GMAT AWA Topic 2:
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 you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
The author argues that Apogee Company improves profitability by closing down its field offices and conducting all its operations from a single location. To support this argument, the author states that such centralization would improve profitability by cutting costs and helping the company maintain better supervision of all employees. In addition, the author points out that Apogee Company enjoyed a more profitable business in the past when it had all its operations in one location. However, the author's argument is flawed in three aspects.
In the first place, the author regards a complicated managerial issue as a single-step change in operations and ignores many relevant factors. A company's profitability is determined by a whole bunch of economic, social, political, and cultural factors as well as management skills and employees' attitude. Luck also plays an important role. It can be reasonably assumed that Apogee Company is suffering a low profitability at present. The reasons can be many, so any single adjustment without considering other possible influential factors is incomplete, and any oversimplified conclusion is unfounded.
In the second place, it is dangerous for Apogee Company to cut costs deeper and supervise employees better by resorting to centralization. The company may lose its market share because it concentrates its entire resource in one single location and has no direct access to some of those markets that it has offices at present. It will be difficult for the company to get first-hand information and make quick decisions to fight competitors. Moreover, Apogee Company may also lose its customers' interest and trust. People always tend to conduct business with somebody who they can see whenever they want to see. Apogee Company may easily become another unfortunate company that is forgotten by its customers in a region where it does not have a permanent office.
In the third place, it is senseless to compare the present operations of Apogee Company with the operations in the past. The world is changing and the business environment is different. Competition is probably more severe than before, for example, so Apogee Company does not have the relative advantage it had. The only way for the company to keep competitive is to keep tighter relationships with its customers and provide better and quicker services to them, but this may require Apogee Company to open more offices rather than to close most of the current offices.
In sum, the author's conclusion is unfounded. To improve its profitability, Apogee Company should analyze its business environment carefully and, without losing its current business relationships, explore new opportunities. If it simply closed its current offices, the most possible result is that it loses its customers and therefore suffers even lower profitability.