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Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
09 Sep 2014, 15:26
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Argument:
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 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.”
This is my essay:
This argument states that as the industry develops more efficient technology and methods, the cost of production would decrease and thus enable Olympic Foods generate more profits. However, this argument is flawed and depends on unproven assumptions. Thus, the argument is weak and unconvincing, unless the author can provide more foundation to the underlying assumptions.
First of all, the argument assumes that Olympic Foods is the only firm that can develop better technology and “do things better.” However, this crucial assumption can be easily shattered, because other firms’ spend resources in Research and Development so that they can invent new methods to reduce costs. Thus, other firms can sell the identical or similar products at a lower price, forcing Olympic Foods to reduce its price as well. Since profit depends on both costs and revenue, a reduction in price will hurt the amount of profit. The computer industry is a great example. The first computer ever invented was big and expensive, but now laptops are now ubiquitously common. As computer technology improves, the reduced costs allow computer firms to sell their products at a lower price, as proven by the ubiquitous scene of today’s electronic world. In other words, new methods cannot necessarily widen the differential between the cost and the price. Thus, if Olympic Foods cannot show that it is the only firm that can reduce costs or that it can reduce costs better than other firms, one can easily argue that Olympic Foods will be forced into a price war and the profit per unit sold remains unchanged.
Secondly, the argument compares itself with the color film industry and assumes that Olympic Foods can catch up with the pace of innovation and will not be wiped out of the market, i.e. it assumes that it is one of the “organizations [that] learn how to do things better.” The comparison is flawed, because not everything company can survive in an innovative world. If the assumption is not proven, Olympic Foods might actually face a danger of extinction rather than an opportunity to maximize profits. For example, Motorola was one of the big giants in the cell phone industry. However, due to its inability to catch up with the smartphone revolution, its earnings declined and the company was later acquired by Google. Thus, to strengthen its argument, Olympic Foods needs to show that they have enough capabilities to counter the innovation of its competing firms.
Finally, Olympic Foods should seek to provide more foundation and evidence to show that it can survive in the food-processing industry. For example, to show that it can reduce costs at a faster pace, Olympic Foods can show that it has patented technology that other firms do not, giving itself a competitive edge. Furthermore, to show that it has the capability to stay ahead, Olympic Foods can demonstrate how it has led several food processing revolutions in the past, changing the standard way of production. Simply using “long experience” does not offer any insight into its competitive standing and does not shed any light on the assumptions they have made in the argument.
The argument, as shown above, lacks foundation and makes several flawed assumptions. To strengthen the argument, the author needs to provide more evidence, as instructed in the above paragraph, so that the assumptions can have greater support and the argument can be more convincing.
Thank you so much!
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 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.”
This is my essay:
This argument states that as the industry develops more efficient technology and methods, the cost of production would decrease and thus enable Olympic Foods generate more profits. However, this argument is flawed and depends on unproven assumptions. Thus, the argument is weak and unconvincing, unless the author can provide more foundation to the underlying assumptions.
First of all, the argument assumes that Olympic Foods is the only firm that can develop better technology and “do things better.” However, this crucial assumption can be easily shattered, because other firms’ spend resources in Research and Development so that they can invent new methods to reduce costs. Thus, other firms can sell the identical or similar products at a lower price, forcing Olympic Foods to reduce its price as well. Since profit depends on both costs and revenue, a reduction in price will hurt the amount of profit. The computer industry is a great example. The first computer ever invented was big and expensive, but now laptops are now ubiquitously common. As computer technology improves, the reduced costs allow computer firms to sell their products at a lower price, as proven by the ubiquitous scene of today’s electronic world. In other words, new methods cannot necessarily widen the differential between the cost and the price. Thus, if Olympic Foods cannot show that it is the only firm that can reduce costs or that it can reduce costs better than other firms, one can easily argue that Olympic Foods will be forced into a price war and the profit per unit sold remains unchanged.
Secondly, the argument compares itself with the color film industry and assumes that Olympic Foods can catch up with the pace of innovation and will not be wiped out of the market, i.e. it assumes that it is one of the “organizations [that] learn how to do things better.” The comparison is flawed, because not everything company can survive in an innovative world. If the assumption is not proven, Olympic Foods might actually face a danger of extinction rather than an opportunity to maximize profits. For example, Motorola was one of the big giants in the cell phone industry. However, due to its inability to catch up with the smartphone revolution, its earnings declined and the company was later acquired by Google. Thus, to strengthen its argument, Olympic Foods needs to show that they have enough capabilities to counter the innovation of its competing firms.
Finally, Olympic Foods should seek to provide more foundation and evidence to show that it can survive in the food-processing industry. For example, to show that it can reduce costs at a faster pace, Olympic Foods can show that it has patented technology that other firms do not, giving itself a competitive edge. Furthermore, to show that it has the capability to stay ahead, Olympic Foods can demonstrate how it has led several food processing revolutions in the past, changing the standard way of production. Simply using “long experience” does not offer any insight into its competitive standing and does not shed any light on the assumptions they have made in the argument.
The argument, as shown above, lacks foundation and makes several flawed assumptions. To strengthen the argument, the author needs to provide more evidence, as instructed in the above paragraph, so that the assumptions can have greater support and the argument can be more convincing.
Thank you so much!
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