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.
At first glance, the reasons stated in an annual report about the efficiency and profit maximization appear to be sound and valid. But a closer examination of the reasons fails to mention several key factors on the basis of which it could be evaluated.
First, the argument readily assumes that if organizations don't learn how to do things better, they cannot become more efficient and the cost of processing will not see a decreasing trend. The statement assumes that it is only the know-how which makes the organization efficient and optimum. To begin with, it is not mentioned that knowing what better, would make the organization efficient and optimum. There can be number of factors, for instance, like reducing labour cost, which will subsequently reduce the processing cost. Over the time the technology may also have developed which will add to reduce the cost of overheads which in turn may ease the processing cost.
Second the argument compares the food processing organization with the color film processing organization, which is same like comparing apple with mango. In addition, the argument speaks about how the cost of color film processing decreased over time. This is again a very weak and unsupported claim as the argument does not demonstrate the reasons behind the drop off in cost from 50 cents in 1970 to 20 cents in 1984. The cost of processing may have declined due to any other reasons, for example, they may have introduced new machinery which is automatic and reduces the time frame of processing the film. In addition the color film processing organizations may have restructured their management policies which in turn must have helped to curb the overhead cost, adding to reduction in the cost of processing a film. Furthermore, the time frame in which the cost of color film processing has declined is incomparable as the situations then and now is completely different.
Finally, the argument concludes that long experience of Olympic Foods will stand as an advantage in minimizing cost and maximizing profits. From this statement again, it is not clear that how the long experience of Olympic Food will enable to optimization. To strengthen the conclusion that Olympic Foods will enjoy minimal costs and maximum profits in the future, the author would have to provide evidence that the company has learned how to do things better as a result of 25 years of experience." There is a need of more information on the beneficial factors of Olympic Foods." Also the author needs to provide information whether Olympic Foods is already making huge profits or is Olympic Foods still webbed by a number of costs and is suffering from huge losses. If the latter is true, then the long experience of the organization will not stand as a benefit in maximizing profits.[/list]
"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.
At first glance, the reasons stated in an annual report about the efficiency and profit maximization appear to be sound and valid. But a closer examination of the reasons fails to mention several key factors on the basis of which it could be evaluated.
First, the argument readily assumes that if organizations don't learn how to do things better, they cannot become more efficient and the cost of processing will not see a decreasing trend. The statement assumes that it is only the know-how which makes the organization efficient and optimum. To begin with, it is not mentioned that knowing what better, would make the organization efficient and optimum. There can be number of factors, for instance, like reducing labour cost, which will subsequently reduce the processing cost. Over the time the technology may also have developed which will add to reduce the cost of overheads which in turn may ease the processing cost.
Second the argument compares the food processing organization with the color film processing organization, which is same like comparing apple with mango. In addition, the argument speaks about how the cost of color film processing decreased over time. This is again a very weak and unsupported claim as the argument does not demonstrate the reasons behind the drop off in cost from 50 cents in 1970 to 20 cents in 1984. The cost of processing may have declined due to any other reasons, for example, they may have introduced new machinery which is automatic and reduces the time frame of processing the film. In addition the color film processing organizations may have restructured their management policies which in turn must have helped to curb the overhead cost, adding to reduction in the cost of processing a film. Furthermore, the time frame in which the cost of color film processing has declined is incomparable as the situations then and now is completely different.
Finally, the argument concludes that long experience of Olympic Foods will stand as an advantage in minimizing cost and maximizing profits. From this statement again, it is not clear that how the long experience of Olympic Food will enable to optimization. To strengthen the conclusion that Olympic Foods will enjoy minimal costs and maximum profits in the future, the author would have to provide evidence that the company has learned how to do things better as a result of 25 years of experience." There is a need of more information on the beneficial factors of Olympic Foods." Also the author needs to provide information whether Olympic Foods is already making huge profits or is Olympic Foods still webbed by a number of costs and is suffering from huge losses. If the latter is true, then the long experience of the organization will not stand as a benefit in maximizing profits.[/list]
