“Overtime, 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 25th birthday, we can expect that our long experience will enable us to minimize costs and maximize profits.”
The argument that processing costs go down over time omits some important concerns that must be addressed to substantiate the argument. The analogy that follows the argument statement does not constitute any logical argument in favour of Olympic Foods company to minimize costs of processing foods and it certainly does not provide support to the main argument.
Most conspicuously, the argument has failed to address the reasons how the time and experience could bring down the costs and maximize profits of processing foods. First the argument assumes that the organizations learn to do things better and they become more efficient in due time. In a weak attempt to support its claim, the argument states an example of the costs of colour film processing that have gone down between 1970 and 1984 that is not comparable to food processing industry. Second, the argument does not address the reasons that the experience would enable the food processing industry to minimize costs and maximize profits. This could be compensated by stating the reasons of developments in technology and its management, the employee contribution, the quality of product, the market of the product etc. Finally, the argument does not address the reasons, why the film processing industry is compared to the food processing industry And also, the argument does not address the problems of storage, contamination and market of the products of food processing industry that affect costs, as these are not the major concerns of the film processing industry.
Because the argument leaves out several key issues, it is not sound or persuasive. If it included the items discussed above instead of solely stating the logic of experience and time enables the organizations to make profits, the argument would have been more thorough and convincing.
how coincidental - well not very since its the first question in Official Guide! - i wrote the same one.
This argument is fundamentally flawed and will probably send a negative signal to the investors because it shows the incompetence of the company in presenting clear facts.
First, the example that was given did not clarify its objective, which is to show how the company is efficient. It is unclear whether the price or the time taken to process has fallen. This is crucial in identifying whether the efficiency refers to the ability to reduce the cost or reduce the time taken. For all we know, costs might actually have increased if the film processing continues to require a five-day and the total cost is $1.
Secondly, it is not logical to use the example given as it does not relate to the industry that is in. While the efficiency may have improved in one industry, it may not have improved in another industry. The efficiency of an industry often depends on the stage it is at in the industry cycle curve. Definitely an infant industry like nanotechnology cannot be compared to film processing technology which is at its declining stage.
It is well known fact that past results are not an indication of future performance. The conclusion that experience will enable them to “minimise cost and thus maximise profits” are unwarranted. If the long experience were positive experience that had provided them with good financial results, it is not indicative that they would be able to replicate their success. This is because there are many external factors beyond the company's control that will affect the bottom line of a company such as the increase in costs of oil which in turn cost the freight to increase.
The report can be made better if another example relating to its line of business is used and the reference of long experience is eliminated