“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 twenty-fifth birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.”
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The author states that the cost incurred by Olympic foods would be reduced because its long experience in the industry. The author substantiates his argument by providing examples of other organizations following this trend. However, a few more details would be required before we can conclude on the same. The argument as it stands is weak and I would argue for this.
The cost incurred by a manufacturing organization depends to a great extent on the cost of the raw materials. The processes and techniques can evolve with experience and increase productivity and thereby reduce costs. However this saving would be offset by increase in cost of raw materials. We need to know that the cost incurred by Olympic foods has not increased over the years.
We are also not told about the market requirements. A change in market requirements will cause Olympic foods to greatly change the processes and manufacturing techniques it uses. The machinery would also have to be upgraded in several cases. In such scenarios , Olympic foods would be just like any other organization trying to capture a share in an emerging market. Apple Inc provides us with a classic case for this scenario. It was mainly involved in the Manufacture of its Mac PC’s. In the beginning of the 21st century Apple came out with the IPOD, which is a music player. Now Apple could not expect cost efficiency in the manufacturing of IPOD due to its long history in making PC’s.
In summary, the argument that Olympic foods could greatly increase its profits and reduce costs due to its long experience in the industry is weak. However it can be greatly strengthened if we are provided more information about the issues mentioned above.
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The author states that the cost incurred by Olympic foods would be reduced because its long experience in the industry. The author substantiates his argument by providing examples of other organizations following this trend. However, a few more details would be required before we can conclude on the same. The argument as it stands is weak and I would argue for this.
The cost incurred by a manufacturing organization depends to a great extent on the cost of the raw materials. The processes and techniques can evolve with experience and increase productivity and thereby reduce costs. However this saving would be offset by increase in cost of raw materials. We need to know that the cost incurred by Olympic foods has not increased over the years.
We are also not told about the market requirements. A change in market requirements will cause Olympic foods to greatly change the processes and manufacturing techniques it uses. The machinery would also have to be upgraded in several cases. In such scenarios , Olympic foods would be just like any other organization trying to capture a share in an emerging market. Apple Inc provides us with a classic case for this scenario. It was mainly involved in the Manufacture of its Mac PC’s. In the beginning of the 21st century Apple came out with the IPOD, which is a music player. Now Apple could not expect cost efficiency in the manufacturing of IPOD due to its long history in making PC’s.
In summary, the argument that Olympic foods could greatly increase its profits and reduce costs due to its long experience in the industry is weak. However it can be greatly strengthened if we are provided more information about the issues mentioned above.
