lee IDA has gone ahead with the sale of the lands to GreenUSA. I’m hoping that this is the right decision, and that all the parties involved can work together to make this project an environmental, as well as economic, success.

 

Potentially Economy Boosting Green Jobs Face Opposition in Lee County

This week’s post is very near and dear to my heart. 

I lived in Lee County most of life, growing up in the tiny town of Pennington Gap.  Pennington Gap has just seventeen hundred residents, making it about the half the size of Wise.  While always a small town, it was less than twenty years ago (I still remember these days)  that Pennington Gap boasted several mom-and-pop department stores, two family owned diners with some of the finest breakfast cuisine I’ve ever come across, and a coffeeshop that featured live music every Friday and Saturday night.  Today, Pennington is a shell of its former self, with 31.3 percent of its residents living below the poverty line and a large number of people struggling with addiction to oxycontin and other prescription pain medications as well as mental illness.  The only other towns in Lee County are Jonesville, the county seat, which has a population of around 900, and Saint Charles, once a major boomtown in the glory days of the coal industry, but now, with only three mines still operating, a nearly deserted ghost town with a population of only 159 souls and a per-capita income of only $10,133 according to the 2010 U.S. census.  The rest of the county is made up of communities that were once considered towns but have lost any viable means to sustain their own governments or communities that were never large enough to gain township status in the first place.  Either way, we call these places “unincorporated areas:”  Dryden, Ben Hur, Rose Hill, Ewing, Flatwoods, Woodway, Stickleyville. 

The bottom line here is that my home county is suffering a full-blown depression, never mind the recession of 2008.  The Lee County Depression has been building for for at least four decades since since the end of the 1970s, and has only gotten worse as time has passed.  The economic meltdown of 2008 that brought on recession for the rest of the country was only the cherry on an already melted sundae. 

But there is hope for change. 

I was made aware yesterday that a start-up company called GreenUSA is attempting to build a major recycling facility on the western end of Lee County.  If this facility becomes a reality, it could potentially bring up to 250 jobs to Lee County, jobs which are much needed and would bring a boost to the county’s nearly-dead economy.  Such a company would also bring a much needed image boost to Lee County, and would hopefully show other counties in southwest Virginia that there are other economic opportunities that should be pursued and considered besides big coal. 

The company is facing opposition from some members of the community, yet other than hearsay and speculation, I have not been able to find out the specific nature of their concerns though I have attempted to contact one of the people opposed to the building of the facility via Facebook.  I have not yet had a response from her.

I contacted the Lee County Industrial Development Authority via e-mail to voice my support for the project, and I have been urging others from Lee County to do the same.  I was told via e-mail by a Lee IDA employee that while they were optimistic about the project, there were still several hurdles to clear. 

For more information about the project and Lee County, you can visit the links below.

http://en.wikipedia.org/wiki/Lee_County,_Virginia

http://www.facebook.com/#!/GreenUSARecycling?fref=ts

http://www.facebook.com/#!/pages/Lee-County-VA-Industrial-Development-Authority/195327090536548?fref=ts