When the Apogee Company had all its operations in one location, it was

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 above argument is based on the premise that centralization was, and will continue to be, the key to Apogee Company’s profitability. From this, it draws the conclusion that closing down its field offices would help improve profitability. This argument is substantially flawed, as it uses vague language and outdated presumptions to draw an obscure conclusion.
The evidence provided by the argument in its favor is ambiguous. For example, the argument states that the company was “more profitable” back when its operations were centralized. What exactly is a good measure of profitability? More importantly, is an increase in profitability always good? Consider a company whose profit and loss account is primarily comprised of non-cash items, with hardly any liquidity to meet its obligations. Merely stating that the company was “more profitable” does not give an accurate picture of its financial position. Furthermore, the argument goes on to say that if Apogee Company chooses to centralize its operations, it could “improve profitability”. This is yet another ambiguous phrase. Even a 1% increase in profitability over the course of a year could be considered an improvement. However, such an improvement cannot necessarily be looked at as a strong case for closing down the company’s field offices.
Yet another flaw in the argument is the time frame that is being referred to. It is unclear as to how many years the company has been in existence. The argument assumes that lack of centralization is the only reason for the difference in profitability. However, it would be wise to have a look a look at the evolution of the company’s business through a set of assumptions. It is possible that the company has been in the market for a long time. In the initial years, the management might not have seen the need for field offices on account of the scale of the company’s operations. Apogee Company could have been profitable simply by catering to a more focused customer segment. Furthermore, a decline in profitability post expansion could have been a result of many other factors, such as economic turbulence or inefficient management. Attributing it to a lack of centralization is a weak argument.
With the very premise of the argument being questionable, the memorandum’s conclusion attempts to justify itself by stating that an improvement in profits would be a direct result of the “cost cutting” benefits that spring from centralization. Let us set aside the vague nature of this phrase for a second. It would be more relevant to look at the underlying assumption itself. The argument assumes that the company could reduce its costs by closing down all its field offices. This is not necessarily true. Continuing with the assumption that Apogee Company has been in existence for quite a long time, and has gained a wider geographical reach, centralization of operations would lead to a significant increase in distribution costs. Furthermore, centralizing operations would lead to significant costs in terms of severance packages for the staff that had to be laid off. Insecurity among existing employees could lead to an increase in employee turnover, which would, in turn, mean higher recruitment costs.
For the aforementioned reasons, the argument lacks persuasiveness. The memorandum has failed to draft a compelling case for Apogee Company to centralize its operations.