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10 Aug 2018, 04:50
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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 employees.”
- - -
The argument presented by Apogee Company states that the company is less profitable today, than when it was operating under a single location. The author further correlates that since the company has expanded into several offices, it has been the cause of the decrease in profitability. To remediate this issue, the argument proposes to centralize back the company’s operation under a single location, closing all its field offices, and by consequence, the author suggests, this will improve profitability and will help to have better control on the employees. The argument made is unconvincing as it resides on two flawed assumptions for which there are no clear evidence. Additional information will be required to provide an objective conclusion.
The first argument stipulate that the expansion of the company’s offices is the cause of the decrease in profitability. This statement is made without any evidence that supports this conclusion, as there can be many factors that can be involved which lead to poor profitability. Factors like poor management, stronger competition, poor location choice for expansion, market changes, poor consequent product releases or wrong expenditure of the companies assets, are all potential factors that are to be questioned before making a conclusion. As a matter of fact, the expansion of a business rarely leads to a decrease in profit, and usually, the opposite is true, as a company expands regionally to nationally to globally, it generates much more profit. This trend do contrast with the author’s conclusion. A potential thought process that could have lead to the author’s conclusion, might be during the early days, when the company was under a single roof, there where less competition in the area, thus they were able to generate more profit, as they expanded and moved to new areas, the climatic competitions were different and it could be that they could not provide a competitive enough product, in that particular market, thus explaining the reduce in profit. Centralizing also brings the point of losing against other competitors in other locations.
The second point made was based on the assumption made above, the author suggest that centralizing back the company would bring more profitability and give more control over the employees. This point neglect the factors mentioned above, which may have cause the issue, for example, managerial issues or stronger competition, these would still not be solved if they move back to a single location. Actually, it might in turn bring additional cost in relocating all the employees under the same location, following subsequent firing and rehiring locally, in terms of time, resources and new infrastructure, which may balance out the whole point of the author, which is to generate more profit. Additional questions could be ask as how they expect to be more profitable when they centralize the company? Will it be cost-effective to relocate and rehire staffs on the long term? Why did they used the assumption of the company’s profitability from the early days, when it was under a single location, on the basis to centralize the company, to seek for eventual future profitability? Is the current management problematic? As the author suggests centralizing would eventually improve the control over the employees, as one of the benefits.
As it stands, the author’s argument is not compelling. In order to assess the merits and strengthen the argument, it is essential to consider all the relevant facts and contributing factors available. The additional questions and factors presented in the analysis above will help to gain a better understanding, ruling out factors other than decentralization, that might be affecting the current profits. Thus, making better decision regarding whether or not the actions proposed would solve the profitability problem and provide a cost-benefit solution to the situation.
“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 employees.”
- - -
The argument presented by Apogee Company states that the company is less profitable today, than when it was operating under a single location. The author further correlates that since the company has expanded into several offices, it has been the cause of the decrease in profitability. To remediate this issue, the argument proposes to centralize back the company’s operation under a single location, closing all its field offices, and by consequence, the author suggests, this will improve profitability and will help to have better control on the employees. The argument made is unconvincing as it resides on two flawed assumptions for which there are no clear evidence. Additional information will be required to provide an objective conclusion.
The first argument stipulate that the expansion of the company’s offices is the cause of the decrease in profitability. This statement is made without any evidence that supports this conclusion, as there can be many factors that can be involved which lead to poor profitability. Factors like poor management, stronger competition, poor location choice for expansion, market changes, poor consequent product releases or wrong expenditure of the companies assets, are all potential factors that are to be questioned before making a conclusion. As a matter of fact, the expansion of a business rarely leads to a decrease in profit, and usually, the opposite is true, as a company expands regionally to nationally to globally, it generates much more profit. This trend do contrast with the author’s conclusion. A potential thought process that could have lead to the author’s conclusion, might be during the early days, when the company was under a single roof, there where less competition in the area, thus they were able to generate more profit, as they expanded and moved to new areas, the climatic competitions were different and it could be that they could not provide a competitive enough product, in that particular market, thus explaining the reduce in profit. Centralizing also brings the point of losing against other competitors in other locations.
The second point made was based on the assumption made above, the author suggest that centralizing back the company would bring more profitability and give more control over the employees. This point neglect the factors mentioned above, which may have cause the issue, for example, managerial issues or stronger competition, these would still not be solved if they move back to a single location. Actually, it might in turn bring additional cost in relocating all the employees under the same location, following subsequent firing and rehiring locally, in terms of time, resources and new infrastructure, which may balance out the whole point of the author, which is to generate more profit. Additional questions could be ask as how they expect to be more profitable when they centralize the company? Will it be cost-effective to relocate and rehire staffs on the long term? Why did they used the assumption of the company’s profitability from the early days, when it was under a single location, on the basis to centralize the company, to seek for eventual future profitability? Is the current management problematic? As the author suggests centralizing would eventually improve the control over the employees, as one of the benefits.
As it stands, the author’s argument is not compelling. In order to assess the merits and strengthen the argument, it is essential to consider all the relevant facts and contributing factors available. The additional questions and factors presented in the analysis above will help to gain a better understanding, ruling out factors other than decentralization, that might be affecting the current profits. Thus, making better decision regarding whether or not the actions proposed would solve the profitability problem and provide a cost-benefit solution to the situation.
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