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25 Feb 2015, 08:16
Kudos
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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.”
Discuss how well reasoned . . . etc.
The author concludes that the cost of processing in food industry is likely to go down and that’s why
Olympic Foods Company due to its experience will be able to minimize costs and thus maximize profits.
However, the conclusion relies on assumptions for which the author does not supply clear evidence.
Above all, the author supplies no evidence that the food processing cost is likely to go down in future.
The author only states that film processing cost went down in the period of 1970-1984. However, the
author gives no evidence that the trend in food industry is the same. Also, even if food processing cost
also went down in previous years, it doesn’t necessarily mean that it will go down in future. It’s
impossible to predict many factors. For example, if tax rates and wages rise, the processing cost may
increase despite improvements in technological process. As far as no evidence that food processing cost
is likely to decrease in future, the argument is flawed.
In addition, the author concludes that if processing cost goes down, the Olympic Foods will maximize its
profit. The author obviously assumes that the prices in food industry are not likely to go down. In this
case company’s revenue is will really remain the same and therefore, the profit will increase. But the
author provides no evidence in support of this assumption. If processing cost decreases due to
technological process improvement, all the competitors will probably reduce the prices and so will do
the Olympic Foods. In this case company’s revenue will go down. Even more, if company’s margin
(evaluated in percent of revenue) remains the same, the profit will decrease.
Finally, the author assumes that 25-year experience is a significant advantage of Olympic Foods and this
experience must help the company to reduce processing cost. But the author does not explain why it
gives an advantage. Young companies may be also efficient in reducing costs. Even more, it’s sometimes
easier for young companies to introduce new technological process than for experienced companies –
to change an existing process. Anyway, the author gives no evidence that company’s experience will
help the company to cut down its processing costs.
To strengthen the argument the author must provide several pieces of evidence to support his
assumptions. First of all, the author should give evidence that processing cost in food industry is likely to
go down in future. Also, the author should supply evidence that reducing processing cost will result in
higher profits for the company. Finally, the author should explain why he finds company’s experience an
important advantage in reducing processing cost. In its current state, the argument relies too heavily on
unsupported assumptions to be convincing.
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.”
Discuss how well reasoned . . . etc.
The author concludes that the cost of processing in food industry is likely to go down and that’s why
Olympic Foods Company due to its experience will be able to minimize costs and thus maximize profits.
However, the conclusion relies on assumptions for which the author does not supply clear evidence.
Above all, the author supplies no evidence that the food processing cost is likely to go down in future.
The author only states that film processing cost went down in the period of 1970-1984. However, the
author gives no evidence that the trend in food industry is the same. Also, even if food processing cost
also went down in previous years, it doesn’t necessarily mean that it will go down in future. It’s
impossible to predict many factors. For example, if tax rates and wages rise, the processing cost may
increase despite improvements in technological process. As far as no evidence that food processing cost
is likely to decrease in future, the argument is flawed.
In addition, the author concludes that if processing cost goes down, the Olympic Foods will maximize its
profit. The author obviously assumes that the prices in food industry are not likely to go down. In this
case company’s revenue is will really remain the same and therefore, the profit will increase. But the
author provides no evidence in support of this assumption. If processing cost decreases due to
technological process improvement, all the competitors will probably reduce the prices and so will do
the Olympic Foods. In this case company’s revenue will go down. Even more, if company’s margin
(evaluated in percent of revenue) remains the same, the profit will decrease.
Finally, the author assumes that 25-year experience is a significant advantage of Olympic Foods and this
experience must help the company to reduce processing cost. But the author does not explain why it
gives an advantage. Young companies may be also efficient in reducing costs. Even more, it’s sometimes
easier for young companies to introduce new technological process than for experienced companies –
to change an existing process. Anyway, the author gives no evidence that company’s experience will
help the company to cut down its processing costs.
To strengthen the argument the author must provide several pieces of evidence to support his
assumptions. First of all, the author should give evidence that processing cost in food industry is likely to
go down in future. Also, the author should supply evidence that reducing processing cost will result in
higher profits for the company. Finally, the author should explain why he finds company’s experience an
important advantage in reducing processing cost. In its current state, the argument relies too heavily on
unsupported assumptions to be convincing.
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