AWA Essay Help (Thanks in advance!!)

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AWA Essay Help (Thanks in advance!!)

by aaronhamburger » Fri Jul 20, 2018 6:33 am
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 argument that long experience in food processing will enable Olympic Foods to minimize costs and thus maximize profits is flawed for a number of reasons. This belief neglects key considerations for such a statement by Olympic Foods , including if other factors drive the Company's efficiency in processing aside from more time doing it, if food processing is the same as processing for other industries, and if Olympic Foods has been processing food for the past 25 years and thus could benefit from increased experience.

The premise that the cost of processing goes down over time for organizations as they learn fails to account for other internal or external forces at play. For example, new technology or equipment purchased over time may aid organizations with optimizing their processes. While this can be seen as the organization learning how to do things better, it is different than the organization learning how to make a current process more efficient. Furthermore, a less efficient organization may just copy a more efficient competitor or even hire a key employee from the competitor to implement the competitor's process. These are just a couple of alternative reasons why costs could go down for processing, but not be as a result of solely learning how to do things better.

If one does accept the cost of processing conclusion in the annual report, the Company's statement still leaves other unanswered questions. It is unclear from the statement if all processing is alike. There is not clear evidence that the same potential synergies from increased time for processing one item, like color processing, is the same as food processing. Food processing could be a more difficult activity and there could potentially be regulations or other external factors specific to the food industry that limit potential advances in reducing costs.

Another issue with the statement is that it assumes Olympic Foods has been processing food for the past 25 years. Over time, there are several examples of companies changing from one core operation to another, such as GE that initialy sold appliances, however, today is a diversified company with operations ranging from finance to insurance. It is possible that Olympic Foods could have started by processing a different product or doing something different all together and only recently decided to start processing food. If the processing or the other operation Olympic Foods engaged in is different than food processing, then it is not logical to assume they will be able to become more efficient in the near future since they only began this type of operation.

Since this article leaves out other several key issues, it is not sound. In order to effectively evaluate the statement, more information is necessary to make this argument convincing.