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.
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Olympic foods claim that it will be able to lower its costs and increase its profits because it has learned over time how to do things better. The author’s line of reasoning is that color processing cost went down from 50 cents in 1970 to 20 cents in 1984 and the same principle will apply to it, resulting in cost reduction and increased profits. The argument is unconvincing in my respects.
First, color processing cost reduction between 1970 and 1984 is based on the assumption that cost reduction happened because organizations learned to do things better. However, author provides no evidence to support this assumption. It may be possible that cost reduction was due to some other factors such as cheaper raw materials or advancement in technologies.
Second, the Olympic Foods assumes that film processing cost reduction principle will apply to it. However, it does not provide any evidence to support the claim. Moreover, it is highly unlikely food processing business is similar the film processing business. For example, the main focus of food processing business is preservation and distribution of food on the other hand main focus of photo processing business is imaging and film processing.
Finally, Olympic food assumes that during the last 25 years of its existence it has learned the things to do better. However, author provides no evidence to support that claim. For example, it may be possible Olympic Foods has not learned anything at all and it is still using outdated processes that it was using years ago.
In conclusion, to convince me that Olympic food will be able to minimize cost and maximize profits, the Olympic Foods would have to provide evidence that it has learned how to reduce costs. It also has to provide the evidence that its business is similar to the photo printing business. Without the additional evidence the argument is not convincing that Olympic Foods can reduce costs and maximize profits.
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.
------------------------------------------------------------
Olympic foods claim that it will be able to lower its costs and increase its profits because it has learned over time how to do things better. The author’s line of reasoning is that color processing cost went down from 50 cents in 1970 to 20 cents in 1984 and the same principle will apply to it, resulting in cost reduction and increased profits. The argument is unconvincing in my respects.
First, color processing cost reduction between 1970 and 1984 is based on the assumption that cost reduction happened because organizations learned to do things better. However, author provides no evidence to support this assumption. It may be possible that cost reduction was due to some other factors such as cheaper raw materials or advancement in technologies.
Second, the Olympic Foods assumes that film processing cost reduction principle will apply to it. However, it does not provide any evidence to support the claim. Moreover, it is highly unlikely food processing business is similar the film processing business. For example, the main focus of food processing business is preservation and distribution of food on the other hand main focus of photo processing business is imaging and film processing.
Finally, Olympic food assumes that during the last 25 years of its existence it has learned the things to do better. However, author provides no evidence to support that claim. For example, it may be possible Olympic Foods has not learned anything at all and it is still using outdated processes that it was using years ago.
In conclusion, to convince me that Olympic food will be able to minimize cost and maximize profits, the Olympic Foods would have to provide evidence that it has learned how to reduce costs. It also has to provide the evidence that its business is similar to the photo printing business. Without the additional evidence the argument is not convincing that Olympic Foods can reduce costs and maximize profits.
