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Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
19 Jun 2022, 12:18
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Quote:
The paragraph primarily discusses how the cost of processing of any article goes down over
a period of time as the organizations over a period of time, learn evolve and become more
efficient in carrying out the same process over and over again. It gives the example of how
cost of coloured film processing went down from 50 cents and a 5 day delivery in 1970 to 20
cents and a one day delivery in 1984.
The article further co-relates and establishes that the same principles apply to processing of
food as well. While It is true that cost of processing and repeating activities over a period of
time generally tends to reduce the cost of the activity. There are a few factors that we may
need to consider while evaluating this argument. Firstly, such reduction in costs closely co –
relates with the kind of raw material and the production of raw material that may be
required to bring down such costs. On one hand we’re talking about cost of development of
a raw film, and as photography and especially film photography over that period of time was
a newly introduce field the premium of such technology reduced over time, which in turn
significantly reduced the prices of color film processing.
I believe the food industry should be looked at and talked about a little differently, cost of
processing food. Food processing in general is a regulated activity and takes place under
strict norms placed by the government. Such is not the case with a lot of other industries.
While there may be process improvements and changes that may result in moving the costs
of production marginally down, but over a period of time and considering that the food is a
relatively stable industry, it generally sees prices adjust and increase according to inflation.
Process improvements also follow the plateau curve, which basically establishes that there
are significant improvements in any process at the start of product development life – cycle.
But, as the product matures the room for improvement reduces thereby stabilizing the costs
and it is then when the cost becomes a factor of inflation and the cost of purchase of goods.
Thus, to conclude I would want to believe that, while it is true that knowledge about process
increases efficiency and that’s the kind of model most of the organizations follow to
increase profit margins etc. The industry and the maturity of the industry also needs to be
taken into consideration co-relating such principles. Most industries/ companies plateau in
the kind of improvements they can make in their products and thus the cost stabilizes.
Though, there could be a case of market disrupters, who come with some breakthrough in
the process and offer significant performance improvement, but we don’t base our
assumptions on market disruptions, rather we base them on our most generic findings.
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