AWA Prompt:
“The profitability of Croesus Company, recently restored to private ownership, is a clear indication that businesses fare better under private ownership than under public ownership.”
Discuss how well reasoned... etc.
AWA Evaluation Request - Please review this, thanks.
The author claims that organisations’ performance improves under private ownership instead of under public ownership. This claim is supported by the specific example of Croesus company. According to the author, this company had improved profitability since it was turned private. The conclusion is clearly over-stretched and has various flaws in its reasoning.
First, the author has used just a single business’s example to make a strong generalization. There are many factors that directly and indirectly impact the profitability of an organization, such as the market share, unique selling propositions of the products and services, the brand value, productivity of the company and the financial health of the company. All these factors have a considerable impact of the profitability of a company. To attribute the improved profitability only to the switch from public to private ownership in the case of Croesus company is unsubstantiated and highly unlikely. Agreed that management of the company does impact its profitability, but there are many other factors involved. So without a deep understanding of the overall business of Croesus company, it is difficult to claim that profitability was a result of the recent ownership change.
Second, ownership change indicates change in management and the way the company operates and undertakes strategic decisions. These factors, while important, show results in the long term and not immediately. For example, if the management decides to introduce a new line of products or changes its distribution model, the profitability would be impacted in the long run, but the results will not show immediately. Hence, it is safe to assume that the profitability of Croesus company is, at best, correlated to the recent change of ownership, but not caused solely due to the ownership change.
Furthermore, the conclusion states that businesses fare better under private ownership. The supporting example, however, only discusses one factor – profitability. These are various other factors that are used to determine whether a business is doing well, such as, the cash flow, working capital, market share, entry barriers, consumer preferences, and other industry specific considerations. Thus, using only profitability to claim that a particular form of ownership is better than another is far-fetched.
In conclusion, the argument is weak and the example of a single company is not strong enough to support the same. In order to strengthen the argument, the author could have provided more specific information about the business of Croesus company that directly proved the impact of the ownership change. Also, to support the conclusion, examples and information of more companies from varied industries would be helpful. With this information, the argument will have a stronger reasoning.