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 Apogee Company, a manufacturer of computer hardware and software, is weighing whether to consolidate its operations. The company’s managing director believes that by closing down smaller offices, Apogee will be able to increase its profitability. He bases this belief on the firm’s experience of consolidating its operations into a single location when it was operating out of several smaller offices. However, a closer examination reveals some flaws in the managing director’s logic.

The managing director makes two key assumptions. First, he assumes that the cost savings that result from consolidating Apogee’s operations will be passed on to consumers. This assumption is based on the belief that the company’s products are competitive and that consolidating operations will give Apogee the bargaining power to negotiate better prices from vendors. However, this assumption may not be valid. For example, it is conceivable that Apogee’s products are becoming less competitive and that vendors have cut prices already, so consolidating Apogee’s operations would not yield any cost savings. Another possibility is that Apogee’s products are competitive, but vendors are reluctant to lower their prices due to Apogee’s consolidation of operations. In that case, Apogee’s employees would no longer have to travel to the various offices, reducing their transportation costs, but vendors would still refuse to lower their prices.

Consolidating Apogee’s operations would also reduce supervision costs. However, this assumes that Apogee’s supervisors are overpaid. Some employees may prefer spending their days working in one office rather than traveling to several offices. In addition, if the offices are located in different cities, supervisors would have to hire transportation to travel to their various locations. Finally, if Apogee’s supervisors are overpaid, then consolidating their operations would not reduce supervision costs.

Instead of consolidating operations, Apogee should increase its efficiency. Apogee’s managers could identify areas in which the company could reduce its costs. For example, they could explore the possibility of consolidating their office locations. That would reduce the travel-related expenses that supervisors incur and the costs of providing office space. Alternatively, Apogee’s managers could explore the possibility of outsourcing certain operations, such as accounting and payroll, to another company. That would reduce costs and reduce the likelihood that the company’s vendors would cut prices. Finally, Apogee’s managers should examine how the company can streamline its operations. For example, they could explore the current ways in which they communicate with employees. Perhaps they could communicate more effectively via e-mail or instant messaging than by telephone, which incurs more costs.

The managing director’s assertion that consolidating operations will improve profitability is not well reasoned. His assumption that cost savings will be realized through better bargaining with vendors is questionable because vendors may have already cut prices. Consolidating operations would not reduce supervision costs because Apogee’s managers are overpaid. Therefore, consolidating Apogee’s operations would not improve profitability.