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ESSAY OF THE WEEK |
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Question
The following appeared in a national business magazine:
"Mega retailer MNO Company released its third quarter sales figures today. Profits were down overall, but figures showed that its remodeled stores performed 5% better than its non-remodeled stores. Some shareholders are now demanding that the company expand its remodeling plans to include all stores in the company."
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.
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| msb: 9/18/2009 |
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The main point which has to be considered here is the reason for the profit fall.Considering the fact that a certain store were remodeled and had better performance then the profits should have increased. Also there is no information related to the profits from the remodeled store or the non-remodeled stores the previous year.
A 5% better performance is not enough incentive to decide on remodeling the rest of the stores. The statement lacks information about why only a few store were selected for re-modeling and not all store.
Since the overall profits are low the investments on re-modeling should consider only those store which have had bad performance and not the once which have had good performance.
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Reference Essay |
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There is no indication that remodeled stores perform better than older stores based upon the remodeling itself. The company may have elected to remodel stores in more affluent areas, accounting for the improved performance. The argument would be stronger if the company could show that customer traffic increased after the remodeling, or that the average sale increased as the result of the redesigned stores.
The remodeled stores may carry more desirable merchandise or more diverse merchandise than the unremodeled stores. The argument for remodeling would be stronger if the passage indicated that the merchandise in the remodeled stores had not changed, or that the merchandise in the remodeled stores was no different than the merchandise in the unremodeled stores.
The passage does not indicate the cost of remodeling or the size of the chain. The cost of remodeling may be cost-prohibitive. The argument would be stronger if it indicated the cost of remodeling the store versus the projected increase in revenue.
The passage indicates that the remodeled stores performed 5% better than unremodeled stores, but the article does not indicate that either the remodeled or unremodeled stores are operating profitably or unprofitably. It could be that regardless of the state of the store, all stores are unprofitable. Conversely, all stores could be operating profitably. The argument for remodeling stores would be stronger if the article indicated that the 5% improvement meant the difference between operating profitably and losing money. If a store could be made profitable by remodeling it, then remodeling may be justified. If the store is already operating at a profit, the expense of remodeling may not be justified.
The fact that remodeled stores operate at a higher profit than unremodeled stores does not conclusively prove that remodeling a store leads to higher profit. Without knowing where the improved stores are, the differences in the merchandise lines, the cost of remodeling a store, and whether or not the 5% increase means the difference between operating at a profit or loss, the reader cannot conclude that remodeling should be undertaken in all cases.
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