Toys R Us And Machiavelli's Virtues Summary
Toys “R” Us and Machiavelli’s Virtues
Machiavelli believed that what one may have been taught as moral and ethical might actually deter you from advancing and obtaining power and that one may need to do “bad” actions only when it’s necessary to protect yourself, maintain and/or gain power. Under Machiavellis’ virtues, a leader should use, “whatever means are available to promote the acquisition and maintenance of one’s power,” (Cavico, Mujtaba, 2009, pg. 65). When one looks at Toys “R” Us’ conduct from a Machiavellian perspective, what Toys “R” Us did in urging suppliers to limit supply of products or refuse to sell to discounters was all done to preserve and advance the firms dominance in the marketplace at the expense of its competitors. …show more content…
Machiavelli went on to state that you should try to win people over and persuade them to act in a manner that benefits you, but if this fails, make yourself feared. In the end, this is how Toys “R” Us acted towards its suppliers as they threatened to not buy from them if they didn’t raise their prices and/or limit their sales to discount and online retailers. Toys “R” Us instilled a sense of fear with their suppliers to act in a certain manner or else they would eliminate any business dealings with them.
Toys “R” Us used their dominant position in the marketplace to not only fix prices in the marketplace by forcing their suppliers to institute minimum price controls and bans on discounting, but also forced them to limit supply or refuse to sell their products to online retailers (Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm). These aggressive tactics by Toys “R” Us ultimately led to a drastic reduction of competition from the heavily discounted online retailers. One supplier in particular, Regal Lager, not only consented to Toys “R” Us’ demands, but stopped opening internet accounts and gave Toys “R” Us preferential treatment because, as stated by Regal Lager’s founder, Brent Lager, “It’s hard to say no when they have over 50% of our business!,” (Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011 http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf). These strong-arm tactics from Toys “R” Us were showcased with several other suppliers as well in this courts opinion.
Toys “R” Us’ unethical business practices were further validated in the U.S.
District Court for the District of Columbia where the court ruled on March 29, 2011 that Toys “R” Us used its clout to complain to, “a supplier about discounting of the supplier’s product or about the supply of product to a toy discounter…in each instance it sought information from a supplier about the supply of product to a toy discounter…” (Federal Trade Commission v. Toys “R” Us, Inc., [2011]. Retrieved May 26th, 2011 http://www.ftc.gov/os/caselist/9410040/110329toysruscmpt.pdf). According to the courts decision, Toys “R” Us’ actions were illegal. When looked at it from Machiavelli’s perspective, they acted in a manner to preserve their dominance in the marketplace and their power over their suppliers. Morally, in the eyes of the Toys “R” Us executives, they were only acting in a manner to secure and maintain their power in their marketplace to protect their business and their margins from online competitors. To their customers, they acted immorally as the tactics used by Toys “R” Us were only benefiting them and not their customers who ultimately overpaid for items that could no longer be purchased by online retailers. Any additional savings that were obtained by Toys “R” Us was not passed on to the customers but rather used to increase the company’s margins because of the fixed pricing that was created with the forced agreements with its suppliers. This resulted in higher prices in the …show more content…
marketplace and reduced the availability of products with other retailers that consumers could choose from (Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm).
Acting in a Machiavellian manner usually only benefits people and companies in the short-term and acting in a deceptive and forceful manner cannot be sustained for extended periods of time. This is exactly what happened to Toys “R” Us as they tried to abuse their power in the marketplace, not only from the supplier side, but the consumer side as well. In turn, Toys “R” Us was not acting in a socially responsible manner to both its suppliers, and more importantly, to its customers.
Toys “R” Us and Social Responsibility
Businesses sell goods and services in to the marketplace to generate income and increase their shareholders value. Corporations are not set up to provide social welfare to the community although according to the principle of “last resort,” corporations might have an obligation to, “work for social as well as economic betterment,” to improve the quality of life in the community and society. A corporation is socially responsible when it takes an active role in the, “social causes and civic life of one’s community and society,” (Cavico, Mujtaba, 2009, pg. 162-163).
While there are people who believe that corporations do not have an obligation to be socially responsible and only need to focus on profits, this is a short-term view and could have negative long-term effects if the corporation ignores the concerns of society.
A negative perception of the corporation by society could result in loss of customers, declining revenue, harder time attracting investors, among other things. This is why a corporation needs to be cognizant of how it is viewed within society. As long as you are in the business of providing goods and services to the marketplace, directly or indirectly, the corporation is serving society and therefore is a part of society. If society feels the corporation is being irresponsible or ignoring their requests to be more socially responsible, they can and will take action. This is exactly what was done with Toys “R” Us when a lawsuit by consumers was brought against them. Toys “R” Us put pressure on its suppliers to control prices and limit the number of retailers/competitors who could carry the products. Toys “R” Us’ intentions to manipulate prices for products was made clear by Judge Anita Brody in her memorandum where she stated that they were, “sufficiently dominant to coerce each manufacturer into preventing internet discounting,” because they were, “by far each manufacturer’s most important distributor,” (Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011
http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf). This led to distributors supplying fewer products in to the marketplace, which in turn led to fewer choices for customers to shop, and in turn higher prices, leading to society becoming upset with Toys “R” Us’ business practices.
