Question - “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.”
Response - The argument claims that long experience will enable organisations to be more efficient and enable lower costs and maximise profits. The conclusion to the argument is based on the premise that 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 and the same principle applies to the processing of food as well. The conclusion of the argument relies on an assumption for which there is no clear evidence. Hence, the argument is unconvincing and has several flaws.
First, the argument readily assumes that the longevity of Olympia foods in the industry has made Olympia foods an efficient organisation and its long experience will enable measures to cut costs and maximise profits. The argument is based on a specific example in the cooler film processing technology which cannot be equated with the food processing industry. It fails to mention other factors which could have caused a decrease in the fall of the print from 50 cents to 20 cents. For example, the decrease in the number of days of service could be attributable to higher number of machines available for color film processing and not efficiency which lower costs. The author fails to mention the total number of machines which were used in 1970 and 1984.
Second, the argument could have been much clearer if the following factors had been mentioned - the advancement of technology reducing the service time and the total number of customers and number of employees which the color film processing company employs in 1970 as against the number in 1984. In fact, it is not at all clear if the decrease in the number of days of service is caused by higher competition in 1984 requiring companies to reduce processing time to stay relevant thereby companies investing in machines with better technology, higher number of staff and reduced prices to attract customers.
Finally, the argument fails to mention one of the key factors the basis of which it could be evaluated that the costs of Olympia foods would reduce due to its entering 25 years of service and the assumption that it has relevant cause to believe that experience can enable cost reduction and higher profits based on an example in the color film processing industry. There are multiple factors such as competition, customer preference, scale of operations to name a few which could
be different.
Without this information, the argument remains unsubstantiated and open to debate.
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