The following appeared in a memorandum from the business department of the Apogee Company:
“When the Apogee Company had all its operations in one location, it was more profitable than it is today. Therefore,
the Apogee Company should close down its field offices and conduct all its operations from a single location. Such
centralization would improve profitability by cutting costs and helping the company maintain better supervision of all
Discuss how well reasoned . . . etc.
The author of the memorandum above argues that Apogee Company should centralize its operations in order to improve profitability. The argument suffers from serious flaws, as it relies on assumptions that may not be valid and does not provide sufficient evidence to prove its case.
Firstly, the author makes the unsubstantiated link between the earlier profitability of the company and the fact that it had all its operations in one location. This assumes that no other factors affected the profitability of the company at that time. However, this is clearly not always the case. For example, it could be that the company’s profitability earlier was because it was an economically favorable time and currently the economy might be suffering from a recession. Or it could also be that more competitors of Apogee company have sprung up in the recent past which is contributing to the lower profitability. In any case, it can be seen that the author’s assumption that the profitability was solely due to having all its operations in one location is flawed.
Secondly, the argument also tries to make the logical link between centralizing its operations and increasing profitability by claiming that it will help cut costs and maintain better employee supervision. However, while that may be the case, this line of reasoning ignores the other effects that centralization could have. For example, having to get all its employees in one location may mean that costs are actually increased. If the company was able to have operations in different areas, it could take advantage of areas with lower labor cost – for example places like India or China.
Furthermore, even if this move did cut costs, it does not guarantee that revenues will not be affected. Centralizing may lower the company’s revenues, for example if it hampers the company’s ability to reach its customer base. This will push profits downwards. The argument makes the serious flaw of ignoring the other side of the profitability equation – it is not only costs that affect profitability, revenues do too. The argument would be strengthened if the author provided some concrete numbers as to how costs and profitability would be expected to change if the operations were centralized.
In conclusion, the author’s argument is seriously flawed due to the above mentioned false assumptions and leaps of logic. If the author wishes to strengthen his or her argument, he or she needs introduce substantial evidence to show why centralization will lead to increased profits and not make comparisons to the past unless he or she can show conclusively that circumstances were absolutely the same then as they are now.
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