Please rate my AWA essay - Apogee Company

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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."

Discuss how well reasoned . . . etc


The argument made by the business department of Apogee company assumes the company would improve profitability if it centralized all operations in a single location. This is deeply flawed for multiple reasons as it makes the assumptions that historical results would still be applicable in the present and the decline in profit is caused by decentralization, both of which are unlikely to be true. Additionally, it fails to specify the amount of decline in profit and does not provide industry benchmarks to contextualize its performance.

First, it cannot be assumed that historical performance can be replicated in the current market, especially if many years have passed since Apogee had a centralized location. There are multiple macroeconomic factors that could have shifted the market in which Apogee operates over time. For example, perhaps there has been an economic recession leading to reduced profitability amongst all companies operating in the sector. In this case, centralization would not result in improving profitability. Current market conditions need to be examined.

Second, there are many reasons why Apogee’s profits could have declined other than decentralization. The argument provides no evidence demonstrating issues with increasing costs or employee performance leading to reduced profitability. Alternatively, increased competition within Apogee’s industry could have driven prices down, leading to reduced revenue. In this case, it’s possible that Apogee’s diversification and establishment of presence in different markets could be adding to profitability rather than cutting it. If Apogee had stayed centralized, profitability may be even lower than it is currently. To strengthen this argument, the business department should present data demonstrating the profitability of different locations, and indicate precisely how expansion has affected profitability.

Finally, the extent of the reduced profitability is neither defined nor specified. Perhaps the authors define profitability as indicators such as return on assets or equity, which could decrease naturally over time as a company matures. If ROA has decreased yet actual net income has increased as the company has grown, the business is still sustainable and profitable. Additionally, the business department needs to contextualize any decrease in profitability by comparing with the rest of the industry as it could be that Apogee is outperforming competitors despite a decrease in profitability.

In summary, the business department’s argument is highly flawed as all assumptions made lack basis and evidence.