GMAT Essays (AWA)

Task
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."

Answer

The argument supports the idea that the Apogee Company should centralize all its offices and keep only one location open in order to cut cost and to better supervise all employees which in return would generate higher profits. Although the logic of the argument might sound coherent at first sight, the evidence for the argumentation is weak and not convincingly formulated. The paragraph does not mention several relevant aspects such as the different points in time when the comparison was made, how the business developed in terms of new markets, products or services and the overall costs generated by centralizing all offices in one location.

First of all, it is not mentioned when the company was more profitable and how its business changed over time. If the company recently expanded in new more distant markets where it needs time to establish itself and gain market share, this would be an indication of potential profit sources.

Secondly, the argument fails to state if the company started to provide new types of services, fact which is relevant for conducting a proper profitability scenario analysis. If the company decided to provide new types of services where distance to customers and delivery time play a key role in gaining customer satisfaction having more than one office placed on carefully selected positions might lead to better sales and potential higher profits in the end.

Thirdly, the argument is only barely touching the cost impact of such a strategic shift. There are no indications regarding the costs linked to closing the locations and also to the logistic cost increase due to having to cover longer distances from one single location. If the company wanted to carefully analyse such a strategic move, all costs implications must be taken into consideration. Moreover, there are no clear links between a stronger supervision and higher profitability. This might have a negative impact on employees' morale and the overall work environment which might lead to reduce productivity.

All in all, despite the argument providing a straightforward explanation of how the company can improve its profitability, this fails to account for several aspects which need to be evaluated before reaching a more sound conclusion. If the paragraph contained more supporting information regarding the points mentioned above it could have provided a more solid argumentation regarding the issue at hand.