The following appeared in a memorandum from the owner of Movies Galore a chain of movie rental stores In order to stop the recent decline in our profits we must reduce operating expenses at Movies Galore s ten movie rental stores Since we are famous f

The owner of Movies Galore made a recommendation to close the stores early and to reduce the stock of movies that are at least five years old in order to reduce costs and increase profitability. While the recommendation of the owner could hold water, it is based on some assumptions which, if proven wrong, might weaken the argument significantly. To evaluate the argument properly, the following concerns should be addressed.

First, the only way to tackle the reduction in profitability that is mentioned is by reducing operating costs. And it is mentioned that reducing cost is the only way since their business model does not allow raising the price of the movies. However, there are a lot of ways where they could increase profitability without having to raise prices or reduce significant costs. For example, the store can start online renting. People can submit their orders online and the store can deliver the movie to the designated address. This can significantly help the stores to gain popularity as well as profitability. Besides, the company can spend on its promotions; they can highlight the fact that they are lending movies at a very low rate which may bring in new customers and help to increase profitability. Moreover, it is not clear how the stores follow cultural trends. For example, the stores can focus on onboarding new movies as early as possible after the release of a certain movie. When a movie is released, people usually wait when the movie is going to arrive at the local stores. If the store successfully onboards new movies at the earliest, it will help the stores gain popularity and profitability. There are more ways to boost sales. It should be analyzed if the owner checked all of those before deciding to reduce stock and close early. If not, this could weaken the argument.

Second, the Recommendation to close the store early is based on only one store in Marston which reduced its operating cost by doing so. However, it is unclear if this decision helped the store increase its sales and profit or not. It is possible that closing the store early has decreased the sales and profit since it is reducing the business hour. Even if reducing business hours does not hamper the profitability of the store, based on this single observation, the owner should not decide to reduce business hours for all the stores. It is possible that customers of the store in Marston prefer to go to rent movies during the day time but customers of the other stores do so in the evening which is very logical as people usually stay busy during the day time and can concentrate on their leisure in the evening. Before deciding to reduce the business hour, the company should run a thorough survey among the customers regarding their preferred times to visit a movie store. If not, this will seriously weaken the argument and the business decision.

Third, it is recommended to reduce the stock of older movies based on the fact that one store reduced its operating cost by doing so. However, it is not clear if that store gained profitability by this reduction. It is possible that the said store lost its profit as well with operating costs since now it has fewer movies to lend. Even if the store does not see a backlash in its profitability, based on one observation, the company should not reduce its stock in all stores. It is possible that customers of downtown Marston prefer mostly new movies but customers of other stores prefer to go to the theater for new movies and usually go to rental stores to borrow old movies. recommending to reduce stock without analyzing customer preference will weaken the argument.

To conclude, the owner of Movies Galore made a sound recommendation to reduce operating costs. However, more data is required to make a firm recommendation that can uplift profitability. If the owner addresses and analyzes the above-mentioned concerns, the argument can be evaluated properly.