“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.”
According to the argument, the author concludes that profitability can be increased by conducting all operations from a single location and shutting down the various other offices of the Apogee company. He has based his conclusion on insufficient premises that profitability only depends on whether operations are centralized or de-centralized. THe author asssumes many aspects and his assumptions are flawed.
Firstly, the author assumes that demand of the products manufactered by the company is still the same and therefore he expects the profitability to be the same if not more. This assumption may not be true and if the company has not catered to the increasing demands and is still producing defunct or old versions of products, profitability will be less. THis will not be due to decentralization but due to the fact there is not much demand for such products now.
Secondly, the author also assumes that the company has moulded its operation and business with the times and is able to cope up with stiff competition from other companies. This cannot be assumed as it is possible that the company has not diversified its operations and hence not been able to compete with companies in the same business domain. If such a thing is true then customers will prefer other companies which offer advanced and diverse range of products than the Apogee company resulting in reduced profitability.
Thirdly, it has been assumed that the expenditure of the company in areas such as salary, operation costs, real estate costs has remained the same. But if expenditure has indeed increased and the revenue of the company has remained the same then profitability will decrease. This decrease will not be due to decentralization.
The author argument may be justified in case it is known that the company is earning more as a result of diversifying its business and producing goods which enjoy a healthy demand in the market. It can then be argued that if revenue has increased there must be another factor which is resulting in low profitability. This factor can be increased expenditure costs due to overheads in supervising different branches.
The argument could be evaluated better if some potential queries were addressed. A few include information on whether the demand of the products manufactured have changed, whether the company is able to meet stiff competition from its rivals and whether the expenditure costs have changed.
Thus based on the reasons cited above, the argument is ill considered and needs further information to be evaluated effectively.
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