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

Question

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....

Explanation

The above argument that over time organizations become more efficient and hence, the cost of processing goes down is flawed because the author has not provided enough evidence in support to the fact that the reason that the price of color film processing fell down was because of the efficiency of the organization.

The author explicitly states that in color film processing the cost was reduced in a duration of approximately 15 years but he/she fails to realize the reason behind the cost reduction, for example, the cost might have been lowered because of the arrival of a new technology and not the efficiency of the organisation or because of increasing competition in the market. The author no where states the reason behind the reduction of the cost. Moreever, the example provided for the conclusion is too generic and does not focus on a particular organiztion. He/she talks about color film processing which represents a whole industry and not any particular organization.

Also, the author here is comparing two completely different industry here. The example provided by author to conclude his/her reasoning, is about color film processing industry where as the stated principle are applied to Olympic foods which is into frozen food processing. The two are very different industry which may cater to very different customers, use different technology, require different expertise. To draw the conclusion about efficiency of organization of these two different categories becomes all the more difficult without any evidence.

The above argument would be more clear if the author could talk more about the efficiency of the organization in color film processing for example - how the cost was reduced by expediting the process with help of skilled employees, expediting the process of training of new employees or avoiding some common mistakes. Also, author could show more relation between the two industries for example - how the two industry use the same technology? , have some common ground to relate to each other. However, in the current form the argument is flawed.

The following appeared in a memorandum from the business department of the Apogee Company:
"When the Apogee Company had all its operations in one location, it was more profitable than it is today.
Therefore, the Apogee Company should close down its field offices and conduct all its operations from a single
location. Such centralization would improve profitability by cutting costs and helping the company maintain better
supervision of all employees."
Discuss how well reasoned ... etc.

Explanation

The above argument that cutting costs by closing all field offices and conducting operations from a single location will improve profitability is flawed because the author fails to explain the reason behind the decline in profitability of the Apogee company. It might be the case that the decline is because of some external factor e.g. recession. In such case closing down the field offices will not make any contribution towards profit. Argument is very unclear about the decline in profits and it is merely comparing profits of a company in two different time periods.

According to the author, the said company was more profitable when it operated from a single location than in its current form, where it has more than one office in different location. However, it might have happened that the field offices are doing good and are , indeed, earning greater revenue but the profits are not realized because the cost for building these offices was high. Maybe in coming years these costs will be recovered and the company will see higher profits than before. Also, it might be the case that the company previously had more local business and has expanded now to serve more customers and in coming time it might get more business from its field offices after establishing a reputation in the new markets.

Also, the authore here, has not stated by what amount the profit has declined ? It maybe the case that the decline in the profit is neglieable. In such case, closing down the field offices may mean losing a lot of customers which were acquired after the opening of new field offices, and in turn losing a lot of revenue. Morever, author fails to explain how the centralizaiton will work in case all the field offices are closed. In fact, we don't even know if it possible to centralize all the work. The process of intergrating the field offices with the main office might be a more profitable or efficient idea to centralize than by closing the field offices.

The above argument could be soldified by providing more proof by stating the reason behind the decline in profits for example - due to the field offices the company employees are finiding it hard to integrate among themselves or the company serves more to local customers and hence has no need of field offices. However, the conclusion to close down the field offices with stating the reason behind the decline in proifit is not justified

Please be as forthright as possible

DOUBT - Currently I am practicing AWA from OG 13. Are the topics at start are easier than those which appear later? Basically are they arranged as per difficulty level because I'm going by the order and not picking any topic at random

b2bt · Answer

Someone please at least rate it. I know evaluating it takes time but at least rate it on a scale of 6 :-D

brianlange77 · Answer

Hmm. I would say this is okay -- not great. Probably around a 3.5 or so. I'd love to see more structure (1 intro paragraph, 3 body paragraphs, 1 conclusion paragraph) with a much better view towards spelling accuracy. In addition, many of your sentences just seem to run along for a while -- you need to have clear structure in each of your sentences.

Before you go any further -- read the sample essays in the OG. They are a good indicator of what 'good' looks like on the AWA.

Best of luck.

b2bt · Answer

Thanks for your valuable feedback

brianlange77 · Answer

Please let me know if you decide to submit an updated attempt here. I'm more than happy to take a look at it again.
Thanks.
Brian

Debayandc · Answer

The argument claims that Olympic foods, a food processing company, will be able to reduce costs and maximize profits solely on the virtue of a long experience of doing business in the industry. Though compelling at face value, the argument is ultimately untenable because it rests on assumptions for which there is no clear evidence. Also, the argument makes many statistical errors while proving its claim making the argument unconvincing and deeply flawed.

Firstly, the argument readily assumes that just because an organization is doing business for a long time, the costs will automatically go down as companies become more efficient. This statement is a stretch and is not substantiated in any way. There are numerous examples in business and commerce when business entities were forced to close down when a new and more efficient company started operations. For example, the business leader of film processing industry itself, Kodak was operating for more than 20 years and was the undisputed leader of the film processing industry. However, when new and improved digital camera started coming into the market, Kodak refused to adapt to changing conditions and ultimately filed for bankruptcy after a few years. Just because a company is operating in an industry for a long time does not guarantee that the company will learn from its every mistake and will be more efficient than others. The argument would have been much clearer if it explicitly gave examples of the methodology used by established companies to reduce their costs and maximize profits. As no such methodology is provided, the argument is unsubstantiated and remains unconvincing.

Secondly, the argument provides faulty evidence to back up the claim in the example of reduction of costs in the film processing industry. That is, 50 cents for 5-day period will mean 10 cents per day in 1974, while the same service costs 20 cents per day as mentioned in argument. So, after comparison is applied under similar standards, costs have actually increased in the time period, not decreased as claimed in the argument by Olympic Foods. This faulty reasoning extremely weakens the argument and provides no basis for the conclusion. Moreover, the argument assumes that efficiency is the only factor hampering the ability of the companies to reduce the costs. The argument fails to take into the account other major factors which may affect the costs and profits of companies such as inflation, economic health of the country and the purchasing power of its customers. The argument would have been more convincing if the it had taken other factors into account while putting forward the conclusion.

Thirdly, the argument readily assumes that like film processing industry, Olympic Foods will also be able to reduce its costs and maximize profits without showing grounds for such a comparison. There could be multiple reasons for which companies in other industries can successfully increase their profits such as lack of competitors, favorable customer perception, easy availability of skilled labor and more. The argument does not make it clear why Olympic Foods is similar to other industries and even then, why on the basis of the fact that it is in business for 25 years, it will simply its reduce costs and improve its profits.

In summary, the argument is flawed and therefore unconvincing. The argument would have been more convincing if it provided correct statistical evidence to support its claims and if it had taken other factors into account while reaching its conclusion. Consequently, the argument of the ability of Olympic Foods to reduce costs on the basis of its long term operations in the industry remains unsubstantiated and open to debate.

Can somebody rate the AWA, please. Thanks in advance.

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

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