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AWA - Olympic Foods - Feel free to judge

Expert replies
by Jumuller » Sat Apr 05, 2014 4:18 am
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The author's conclusion that Olympic Foods can expect to minimize costs and thus maximize their profit overlooks important concerns about the arguments stated and must therefore be considered questionable. It is inferred from a statement at the beginning, that all companies become more efficient over time which the author tries to prove by an example that describes a different product and a different industry. This alone does not constitute a logical argument in favor for the reduction of costs of processing within all organizations and certainly doesn't support or prove the author's main conclusion.

Most important the argument states that in all organizations time leads to higher efficiency, it compares two very different forms of processing, namely food and film and it claims that lower costs necessarily lead to higher profits. First, the argument assumes all organizations and their products are similar and therefor the production becomes more efficient as organizations learn about the process. In a weak attempt to support this assumption the author gives the example of consumer film processing in stores between 1970 and 1984 and the price reduction that occurred over time. Two flaws are inherent in that claim. Industries differ from each other in terms of maturity, use of technology, size, market and others. It is for example easier to improve production processes when the industries maturity isn't very high, so that processes still have a lot of room for improvement. That might have been the case with film processing, which has not been available for a long time in 1970. The second flaw is that the price reduction only came from higher efficiency and lower costs. Other aspects such as a higher number of competitors or economic circumstances might have also played an important role in the price reduction which then might only have led to a reduction in the margin and not to higher profits. This possibility also proves the final claim in the author's argument wrong, that the reduction of costs lead to higher profits. If Olympic Foods reduces costs it might also reduce quality and thus might lose market share which would reduce revenue and profits.

Due to the fact that the argument highly depends on flawed logic, it is not sound or persuasive. It would have been more convincing if examples from the same industry were provided.
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Source: — GMAT Essays (AWA) |

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