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 snippet in the annual report concludes that the long experience of Olympic Foods will enable it to minimize costs and maximize profits. A comparision of improvements in efficiency in color film processing is stated in order to support this conclusion. This comparision is both illogical and insufficient in supporting the stated conclusion.
Firstly, the comparision of color film processing and food processing is questionable. The comparision is like comparing oranges with apples. The color film processing cannot be considered in the same league as food processing. Also, the reduction in costs of services offered by color film processing companies could be because of improvement in technology used by the same rather than re-organization. But, the same principles need not apply to the Olympic Foods. Secondly, even if the illogical comparision between the two are ignored, the assumption that the color film processing became efficient overtime due to the experience in the field is questionable. It could be due to various factors. For example, a lot of government funding in the technologies involved in color film processing or an increase in tourism which drives color film processing might be the reason for cheap services. Hence, the premise supporting the conclusion is weak.
The conclusion can be better supported if evidence can be given to prove that the comparision between the frozen food processing company and color film processing companies are valid. Also, it would help to strengthen (or refute) the conclusion if the amount of innovation taking place in the technologies utilized by Olympic Foods can be calculated.
The argument can be made more logical if, instead of comparing companies invloved in two diverse area, two companies involved in similar area are compared.
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 snippet in the annual report concludes that the long experience of Olympic Foods will enable it to minimize costs and maximize profits. A comparision of improvements in efficiency in color film processing is stated in order to support this conclusion. This comparision is both illogical and insufficient in supporting the stated conclusion.
Firstly, the comparision of color film processing and food processing is questionable. The comparision is like comparing oranges with apples. The color film processing cannot be considered in the same league as food processing. Also, the reduction in costs of services offered by color film processing companies could be because of improvement in technology used by the same rather than re-organization. But, the same principles need not apply to the Olympic Foods. Secondly, even if the illogical comparision between the two are ignored, the assumption that the color film processing became efficient overtime due to the experience in the field is questionable. It could be due to various factors. For example, a lot of government funding in the technologies involved in color film processing or an increase in tourism which drives color film processing might be the reason for cheap services. Hence, the premise supporting the conclusion is weak.
The conclusion can be better supported if evidence can be given to prove that the comparision between the frozen food processing company and color film processing companies are valid. Also, it would help to strengthen (or refute) the conclusion if the amount of innovation taking place in the technologies utilized by Olympic Foods can be calculated.
The argument can be made more logical if, instead of comparing companies invloved in two diverse area, two companies involved in similar area are compared.
