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.
ResponseThe argument claims the as organizations become bigger, they become more efficient. It claims that since the company will complete 25 years its cost will go down and thus maximize profits. This argument manipulates facts and conveys a distorted view of the situation. The assumptions involved have not been clearly explained and thus the argument is inconclusive and flawed.
Firstly, the argument states that as companies become bigger, they become more efficient. This statement is a stretch. This cannot be said about all organization. The argument provides no quantitative figures about the organizations that become more efficient with time. As organisations become bigger, they could hire more people and become inefficient rather that efficient as well. Even if this were true about a couple of organizations, we are not sure if this will be the case for Organic Foods.
Secondly, the argument talks about colour film processing costs which fell between 1970 and 1984. Comparing colour film processing to food industry is dubious. What if the colour film processing costs’ fell because of technological development and not because of increased efficiency? We cannot assume that technological development will take place in food industry as well. The example provided may not be relevant and comparable to the argument, unless more concreate facts are provided.
The argument also talks about costs going down because of increased efficiency and thus increase profits. We are not given any information about revenue. The revenue could be falling and in that case profits will not rise. Also, the initial part of the argument does not mention a time frame about how long it takes for organisations to become efficient. It could be 10, 20,25,30, years. Without that information we cannot be sure that in 25 years the organization will become efficient or if it would be later on.
In conclusion the argument is flawed because of the above-mentioned reasons. More concreate assumptions will go a long way in making the argument more relevant and substantiated. The argument in its current form remains inconclusive and open to debate.