A recommendation for Toys “R” Us to be more socially responsible in light of this price-fixing lawsuit could be to follow Progressive Insurances marketing campaign of showcasing their prices along with competitors’ prices. Being more transparent on how their products match up to the competition could ease their customers concerns of whether or not the products are fairly priced in the marketplace and to ensure that the product is available at other outlets. While this won’t address the manufacturers concern of price fixing, it will at least address societies concerns of feeling they are buying a product at a fair price and in turn make the company appear to be more socially responsible.
In regards to the manufacturers, aside from government regulating how Toys “R” Us conducts itself in the marketplace as it pertains to price fixing moving forward, Toys “R” Us could mandate its suppliers to be more eco-friendly with the products it uses to manufacture the goods they are selling to Toys “R” Us. This in turn could provide marginal value in their products, assuming it makes business sense and it allows them to maintain a level of profit margin to be sustainable and allow for growth, which could help differentiate them from their competitors and in turn could help them to be viewed as a socially responsible firm. Acting in this manner could potentially attract more customers, which in turn could increase revenues as well as their market share, which could in turn make them look more favorable to not only their customers, but investors as well. These actions could change society’s perception of them as a company that once took advantage of its suppliers and customers to one that is being socially responsible by the way it manufactures its products and ensuring that their prices are fair and available by other vendors by being more transparent.
There could be financial consequences for being or not being a socially responsible company. With Wall Street only focused on quarterly company results, it is hard for investors to see the benefits of programs and actions that are socially responsible which can take some time before the benefits are noticed. At the same time, focusing only on short-term results and acting in a selfish manner can hurt a company’s reputation in the marketplace. The lawsuit brought against Toys “R” Us by some of its customers’ shows what can happen if a company is not acting in a socially responsible manner. These types of actions can help keep companies in check and remind them that they need to act in a manner that is not only beneficial for them, but more importantly, society as well.
References:
Cavico, Mujtaba, 2009
Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm
Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011 http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf
Machiavelli believed that what one may have been taught as moral and ethical might actually deter you from advancing and obtaining power and that one may need to do “bad” actions only when it’s necessary to protect yourself, maintain and/or gain power. Under Machiavellis’ virtues, a leader should use, “whatever means are available to promote the acquisition and maintenance of one’s power,” (Cavico, Mujtaba, 2009, pg. 65). When one looks at Toys “R” Us’ conduct from a Machiavellian perspective, what Toys “R” Us did in urging suppliers to limit supply of products or refuse to sell to discounters was all done to preserve and advance the firms dominance in the marketplace at the expense of its competitors. …show more content…
Machiavelli went on to state that you should try to win people over and persuade them to act in a manner that benefits you, but if this fails, make yourself feared. In the end, this is how Toys “R” Us acted towards its suppliers as they threatened to not buy from them if they didn’t raise their prices and/or limit their sales to discount and online retailers. Toys “R” Us instilled a sense of fear with their suppliers to act in a certain manner or else they would eliminate any business dealings with them.
Toys “R” Us used their dominant position in the marketplace to not only fix prices in the marketplace by forcing their suppliers to institute minimum price controls and bans on discounting, but also forced them to limit supply or refuse to sell their products to online retailers (Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm). These aggressive tactics by Toys “R” Us ultimately led to a drastic reduction of competition from the heavily discounted online retailers. One supplier in particular, Regal Lager, not only consented to Toys “R” Us’ demands, but stopped opening internet accounts and gave Toys “R” Us preferential treatment because, as stated by Regal Lager’s founder, Brent Lager, “It’s hard to say no when they have over 50% of our business!,” (Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011 http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf). These strong-arm tactics from Toys “R” Us were showcased with several other suppliers as well in this courts opinion.
Toys “R” Us’ unethical business practices were further validated in the U.S.
District Court for the District of Columbia where the court ruled on March 29, 2011 that Toys “R” Us used its clout to complain to, “a supplier about discounting of the supplier’s product or about the supply of product to a toy discounter…in each instance it sought information from a supplier about the supply of product to a toy discounter…” (Federal Trade Commission v. Toys “R” Us, Inc., [2011]. Retrieved May 26th, 2011 http://www.ftc.gov/os/caselist/9410040/110329toysruscmpt.pdf). According to the courts decision, Toys “R” Us’ actions were illegal. When looked at it from Machiavelli’s perspective, they acted in a manner to preserve their dominance in the marketplace and their power over their suppliers. Morally, in the eyes of the Toys “R” Us executives, they were only acting in a manner to secure and maintain their power in their marketplace to protect their business and their margins from online competitors. To their customers, they acted immorally as the tactics used by Toys “R” Us were only benefiting them and not their customers who ultimately overpaid for items that could no longer be purchased by online retailers. Any additional savings that were obtained by Toys “R” Us was not passed on to the customers but rather used to increase the company’s margins because of the fixed pricing that was created with the forced agreements with its suppliers. This resulted in higher prices in the …show more content…
marketplace and reduced the availability of products with other retailers that consumers could choose from (Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm).
