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25 Apr 2014, 07:01
Kudos
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"When the Apogee Company had all it's 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 centralisation would improve profitability by cutting costs and helping the company maintain better supervision of all employees."
The author proposes that the organisation close its field offices and centralise operations in order to return to profitability levels that have not been seen since the company was run from a single location. The proposal is narrow in consideration of external factors and proposes a plan that dubiously relies on the assumption that centralisation caused a higher level of profitability in the past. Even if it is accepted as being true, other circumstances may have changed and a return to centralisation may not result in improved profitability during current times.
The argument fails to prove a direct relationship between centralisation and profitability beyond a reasonable level of doubt. Costs and market price both contribute to profitability and changes in either of these factors could have been the cause of historically higher profitability. An upward trend in labour or energy costs would show a factor other than the process of decentralisation caused the decrease in profitability, weakening the argument. If competition has increased in recent years, pushing down market prices, then a factor unrelated to costs could have caused the decrease in profitability.
Even if we accept that decentralisation lead to the decrease in profitability over time, simply reverting to centralised operations does not guarantee improved profitability if circumstances have changed. Apogee does not operate in a vacuum and the argument overlooks the possibility of changes to the market in which the company operates. The market may now require decentralised operations, for example, if Apogee customers have spread geographically over the years then a centralised operation may no longer be able to service their requirements competitively. Initial decentralisation could have been due to market changes that would have resulted in losses for Apogee had branch offices not been set up.
With little consideration of these external factors the proposal to simply revert to centralised operations to improve profitability is misguided. If it fleshed out, or at least clarified, the external factors that have an effect of profitability and quantified them as being less significant than the effect of centralisation, then the proposal to revert to centralisation would be more thoroughly justified.
- What do you think, am I taking too long to make my points - does it matter that I left out the issue of 'better supervision of staff' not necessarily relating to improved profitability?
The author proposes that the organisation close its field offices and centralise operations in order to return to profitability levels that have not been seen since the company was run from a single location. The proposal is narrow in consideration of external factors and proposes a plan that dubiously relies on the assumption that centralisation caused a higher level of profitability in the past. Even if it is accepted as being true, other circumstances may have changed and a return to centralisation may not result in improved profitability during current times.
The argument fails to prove a direct relationship between centralisation and profitability beyond a reasonable level of doubt. Costs and market price both contribute to profitability and changes in either of these factors could have been the cause of historically higher profitability. An upward trend in labour or energy costs would show a factor other than the process of decentralisation caused the decrease in profitability, weakening the argument. If competition has increased in recent years, pushing down market prices, then a factor unrelated to costs could have caused the decrease in profitability.
Even if we accept that decentralisation lead to the decrease in profitability over time, simply reverting to centralised operations does not guarantee improved profitability if circumstances have changed. Apogee does not operate in a vacuum and the argument overlooks the possibility of changes to the market in which the company operates. The market may now require decentralised operations, for example, if Apogee customers have spread geographically over the years then a centralised operation may no longer be able to service their requirements competitively. Initial decentralisation could have been due to market changes that would have resulted in losses for Apogee had branch offices not been set up.
With little consideration of these external factors the proposal to simply revert to centralised operations to improve profitability is misguided. If it fleshed out, or at least clarified, the external factors that have an effect of profitability and quantified them as being less significant than the effect of centralisation, then the proposal to revert to centralisation would be more thoroughly justified.
- What do you think, am I taking too long to make my points - does it matter that I left out the issue of 'better supervision of staff' not necessarily relating to improved profitability?
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