RJBergerのMBA奮闘記

UKのMBA受験に向けた奮闘記!

AWA練習① Olympic Foods

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.”

 

【Paragraph 1】
The author concludes that Olympic Foods would be able to reduce the processing costs and this might lead to maximise profit thanks to the fact that the expense of a 3-by-5 inch print was 20 cents for one-day service in 1984 despite its costs in 1970 had been 50cent.
The author's line of reasoning is that the company would also minimise the expenditure for the processing cost more in the future as the cost has fallen in the past.
This argument is unconvincing because it suffers from two critical flaws.

【Paragraph 2】
To begin with, the author's forecast that the company would be able to cut the cost and maximise the profit is based upon the questionable assumption that Olympic Foods' long experience.
However, this reasoning cannot necessarily apply to the current situation. For instance, although the machine efficiency has been amazingly developed compare to that of in the past, the investment for the cutting-edge machines would also be expensive. In this case, while the sales amount would rise, the processing cost also would soar. This might leads to the cost increase.

【Paragraph 3】
Secondly, the author assumes that colour film processing can apply to the processing of food.
However, there is no evidence that it can be in the article. It might be necessary to fine-tune; moreover, this might need the amount of the investment that gobbles up the profits.

【Paragraph 4】
In conclusion, To strengthen the conclusion that the long experience and the appliance of colour film processing to the processing of food would contribute to cut the cost and maximise the profit, the author would have to provide evidence that the feasibility of applicability of the method in the past and technology which is owned by the company.
Without this additional evidence, I am not convinced that two facts above would link the author's conclusion.