In this argument the author concludes that the Apogee Company should close down
field offices and conduct all its operations from a single, centralized location
because the company had been more profitable in the past when all its operations
were in one location. For a couple of reasons, this argument is not very convincing.
First, the author assumes that centralization would improve profitability by cutting
costs and streamlining supervision of employees. This assumption is never supported
with any data or projections. Moreover, the assumption fails to take into account
cost increases and inefficiency that could result from centralization. For instance,
company representatives would have to travel to do business in areas formerly served
by a field office, creating travel costs and loss of critical time. In short, this assumption
must be supported with a thorough cost-benefit analysis of centralization versus othe
possible cost-cutting and/or profit-enhancing strategies.
Second, the only reason offered by the author is the claim that Apogee was more profitable
when it had operated from a single, centralized location. But is centralization the only
difference relevant to greater past profitability? It is entirely possible that management
has become lax regarding any number of factors that can affect the bottom line such as
inferior products, careless product pricing, inefficient production, poor employee expense
account monitoring, ineffective advertising, sloppy buying policies and other wasteful
spending. Unless the author can rule out other factors relevant to diminishing profits,
this argument commits the fallacy of assuming that just because one event (decreasing profits)
follows another (decentralization), the second event has been caused by the first.
In conclusion, this is a weak argument. To strengthen the conclusion that Apogee should
close field offices and centralize, this author must provide a thorough cost-benefit
analysis of available alternatives and rule out factors other than decentralization
that might be affecting current profits negatively.