Over time, the costs of processing go down because as organizations le

The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen foods:

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.”

My response:

The argument stating that Olympic Foods will be able to minimize costs and maximize profit is flawed because of several reasons. Primarily, the color film industry does not work the same way as the food processing industry. Secondarily, not all companies learn how to do things better with time.

The color film industry might have had reduced it costs for prints over time, after doing things better, but we can´t assume that it will work the same way for the food processing industry. Food processing is an industry that has a bigger array of products, which can also change over time, making it much more structureless that color film processing. An assumption that could be more clearly supported in this case would be to compare Olympic Foods processing with a food processor that has more than 25 years in business.

Moreover, another vague assumption made in the argument is that companies learn how to do things better after some time. What if a company changes or doesn´t improve its management style over the course of time and stays stuck in the same place? The only way to quantify this would be to follow the progress of a company year after year and measure its profit in relation to the past.

These two assumptions mentioned above make the whole argument vague and not verifiable. If it included the arguments mentioned above, it would be more thorough and convincing.



Thanks!!!!