Please review GMAT Analysis of Argument

[sonalic]

Argument Topic is:

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

 

 

Analysis:

The Apogee Company wants to centralize its field offices. They found that the profit of the company was more than today. The company feels that by doing so , the cost can be reduced along with that the employees can be supervised in a better way. The argument is flawed and, hence, not persuasive.

Firstly, the turnover or the number of employees working in the Apogee company is not given. It is very important factor to decide the number of field offices to be mentioned. If there are thousands of employees at one location then it is good idea to have field offices at different locations. This will help in a better way to manage the employees locally at each office location. Also by doing so, the local clients at each field office location can be serviced in a better way by these employees.

However,for example, if there are only some 10 employees working at each location then it is not good idea to maintain such field offices, as this will involve frequent travelling of manager to supervise employees, also co-coordinating with the management staff at every location will involve bottleneck in the decisions of the organization as whole.

Secondly, it is not given how the work at different location is interdependent. If the work at one location requires approval or subpart from other location to proceed their work then the geographical barrier may serve as obstacle to the delivery of product on time, because of reasons like, distance between the locations or the time zone difference, work culture difference etc. However if the final product is not interdependent on the different field location, and, can be manufactured at one location to be sold to clients then in that case it is good idea to have different field locations as by doing so the product can be manufactured and delivered to the local/nearby clients soon without involving huge transport cost too.

Thirdly, how the location of field offices was chosen is not given in the argument. If the field offices are at manageable distance from the main office and also has plenty of clients located nearby then it is good idea to have such offices. This will help to serve the clients more efficiently as will not involve geographical barrier.

Fourthly, it is not given how all field offices were coordinated. This is very deciding factor to the profit of company. If each office has its own management levels to manage their office then the monthly or quarterly or yearly report can be monitored for the revenue made at each location by main office, and, all responsibility can be handed over to local management at each location. This will reduce the bottleneck of monitoring the employees at different locations.

Fifthly, how the work distribution among the offices was done is also not given in the argument. If the work is distributed to very distant offices then that may affect the profit of the company, as it involves the culture difference, time zone difference and hence the quality and time line of the product. Whether to centralize or distribute work also partially depend on product of the company too. For example in case of IT company the product is in electronic format which can be delivered via Internet too. So it is good to have centralized office too.

In sum, it cannot be decided whether all the field offices should be closed and the company should be made centralized unless the factors like turnover, number of employees at each field location, the criteria for the field office locations, work co-ordination are analyzed.

[smittty]

This is good. Here are some additional considerations.

 

1) Profit= Revenue - expenses. What was affected? Revenue (Apogee was making less money) or Expenses (It cost more to conduct business, production, materials). If Apogee cut costs and makes less money, they would be just as unprofitable as before. Apogee needs to identify the issue.

 

2) Why was the Apogee profitable? Where the market conditions favorable (right product at the right time), less competition...what other factors may have been in play.

 

3) Is supervision even an issue? Which I think you touched on. How did the supervision of the employees affect profits. Without productivity data or survey data, we don't know.

[sonalic]

Hi Smittty,

thank you for posing the comments on my eassy..your suggestions were very useful. :)

[tablesalt]

1. Many other factors (management, cost, labor, etc.) could be blamed for the failure of a business instead of the location.

 

2. Concentration of business operations may not save money. Actually, world economies have been globalised. Many multinational corporations are branching out to emerging economies, such as China and India, to save costs.

 

3. Speading out business operations have many adantages: closer to potential markets, cost-saving, etc.