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AWA practice

by stingray990 » Fri Feb 07, 2020 8:02 am
Hi all,
I'm embarking on my 6 month GMAT study plan! As a part of this practice, I'll be doing AWAs periodically.
I would love to hear any and all feedback.
Thanks in advance for your support.
-stingray990

(originally planned for one AWA each week, but as advised, decided to focus more energy on my quant) :)
Last edited by stingray990 on Mon May 04, 2020 4:46 pm, edited 2 times in total.

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Re: AWA practice

by stingray990 » Fri Feb 07, 2020 8:03 am
Week 1 - Olympic Foods

Prompt:

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 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. 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 you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might you can also discuss what sort of evidence would encourage or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

Essay:

The argument presented in the Olympic Foods annual report is faulty, due to the unsubstantiated claims made about the ability to achieve increasing cost efficiencies over time. To improve the argument that Olympic Foods will be able to minimize costs and maximize profits through this method, the author should elucidate how their case example is relevant to the food processing industry and provide further context on whether cost efficiencies will lead to total cost reduction and be accompanied by stable or increasing revenue.

The argument author postulates that Olympic Foods is likely to see increasing cost efficiency over time by citing an example from color film processing. However, this example has several flaws that call into question its relevancy. First, the author does not describe any, if all, similarities between food and film processing, which leads the reader to question whether similar efficiency gains can be achieved by Olympic Foods. If, for example, most of these gains in film processing were achieved by process streamlining and reduction of overhead costs per print, then perhaps the food industry could also learn from and apply these improvements. Second, the author does not explain the applicability of cost efficiency gains from the 1980s to today. If these improvements were brought about by computerization of aforementioned overhead costs, then arguably Olympic Foods would have also done so at the time and similar leaps in efficiency would not be relevant today. Lastly, the example itself does not clearly demonstrate efficiency gains, as 50 cents per 5 days in 1970 results in an average cost of 10 cents per day, lower than the achieved 20 cents per day in 1984. If the author can explain the breakdown of these costs and how this example can translate to food processing, it would be a more compelling example.

Furthermore, the argument author does not flush out details regarding other factors that could influence Olympic Foods’ profits. For example, even if we accept that Olympic Foods can and will achieve increasing cost efficiencies, we still do not know whether this will result in decreasing total costs. Olympic Foods could potentially be expanding a product line or launching in new geographies, requiring more manufactured product. Even if the cost per unit is reduced, if they end up producing more total units, then bottom line costs could actually increase. Additionally, we do not know whether Olympic Foods will be able to continue to price their food products at the same level or if demand for their food products will remain the same. There is the possibility that the generated revenue per unit could be lower today, at a level beyond what potential cost efficiencies could capture in overall profit. Thus, the author would need to explain how cost efficiencies fit into Olympic Foods’ overall income outlook, including total manufacturing plans and sales.

In order for the author to make a compelling argument for Olympic Foods’ ability to lower costs and maximize profits through increasing cost efficiencies, they would need to make additions to their original statement, specifically to address the relevancy of their case example and how these cost efficiencies fit with the rest of the company’s economic status.


Afterthoughts:

I felt extremely rushed. First 5 minutes were allocated to prepping, wrote down 6 potential flaws to address, ended up grouping some of them down to 4, but then realized it was really addressing 2 areas: the example and the claim about profits. 23 minutes were straight writing, ending up with only 2 minutes to proofread...I felt I rambled a bit and didnt get a chance to make my body paragraphs concise and snappy. Definitely was worried about using the same phrasing over and over. SO had an opinion about the "10 cents per day" critique and thought I should have left that out. Overall feeling okay for first attempt, need to have more vocab variety in back pocket.
Last edited by stingray990 on Mon May 04, 2020 4:45 pm, edited 1 time in total.

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Week 2: Apogee Company

Prompt:

The following appeared in a memorandum from the business department of the Apogee Company:

“When the Apogee Company had all its operations in one location, it was more profitable than it is today. Therefore, the Apogee Company should close down its field offices and conduct all its operations from a single location. Such centralization would improve productivity by cutting costs and helping the company maintain better supervision of all employees.”

Discuss how well reasoned…etc.

Essay:

The argument presented is flawed due to the many unsubstantiated assumptions made about Apogee’s ability to lower costs and improve profitability through centralization of their offices. The author would be more persuasive if they added further explanation to clarify how a centralized office would achieve cost reduction without disrupting operations, whether Apogee’s profitability is suffering due to cost overruns as opposed to waning revenue generation, and if employee performance is declining due to lack of supervision.

The author claims that Apogee’s profitability would be restored to previous years’ levels if their various field offices, presumably spread across a wide geography, were consolidated into one central headquarters, thereby lowering total costs. However, it is not clear if this result would be achieved by this move without further detail. For example, if Apogee’s operations require frequent visits to their in-field operations, then employees would have to travel more between the central headquarters and the operation sites. This additional cost would have to be offset by the savings made by consolidating in order for the author’s conclusion to be correct. Furthermore, the location of the headquarters would need to be decided carefully to ensure adequate access to resources and an attractive office lease market. If the headquarters does not have the former, then there may be a hindrance in performance through lacking critical equipment or additional incurred shipping costs that could add to bottom line. If the headquarters does not have the latter, then the cheaper field office leases may be a better set-up than the more expensive large headquarters (e.g. in a city like New York, a large office would be very costly).

Even if the author is able to explain how the consolidated headquarters would lead to less costs for operations, this still does not confirm the argument that this would lead to profitability like that of yesteryear. The author would need to explain further whether Apogee’s waning performance is driven by costs and not loss in revenue. For example, if Apogee’s market share is shrinking or their product has required a significant price cut in order to maintain competitiveness, then Apogee needs to consider these factors as well for long-term economic sustainability. It may be more advantageous to develop a new product line, enter into an adjacent market, or abandon a service offering that is unprofitable. Furthermore, the author would need to show that the costs saved through the consolidation would be significant enough to justify the logistical difficulties required to move everyone to the new location. If it save only one dollar, then this would likely not be the best use of the company’s time.

Lastly, the author needs to further explain how more supervision would lead to better performance by employees and lower costs. Depending on how the company is structured, it could be possible that less red tape would allow for the employees to conduct their business more effectively. This is an issue that requires review of Apogee’s process efficiency, adequate internal controls, and corporate culture. The author does not provide any evidence to corroborate their statement that more supervision is required, so it would be best to review this claim before making a decision that could stall business and lose trust from employees.

Overall, the author does not provide adequate evidence or reasoning to convincingly deliver their argument that Apogee should consolidate into one headquarter location in order to increase profitability. This argument would be made stronger if they provided further justification of the cost-cutting potential of the headquarter location, the context of Apogee’s overall productivity, and the need for more supervision of employees.

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Re: AWA practice

by kolkahenry » Wed Jun 10, 2020 11:23 pm
Good essay! Nothing to say!

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Re: AWA practice

by TimothyLyall » Tue Jun 16, 2020 8:11 am
Great essay

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Re: AWA practice

by Taj Burrowes » Thu Jul 30, 2020 7:24 am
I think this is a cool experience! :thumb-up: