The following appeared in a memo from the president of a company that builds and sells new homes in Steel City.

"Over the past five years, the population of Steel City has increased by more than 20 percent, and family incomes in Steel City have risen much faster than the national average. Nationwide, sales of houses priced above $150,000 have increased more than have sales of lower-priced houses. Such data indicate that we should make changes in our business to increase company profits. First, we should build fewer low-priced houses than we did last year and focus instead on building houses designed to sell at above $150,000. Second, we should hire additional workers so that we can build a larger total number of houses than we did last year."


At a first glance the argument for changing strategy in company policy towards company’s profit is an obvious conclusion. But there are some assumptions that make the argument weak.

First of all, as mentioned over the past years the population of Steel City has increased by more than 20 percent. This is because of the building of the new houses. And many of newly arrived people may have already purchase a house. So there are a few possibilities of purchasing a new one. So the population increment is not a vital cause for company’s profit.

As mentioned by the author that the sales of houses priced above $150,000 have increased more than have sales of lower-priced houses. There is no sufficient data for those points. It will be useful if the author provide some valid survey as an example.

Lastly, if the company invests some more money for building house of price above $150,000 , may not get the right kind of profit. The sales of that company will be high suddenly, but there is assurance that the company may get the same ratio of gain. Because for building those houses the company has to hire some specialist additional workers, which is cost effective. And there is more risk involved in building those houses then lower-priced houses.
The argument for changing strategy in company policy towards company’s profit could provide more information. This will make the argument stronger. In order to lack of sufficient data and proper analysis the argument seems to be weak. After all, a false confidence towards the profit could take the company a sheer loss.