GMAT Essays (AWA)

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 argument in the memorandum of Apogee Company concludes that it should close down its field offices and centralize its operations in order to improve profitability and better supervision. This conclusion is supported with some premises which prove to be weak and insufficient.

One of the reason given in the argument to close down its field offices and centralize the operations is that the company was more profitable than it is today. The reasoning is based on the questionable assumption that the company is less profitable today only because of decentralization. The decline in profits could be due to various reasons such as, improper organization structure, increased competition, etc. Hence, the reasoning here is weak.

The argument also states that centralization would improve profitability by cutting costs. The reasoning does not account all the scenarios in determining the impact to the costs due to centralization. No doubt conducting operations from a single location reduces certain type of costs. However, it also increases some other costs. For example, due to centralization commute costs increase as employees will need to visit the field where work is actually taking place. This will also involve employee's much valued time, which is another important parameter in determining costs. Hence, centralization does not necessarily cut costs. Also, the stated reason of better supervision is inconclusive. If many workers need to be out in field where work is actually taking place, supervision of such employees will be difficult from a centralized office.

The conclusion can be better supported if it can be proved that decentralization and not anything else, is the reason behind the decrease in profits. It would also be helpful to state how centralization will cut costs and maintain better supervision of all.

The memorandum would be more acceptable if it states decentralization as one of the reasons instead of stating it as the only reason for the decline in profits.