AWA #1. Cost of proceesing
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23 Dec 2014, 00:05
"Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits."
Any input or critics on this essay is welcomed and appreciated!
The argument concludes from an analogy example in color film processing that the lower costs of processing over time will enable the Olympic Foods company to minimize costs and thus maximize profits. However, it fails to consider the whole picture of the market and the differences between the natures of these two industries. Thus, this argument contains some flaws and remains weak and unconvinced.
First, by applying the same principle from the film processing to the processing of food, this argument fails to distinguish the distinctions between two high-tech industry and food industries. Over 14 years period from 1970-1984, film industry witnessed the sharp increase in consuming with the big changes in technology used. The increasing demand boosts productions to be more efficient and firms benefited from economic of scale while technologies may help to use varieties of low-prices raw material to process final products. Those are mandatory for the lower costs of processing in this industry. Meanwhile, food industry may not benefit from the economics of scale and the cost of raw material is actually increasing. These factors in food industry may indeed drive the cost of processing food to higher. Thus, by only stating that one principle is applicable to another case without considering and clearly mentioning other factors relating cost, this argument leaves rooms for debating.
Second, the argument leave the black box unrevealed by considering cost as a solely factor that affects profit. Given the equation “profit = revenue – cost”, the “revenue” part is dismissed thus makes the argument conclusion relatively weak. As mentioned above, the demand for color film is in the rise during that particular time, but no information about the demand for food produced by Olympic Foods is presented in the argument. Thus, we cannot guarantee that profit will increase if sales decrease while cost remains the same or slightly reduce (if ever because of lower processing cost). Therefore, if the argument could provide more information about the market trend in food industry, the conclusion would be more convinced and persuasive.
In summary, the argument is flawed and therefore unconvincing for the above-mentioned reason. It could be considerably strengthened if the author clearly mentioned all the relevant facts. In order to assess the merits of a certain situation, it’s essential to have full knowledge of contributing factors. Without this information, the argument remains unsubstantiated and open to debate.