Acting in a Machiavellian manner usually only benefits people and companies in the short-term and acting in a deceptive and forceful manner cannot be sustained for extended periods of time. This is exactly what happened to Toys “R” Us as they tried to abuse their power in the marketplace, not only from the supplier side, but the consumer side as well. In turn, Toys “R” Us was not acting in a socially responsible manner to both its suppliers, and more importantly, to its customers.
Toys “R” Us and Social Responsibility
Businesses sell goods and services in to the marketplace to generate income and increase their shareholders value. Corporations are not set up to provide social welfare to the community although according to the principle of “last resort,” corporations might have an obligation to, “work for social as well as economic betterment,” to improve the quality of life in the community and society. A corporation is socially responsible when it takes an active role in the, “social causes and civic life of one’s community and society,” (Cavico, Mujtaba, 2009, pg. 162-163).
While there are people who believe that corporations do not have an obligation to be socially responsible and only need to focus on profits, this is a short-term view and could have negative long-term effects if the corporation ignores the concerns of society.
A negative perception of the corporation by society could result in loss of customers, declining revenue, harder time attracting investors, among other things. This is why a corporation needs to be cognizant of how it is viewed within society. As long as you are in the business of providing goods and services to the marketplace, directly or indirectly, the corporation is serving society and therefore is a part of society. If society feels the corporation is being irresponsible or ignoring their requests to be more socially responsible, they can and will take action. This is exactly what was done with Toys “R” Us when a lawsuit by consumers was brought against them. Toys “R” Us put pressure on its suppliers to control prices and limit the number of retailers/competitors who could carry the products. Toys “R” Us’ intentions to manipulate prices for products was made clear by Judge Anita Brody in her memorandum where she stated that they were, “sufficiently dominant to coerce each manufacturer into preventing internet discounting,” because they were, “by far each manufacturer’s most important distributor,” (Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011
http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf). This led to distributors supplying fewer products in to the marketplace, which in turn led to fewer choices for customers to shop, and in turn higher prices, leading to society becoming upset with Toys “R” Us’ business practices.
A recommendation for Toys “R” Us to be more socially responsible in light of this price-fixing lawsuit could be to follow Progressive Insurances marketing campaign of showcasing their prices along with competitors’ prices. Being more transparent on how their products match up to the competition could ease their customers concerns of whether or not the products are fairly priced in the marketplace and to ensure that the product is available at other outlets. While this won’t address the manufacturers concern of price fixing, it will at least address societies concerns of feeling they are buying a product at a fair price and in turn make the company appear to be more socially responsible.
In regards to the manufacturers, aside from government regulating how Toys “R” Us conducts itself in the marketplace as it pertains to price fixing moving forward, Toys “R” Us could mandate its suppliers to be more eco-friendly with the products it uses to manufacture the goods they are selling to Toys “R” Us. This in turn could provide marginal value in their products, assuming it makes business sense and it allows them to maintain a level of profit margin to be sustainable and allow for growth, which could help differentiate them from their competitors and in turn could help them to be viewed as a socially responsible firm. Acting in this manner could potentially attract more customers, which in turn could increase revenues as well as their market share, which could in turn make them look more favorable to not only their customers, but investors as well. These actions could change society’s perception of them as a company that once took advantage of its suppliers and customers to one that is being socially responsible by the way it manufactures its products and ensuring that their prices are fair and available by other vendors by being more transparent.
There could be financial consequences for being or not being a socially responsible company. With Wall Street only focused on quarterly company results, it is hard for investors to see the benefits of programs and actions that are socially responsible which can take some time before the benefits are noticed. At the same time, focusing only on short-term results and acting in a selfish manner can hurt a company’s reputation in the marketplace. The lawsuit brought against Toys “R” Us by some of its customers’ shows what can happen if a company is not acting in a socially responsible manner. These types of actions can help keep companies in check and remind them that they need to act in a manner that is not only beneficial for them, but more importantly, society as well.
References:
Cavico, Mujtaba, 2009
Federal Trade Commission. 2011. Toys “R” Us to Pay $1.3 Million Penalty for Violating FTC Order. Retrieved from http://www.ftc.gov/opa/2011/03/toysrus.shtm
Carol McDonough, et al., v. Toys “R” Us, Inc., et al., [2009]. Retrieved May 26th, 2011 http://www.paed.uscourts.gov/documents/opinions/09d0819p.pdf