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 author concludes that when Apogee Company had all its operations in one location, it was more profitable than it is today. Thus the Apogee Company should close down all its field operations and conduct all its operations from one location. Such centralization would improve profitability by cutting costs and helping the company maintain better supervision of all employees. Author's line of reasoning is that the Apogee Company generated profit because of its centralized operations and reverting to same shall brig back company to profitable state. The author further states that centralization shall improve profitability by cutting costs and enhancing supervision of employees. This argument is unconvincing on several accounts. It is flawed in its assumptions and
To begin with, the author incorrectly assumes that the reason for profit making for the company is carrying out operation from one central location, whereas no supporting information thereof has been provided. Though the argument mentions that when the Apogee Company had all its operations in one location, it was more profitable than it is today, but this does not clarify the present state of profitability of the company at that location. It is possible that the very location has turned into a loss making one because of external factors.
Secondly, author assumes that closing field offices shall bring company a step closer towards profit; here it fails to consider current state of profitability of these field offices. It is possible that these field offices may be generating profit and do not merit closure.
Thirdly, the argument concludes that the change of system, towards a more centralized one with better supervision over employees and cost cutting will lead to higher profit. Since no information has been provided as to how a centralised system is affecting current state of profitability, it is incorrect to assume that switching to a more centralized system shall restore profitable status of the company.
Finally, to evaluate argument in a better manner, it will be worthwhile to know the causes for decline of profitability for the Apogee Company, the macro-environment in which the company is operating, effect of current system of employee supervision towards profitability and state of profitability of company's various field offices, as well as the effect of closure of field offices on expansion of business. It will also be important to consider the product life-cycle of the product Apogee Company produces. Considering aforesaid shall make argument more balanced and wholesome.