GMAT Essays (AWA)

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.”




The annual report sent to stockholders by Olympic Foods, while ambitious, is not logically sound. The stockholders fail to consider several factors in their reasoning that a company’s longevity will determine processing costs. They also give a faulty example to back up their claim. The argument below will refute the stockholder’s argument that the costs of processing will go down.

The stockholders use the processing cost of a 3-by-5 print as an example to show that the cost of processing frozen food will go down. What they fail to recognize is the differences between photography and frozen food. Simply because the processing cost of photography has decreased over the period of time between 1970 and 1984, it doesn’t necessarily mean the same will apply to frozen food. This may have been a unique technological time for the photography industry. If new advances were made in the field of photography allowing for companies to process photographs faster and cheaper, this would explain the lower processing cost – not increased efficiency.

The stockholders also fail to consider the costs after 1984. If the costs of processing photographs were shown to rise from 1984 through 2008, this certainly would weaken the their argument. The 14-year period mentioned is less than the 25-year period Olympic Foods has been processing. According to the reasoning by the stockholders, Olympic Foods should have realized their improvements in efficiency already.

Finally, the stockholders also fail to recognize other organizations that have actually had processing costs go up. United and American Airlines have been in service for many years, flying to a number of destinations around the country and the world. Over the past few years, airline processing costs have risen dramatically, mainly due to the increased prices of fuel. This external factor, not related to the efficiency of processing, has affected processing costs for the airline. The same could be true for Olympic Foods. If the cost to power industrial strength freezers were to dramatically rise, the processing costs for Olympic Foods would rise significantly, through no fault of their efficiency.

These points above show that the stockholders have looked over a few points. If they were to address the above issues, they might have a better, more airtight argument. As it stands, their logic is faulty and their argument is weak.