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

The recommendation, according to the memorandum from the owner of the movie galore, lacks substantial evidence to support the claim, confused popularity with viability of improving profit and made a costly generalization for all the ten stores based on observation from one of the stores.
Recent decline in profit was attributed to the operating expenses at the movie galore’s rental stores and according to the memorandum, in order to reverse the decline, operational expenses need to be reduced. The basis on which this decision was made is not so clear. It is possible that the electricity cost and cost of renting a space increased over the years, while the price of movie rental price remained unchanged. It is important that the reasons for ascribing the plunging profit to operating expenses be clearly stated.
Further, the Movie galore seems to be confusing popularity for special bargain with non-viability of increasing profit by increasing rental price. What if the special bargain power could be leverage upon to set a more favourable price? If the operational expenses have increased over time, the wise decision, in this case, could be increasing the rental price to compensate for the surging operational expenses.
It was asserted that the one of the movie galore’s stores significantly reduced her operating expenses by reducing the amount of working hours. This might help in saving the cost on electricity as well and renting space, if the renting space is paid for per hour. However, we need to know the exact result of the reduced operating time – was there any significant increase in profit? Also, Further study needs to be made to be sure that by reducing the operating time, the store is not missing out greatly for the remaining time period for earlier operating time – there may be some customers that needs the company’s services outside the new operating time. There should be a reason while the store closes by 9pm rather than 6pm, in the first place. Similarly, the store need to ascertain that movie rentals do not prefer movies released more than five years ago. This can be supported by reviews from customers and or questionnaires to ensure that the right decision is being made.
Finally, implementing similar changes to other nine stores may not be a wise decision. Are other stores operating in a similar conditions and demographics with the store upon which the recommendation was made? We need to ascertain that similar conditions and demographics influence all the ten rental stores for the recommendation to be valid.
In conclusion, an observation based on just one of the store is not substantial to determine how other stores should be operated. There is a need for an intense study to understand the various factors influencing the operations of each store. This will help in making wise decisions which will cumulatively bring about increase in the company’s profit.