GMAT Essays (AWA)

Just wrote this, timed for 30 minutes and didn't use spell check. I know their are obvious flaws but I am interested what score something like this would get me? Thanks!

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 article by Olympic foods indicating an expected profit increase is clearly written to appeal to the stockholders interest. However whether the deception was deliberate or by mere inadequate reasoning, there were a number of limited and short sighted assumptions made in order to support the claim.

Olympic Foods claims that because they have been in business for 25 years they expect to be more efficient; reducing costs and increasing profit levels. The biggest flaw with this is the complete lack of consideration for the market they are in. Their costs of production are likely to be similar to their direct competitors regardless of the companies age. More relevant factors for indicating lower costs would be; overall size of the company and quantity of output compared to competitors. A company of only 5 years who has double the size and output of Olympic Foods could easily have lower production costs and therefore offer a more competitive price. By undercutting Olympic Foods prices this younger company could directly cause a decrease in Olympic Foods profits.
To support the claim that the companies age directly lowers costs Olympic Foods has used a poor analogy in comparing itself to the technology sector. The technology sector could be considered the worst sector to draw inferences from as it is charastically going through rapid change and development.

Olympic foods has not taken into account external variables that could negatively impact profit levels. Because they are an older company they may be facing new machinery costs and therefor increased training costs for staff. Also, that the company has existed for 25 years does not mean the staff have 25 years worth of experience.

In summary the argument projects profit levels based on a very narrow level of reasoning. Olympic foods has failed to consider the effect of exernal variables, the negative implications of the companies age and the limitations of their workforce. Had they considered these variabels more througherly, a more convincing argument could be made for expected profits and they may increase their credibility to the stockholders.