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."
Discuss how well reasoned . . . etc.

AWA:

The Argument stated above is flawed as it makes some illogical comparisons. Not only that it compares the term Processing costs with Color film processing and makes some premature conclusion about Food processing but also states facts about cost reduction in Film processing in a particular period and reason it to the Longevity of the Industry. In addition, Processing costs is vaguely considered as the overall cost in an organization and that it will determine the profits. All these stated flaws are explained in detail below.
First, the term Processing cost refers to the costs involved in the various processes in an organization but here it is being wrongly compared to Color film processing which is a Film processing technique. So this not a sound comparison. Also facts about cost reduction achieved in this technique is used to prematurely conclude something about food processing which is a completely different line altogether. For example, color film processing is not much sensitive to external conditions whereas food processing is sensitive to those. Also other factors would have influenced cost reduction in Color film processing such as technological advancement facilitating efficient use of the resources.
Second, it's just stated that Olympic foods has been for 25 years but doesn't say about the longevity of the workers employed. For example , new workers may be recruited recently in place of the experienced ones and they would have inherited the organizational principles yet . So this does not guarantee efficiency.
Third, its being concluded that decrease in processing costs will increase profits. This might not be the case as Profits are related to other costs such as operational costs, transport costs, labour costs etc . as well. So even though the processing costs decreases any substantial increase in the above mentioned costs may reduce the profits.
To conclude, the argument has some serious flaws and it would have been more tight and logically effective if it had included the above mentioned points .