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GMAT this week. Please rate my AWA.

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Joined: 20 Feb 2017
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GMAT this week. Please rate my AWA. [#permalink]

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New post 05 Mar 2017, 13:12
This is my first AWA, I would appreciate any comment. Thanks in advance.

The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen
“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.”
Discuss how well reasoned . . . etc.

The argument claims that as time passes, organizations learn how to do things better and thus become more efficient. The argument continues with an example from color film processing industry on how cost of a particular type of printing went down and draws an analogy to food processing industry. Stated in this way the argument fails to mention several key factors, on the basis of which it could be evaluated. The conclusion of the argument relies on assumptions for which there is no clear evidence. Hence, the argument is weak and unconvincing, and has several flaws.

First, the argument readily assumes that the cost decrease in color film processing industry is due to higher efficiency. This statement is a stretch and does not take into account other possible factors. For example, a cost reduction may be caused by a reduction in raw material costs. Moreover, color film processing industry may have grown to an extent at which the scale may have brought the costs down. Stated this way, the reasons of the cost reduction are not clear. The argument could have been much clearer if it explicitly illustrated how companies become more efficient as time passes and what type of costs go down.

Second, the argument claims that the cost reduction principle in color film processing industry applies to food processing industry, as well. This is again a very weak and unsupported claim as the argument does not demonstrate any reason to draw this conclusion. While the color film processing industry experiences such a change, it may well be a case where food processing companies face increased costs because of other factors. In fact it is not at all clear why food processing companies should become more efficient in the future. If the argument had provided evidence that costs have decreased and the company have become more efficient each year, then the argument would have been a lot more convincing that this trend may continue in the near future as well.

Finally, one would argue that the argument should explain what specific actions Olympic Foods will take in near future in order to experience lower costs and higher profits. Without convincing answers to this question, one is left with the impression that the claim is more of a wishful thinking rather than substantive evidence.

In conclusion, the argument is flawed for the abovementioned reasons and is therefore unconvincing. It could be considerably strengthened if the author clearly mentioned all the relevant factors affecting the company’s profitability and cost structure. In order to assess the merits of a certain situation, it is essential to have full knowledge of all contributing factors. In this particular case, one is left with confusion how exactly this claim will come true. Without this information, the argument remains unsubstantiated and open to debate.

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GMAT this week. Please rate my AWA.   [#permalink] 05 Mar 2017, 13:12
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