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 argument claims that costs of processing decrease over time as organizations learn how to do things better; thus, resulting in greater efficiency. Hence, Olympic Food, which is almost 25years old, is expected to minimize costs and maximize profits. Stated in this manner, the argument reveals examples of leap of faith, poor reasoning and ill-defined terminology. The conclusion of the argument relies on assumptions for which there is no clear evidence. Therefore, the argument is rather weak and unconvincing.
Firstly, the argument readily assumes that color film processing is comparable to food processing. This statement is a stretch. It is unlikely that there is any process that would be present in both color film processing and food processing. The purpose of these two processes is entirely different and thus the means to achieve its ends are likely to be very different. Processing of color film is used in order to produce photographs. The latter is used to preserve and conveniently store food so that it remains edible for later use.
Secondly even if we would assume that some processes are similar or perhaps even identical, does the length of the business correspond to greater ability to reduce costs? Similarly, does minimizing cost necessarily imply maximizing profits? While it can be argued that over time processes get improved, a new company will have the same processes at their disposal as well, provided that it has the needed capital. Even if we allow the assumption from the annual report to be true, following the same logic, other companies with same or greater length may minimize their costs further. In return, this would imply that despite the fact that Olympic Food will be able to minimize its costs other companies which are older will be able to minimize costs further and thus offer even better prices to the customers. Alternatively, it might be the case that the improvements do not result in substantial reduction to the cost.
Finally, the argument uses an example of the cost of 3-by-5-inch print which fell from 50cents in 1970 to 20cents in 1984. This example is very specific, notice the format of the print. Further, the argument does not attribute the fall in the cost of the print to any particular company. It would be helpful if the example would be related to processing in food industry. However, if there would be such an example it is unlikely that fall in the price of oranges will translate to Olympic Food's maximizing profit over the period.
In conclusion, the argument is flawed for the above-mentioned reasons and is therefore unconvincing. It could be considerably strengthened if the author introduced examples which would be relevant to the processing in food industry and how are these specifically related to Olympic Food's capability of maximizing profits.
"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 argument claims that costs of processing decrease over time as organizations learn how to do things better; thus, resulting in greater efficiency. Hence, Olympic Food, which is almost 25years old, is expected to minimize costs and maximize profits. Stated in this manner, the argument reveals examples of leap of faith, poor reasoning and ill-defined terminology. The conclusion of the argument relies on assumptions for which there is no clear evidence. Therefore, the argument is rather weak and unconvincing.
Firstly, the argument readily assumes that color film processing is comparable to food processing. This statement is a stretch. It is unlikely that there is any process that would be present in both color film processing and food processing. The purpose of these two processes is entirely different and thus the means to achieve its ends are likely to be very different. Processing of color film is used in order to produce photographs. The latter is used to preserve and conveniently store food so that it remains edible for later use.
Secondly even if we would assume that some processes are similar or perhaps even identical, does the length of the business correspond to greater ability to reduce costs? Similarly, does minimizing cost necessarily imply maximizing profits? While it can be argued that over time processes get improved, a new company will have the same processes at their disposal as well, provided that it has the needed capital. Even if we allow the assumption from the annual report to be true, following the same logic, other companies with same or greater length may minimize their costs further. In return, this would imply that despite the fact that Olympic Food will be able to minimize its costs other companies which are older will be able to minimize costs further and thus offer even better prices to the customers. Alternatively, it might be the case that the improvements do not result in substantial reduction to the cost.
Finally, the argument uses an example of the cost of 3-by-5-inch print which fell from 50cents in 1970 to 20cents in 1984. This example is very specific, notice the format of the print. Further, the argument does not attribute the fall in the cost of the print to any particular company. It would be helpful if the example would be related to processing in food industry. However, if there would be such an example it is unlikely that fall in the price of oranges will translate to Olympic Food's maximizing profit over the period.
In conclusion, the argument is flawed for the above-mentioned reasons and is therefore unconvincing. It could be considerably strengthened if the author introduced examples which would be relevant to the processing in food industry and how are these specifically related to Olympic Food's capability of maximizing profits.
