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1. 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 essay:
In this argument, the management of Olympic Foods holds such opinion that lessening costs can lead to high efficiency and profit maximization and that long experience help reduce costs, concerned. Based on color film industry’s status, the reasoning line fails on rough casual relationship among compliated variables such as cost, efficiency and experience through too simply analogying the totally different industries. The following will examine the weakness of the reasoning line.
In the first place, the argument does not present how the color film industry become more efficient, just show a simple figure about cost saving, which is 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 truth does not show any relationship between cost and efficiency and it even does not explain what is efficiency, especially what is efficiency to frozen food industry. To any industry, improving efficiency maybe help reduce costs, or reducing costs is just a meathod to improve efficiency. It is definitely not true to regard reducing costs as a must to high efficiency. Especially, different industries have different criteria due to different pursues to efficiency. For example, as to frozen foods industry, efficiency means Just-In-time deliverary, fresh food supply, quality management, food security , taste, calorie balance and etc.. This issues represent the specific requirements of frozen food industry. Because of the specifications of different industryies, color film is kind of standardized product without too much distinction among different brands of color film. Thus, costs become an important banchmark to evaluate the efficiency in this industry. Clearly, it is too rough to compare the two dissimliar industries to look for high efficiency meathod.
In the second place, the management of Olympic Foods harshly consider profit maximization result from cost reduction. The profits of company refers to the difference between revenue to cost. If the cost reduction do harm to the sale of the company for product quality or outdated product unfiting the current market, the revenue of the company will lessen or even be on the edge of bankrupt. Hence, it is not wise to only consider the varible of cost. In contast with reducing cost strategy, Sony company devotes to high investment in produce innovation, with high production cost, however, it got great profit return.
In the third place, a company can learn how to do things better during the period of 25 years. It is still needed to be doubted. Different companies have specific status. If the color film company focus on organization culture establishment, we can’t expect this company to aggregate enough experience in reduing costs and Olympic foods can learn such know-how from it. Not speaking of such status, the color film company only has dealed with regular works and done nothing in reducing costs in the past 25 years.
In conclusion, this argument fails to support its allege by correct analogy between similar industry with similar satus. In order to support this propose, the author should provide the evidence to prove the casual relationship among cost, efficiency and profits. And at the same time, we need to know more about Olymic Foods to assess the relevance of this propose. | 
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发表于 2005-8-20 15:16:00
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