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Please rate my essay (Olympic Foods) [#permalink]
25 Feb 2014, 02:17
Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color 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.
The argument claims that processing costs go down over time as organizations learn how to do things better they, become more efficient. The argument says that because a single example from the color processing industry seemingly supports the above hypothesis, the food processing industry as a whole should also obey the hypothesis. Hence, the food processing company Olympic Foods, which is 25 years old, should enjoy minimal costs and maximal profits from here on out. Stated in this way, the argument fails to mention several key factors, on the basis of which it could be evaluated. The argument relies on assumptions, for which there are no clear evidence. Therefore, the argument is weak, unconvincing and flawed.
First, the argument readily claims that organizations necessarily learn how to do things better over time. This statement is a stretch and not substantiated in any way. There are numerous examples where long established entities, instead of doing things better, make key strategic errors, relegating them from a position of industry leader to a minor player, or worse, forcing them into bankruptcy. Take for instance Kodak, the once pre-eminent leader in photography equipment and processing. In the 80s and 90s, when film ruled photography, Kodak was an indomitable force, holding what was essentially a monopoly on all large scale photography production. However even all their years of experience in photography did not equip them with the wisdom to face the coming revolution of digital photography. They were slow and lethargic in their adoption of digital technology, and this error ultimately caused them to fade into oblivion. Clearly, instead of learning to do things better, Kodak was resistant to the idea of doing things better. The argument could have been much better if it explicitly gave examples of how, under certain circumstances, companies do learn to operate better, and how these examples are relevant to Olympic Foods specifically.
Second, the argument claims that because costs of prints went down over time in the color processing industry, the costs of processing food should also go down over time. It thus suggests that the color processing industry operates in an identical fashion to the food processing industry, and to Olympic Foods in particular. This is again a very weak and unsupported claim as the argument does not demonstrate any correlation between the operations of the color processing industry and the food processing industry. In fact it is not at all clear how the very particular instance of print costs in the color industry parallels the costs of food production in the manner that Olympic Foods operates.
If the argument had demonstrated a correlation between operations of the color industry and the food processing industry, then the argument would have been a lot more convincing. In addition if the argument had provided evidence that print costs are somehow connected to the costs of food production, the argument could have been strengthened even further.
Finally the argument concludes that because Olympic Foods is 25 years old and thus “experienced”, it should be able to do things better and more efficiently, resulting in lower costs and thus greater profits going forwards. As demonstrated above, this statement is based on flawed premises, hence is inadmissible as a justification for lower costs. Without supporting evidence and examples one is left with the impression that the claim is more wishful thinking than substantive evidence.
Moreover, the statement automatically assumes that lower costs leads to higher profits. This leaves out the other important ingredient in calculating profits, namely, revenues. No mention is made of how Olympic Foods’ pricing power may be affected in future and thus it is premature to draw the conclusion that lower costs leads to higher profits.
In summary, the argument is flawed and therefore unconvincing. It can be considerably strengthened if the author mentions all the relevant facts. In order to assess the merits of a certain situation, it is essential to have full knowledge of all contributing factors.