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Manager
Joined: 18 Oct 2009
Posts: 52
Schools: Queen's E-MBA
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07 Feb 2010, 20:30
Just wondering how I would be rated on this essay. Please if you guys can spend few moments to read & comment.

The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen foods.
“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 twenty-fifth birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.”
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. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

The annual report sends a message to Olympic Food’s stock holders that with it’s 25 years of experience in the industry, it will now be able to minimize the costs and boosts profits. The reasoning for such conclusion is the trend observed in organisations where, upon gaining maturity they are able to operate efficiently. In my opinion this argument is not too convincing as it is a generalized statement backed by an example from different industry.

First of all it is too wide statement that maturity in business brings efficiency in operation. While making this statement the Olympic Food has wrongly assumed that there cannot be other operating costs that might offset the savings made from efficient operation. Minimizing costs in operation may contribute to maximizing the profits but there may be other heavy weights eating up this saving, like increased cost of raw materials.

Secondly, the company cites the example of color film processing as an example where cost has reduced as years passed. But, this is a wrong sample considered for comparison. Raw materials for film processing are chemicals and printing paper mainly which are not as affected by price fluctuation as the raw food used by Olympic Foods. Moreover, dealing with food items requires more adherences to various statutory norms that are prone to changes and outside manufacturer’s control.

Finally, they have overlooked one very important aspect that has to do with operating costs in production line. It is the incremental cost to maintain the machineries as the processing unit grows by age. There may be more downtime (i.e. stoppage of production) due to failure of machineries thus impacting production cost and volume.

In sum I would not agree to the statement made to share holders as presented. To justify the claim Olympic Foods has to provide statistics from it’s competitors. It also needs to establish it’s claim by giving few examples of how such cost reduction measures have already been implemented.

WORD COUNT => 325
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