"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 colour 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."
In the given argument author concludes that Olympic Foods, a processor of frozen foods will minimize costs and thus maximize profits as it is celebrating its twenty-fifth birthday. Author's line of reasoning is that because Olympic Foods has acquired an experience of 25 years, it will become efficient as well. The argument is unconvincing for several reasons and it implies red herring by using example of reduction in cost of cost of colour film processing.
One assumption in the argument is that experience in manufacturing will result in reduction in cost. However, it fails to consider that reduction in cost is due to increase in efficiency that may or may not be the function of acquired experience. Thus, it takes the line of reasoning that since Olympic Foods has gathered 25 years of experience, its costs will automatically come down.
Secondly, the argument employs red herring while using example of color film processing. Author assumes that color film processing costs came down because of experience earned between 1970 and 1984. However, it fails to consider that the organization learnt how to do things better and it became more efficient that brought down the costs.
Furthermore, one of the premises in the argument is that, since colour printing industry has reduced its costs to maximize profit with experience, so will the process food industry. It is incorrect to assume to assume so without evaluating the advancements taking place in process food industry and similarities in their circumstances.
Finally, it will be worthwhile to know if there are any new and efficient processes designed or any technical breakthrough has been found by Olympic Foods during its 25 years of processing frozen foods that will help in reducing costs. Introduction of this aspect will render argument more wholesome and balanced.
In the given argument author concludes that Olympic Foods, a processor of frozen foods will minimize costs and thus maximize profits as it is celebrating its twenty-fifth birthday. Author's line of reasoning is that because Olympic Foods has acquired an experience of 25 years, it will become efficient as well. The argument is unconvincing for several reasons and it implies red herring by using example of reduction in cost of cost of colour film processing.
One assumption in the argument is that experience in manufacturing will result in reduction in cost. However, it fails to consider that reduction in cost is due to increase in efficiency that may or may not be the function of acquired experience. Thus, it takes the line of reasoning that since Olympic Foods has gathered 25 years of experience, its costs will automatically come down.
Secondly, the argument employs red herring while using example of color film processing. Author assumes that color film processing costs came down because of experience earned between 1970 and 1984. However, it fails to consider that the organization learnt how to do things better and it became more efficient that brought down the costs.
Furthermore, one of the premises in the argument is that, since colour printing industry has reduced its costs to maximize profit with experience, so will the process food industry. It is incorrect to assume to assume so without evaluating the advancements taking place in process food industry and similarities in their circumstances.
Finally, it will be worthwhile to know if there are any new and efficient processes designed or any technical breakthrough has been found by Olympic Foods during its 25 years of processing frozen foods that will help in reducing costs. Introduction of this aspect will render argument more wholesome and balanced.
