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."
Discuss how well reasoned ... etc.



The memorandum from the business department states that when the company was operating from one location, its profitability was
greater than it is today. It also goes on to say that it should close down all field offices and operate from a single location and
that such centralization would improve profitability. The argument is far from being well reasoned, rather it has many gaping flaws as
it relies on many assumptions.

Firstly, it doesnt mention or take into account any other factors which could have affected the profitablity, instead puts all the blame
only on the location.There could be stiff competition, lesser margins on sales, other increasing costs etc
Also, it fails to recognize that the operations of the company may be such that field offices might be essential to the operations of the company.
For example, an insurance company generally requires field offices so that the clients can be given speedy service. In such a case,
closing field offices may actually worsen Apogee's problems. The fact that the company was earlier operated from one location could have also
been due to many factors like state regulations or may be the company was new then or such.

Secondly, such structuring and restructuring of a company often leads to investors viewing the strategy of the company as unclear. It could
weaken the position of the company if such is the case. Because, it must have been the same company's decision to open field offices in the first
place. Also,centralization to one location may also lead to problems to employees who will all have to shift their bases to the new location.
These factors might lead to a bad name for the company in the market as a preferred employer.

Finally,the argument nowhere states why centralization will necessarily lead to reducing costs.It would have been substantiated if
there was some example of another company doing so and acheiving similar results to the one the company wants. Also there could have
been some specific reasons that could have lended some support to the claim.

In conclusion, the argument is not well reasoned and overlooks some important details and to assess the future of a company, a more
holistic approach would be essential.