Essay Question:
Essay: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.
Apogee Company should consider their actions before it takes action on the memorandum provided by the business department because of logical issues and fallacies contained in the memorandum that I will address herewith. In the memorandum the success Apogee Company has had in the past is attributed to having only one location. There may actually be other reasons why the company has been profitable in the past. While the memorandum may be an internal document and doesn't necessarily need to address the business Apogee Company is in, it is important for the reader to know whether closing a field office will have a minimal impact on the business. Sales from certain 'field offices' may be a great source of revenue and by closing them, would make Apogee Company less profitable. In addition to these issues, why is consolidated supervision of employees necessary? Supervision may not be enough of a justification for consolidation. I will address these issue henceforth.
At some point in time Apogee Company was profitable. There could be a million reasons why it was. However, the memorandum writers seem to think that having a centralized location was the primary reason why the company was profitable. Lets imagine that Apogee Company implement the major change of consolidating their field offices into one location. Is it possible that the company would not see anything in terms of profit? Is it possible that a profit wouldn't be realized for the short term or the long term? We don't know our time horizon and we don't know how events in the market will affect profit, revenues, and expenses for the company. The memorandum needs to justify why having one location determined profitability in the past.
If the filed offices have some type of sales or regional necessity, it may be a bad idea to close all of the field offices across the board. It may be a very good idea for Apogee Company to determine which field offices have the most impact on the region they lie in as well as determine which field offices generate the most sales (if that's what these field offices functions are) thereby aiding in which offices to keep and which ones to shut down. This would help maintain revenue for those regions and lower expenses for the company overall.
Does supervision actually aid with profit? Not necessarily. Increased supervision may hinder employee satisfaction due to micromanagement and may hinder the company in the long-term which wouldn't be good for company profitability. It may be necessary for Apogee Company to make a more compelling and comprehensive case on what benefits the company will receive due to consolidating their offices before the company takes any action on the memorandum.
With a more rigorous analysis of the past determinants of Apogee Company profitability, the company may have some useful information that can aid it in making a decision. However, the past doesn't equal the future and there are a multidude of factors that can affect company profitability. It will be important for Apogee COmpany to make an analysis in this regard.
