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 twenty-fifth birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits."
My Response:
The argument claims that over time organizations learn to do things better, they become more efficient and costs go down. Hence, Olympic foods which will celebrate its twenty-fifth anniversary will be able to minimize costs and maximize profits. Stated in this way the argument fails to mention several key factors on the basis of which it could be evaluated. The conclusion of the argument relies on assumptions, for which there is no clear evidence. Hence, the argument is weak, unconvincing and has several flaws.
First, the argument readily assumes that longer experience has taught organisations to do things better and become more efficient. This statement is a stretch and is not substantiated in any way. There are numerous examples where the longevity of an industry has no effect on efficiency and profits such as energy generation plants. These plants have been in operation for several years and still face the risk of being shut down owing to higher raw material costs, pollution control laws etc. The argument would have been much clearer if it explicitly gave examples how efficiency and costs go down over a long period and whether these changes could be implemented at an earlier stage in the respective industries.
Second, the argument claims that the principle of film processing industry is applicable to food industry. This is again a very weak and unsupported claim as the argument does not demonstrate any correlation between film processing industry and food industry. In addition, if it provided evidence that the revenue margins, processes or state of the art facility of the two industries are common then the argument would have been a lot more convincing.
Finally, the argument concludes that Olympic foods will be able to minimize costs and maximize profits. From this statement it is not clear how it will achieve both the effects simultaneously. Without evidence and examples from other organisations in food industry, which were able to lower costs and maximize profits simultaneously, one is left with the impression that the claim is more of a wishful thinking rather than substantive evidence. As a result, the conclusion has no legs to stand on.
In summary the argument has several flaws and therefore unconvincing. The argument could be considerably strengthened if the author clearly mentioned all the relevant facts. In order to assess the merits of a certain situation, it is essential to have full knowledge of all contributing factors.
"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."
My Response:
The argument claims that over time organizations learn to do things better, they become more efficient and costs go down. Hence, Olympic foods which will celebrate its twenty-fifth anniversary will be able to minimize costs and maximize profits. Stated in this way the argument fails to mention several key factors on the basis of which it could be evaluated. The conclusion of the argument relies on assumptions, for which there is no clear evidence. Hence, the argument is weak, unconvincing and has several flaws.
First, the argument readily assumes that longer experience has taught organisations to do things better and become more efficient. This statement is a stretch and is not substantiated in any way. There are numerous examples where the longevity of an industry has no effect on efficiency and profits such as energy generation plants. These plants have been in operation for several years and still face the risk of being shut down owing to higher raw material costs, pollution control laws etc. The argument would have been much clearer if it explicitly gave examples how efficiency and costs go down over a long period and whether these changes could be implemented at an earlier stage in the respective industries.
Second, the argument claims that the principle of film processing industry is applicable to food industry. This is again a very weak and unsupported claim as the argument does not demonstrate any correlation between film processing industry and food industry. In addition, if it provided evidence that the revenue margins, processes or state of the art facility of the two industries are common then the argument would have been a lot more convincing.
Finally, the argument concludes that Olympic foods will be able to minimize costs and maximize profits. From this statement it is not clear how it will achieve both the effects simultaneously. Without evidence and examples from other organisations in food industry, which were able to lower costs and maximize profits simultaneously, one is left with the impression that the claim is more of a wishful thinking rather than substantive evidence. As a result, the conclusion has no legs to stand on.
In summary the argument has several flaws and therefore unconvincing. The argument could be considerably strengthened if the author clearly mentioned all the relevant facts. In order to assess the merits of a certain situation, it is essential to have full knowledge of all contributing factors.
