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 Olympic Foods tries to convince its stockholders through its annual report that it can increase profits as it has long experience. This is supported by comparing with a color film industry in which, the cost of a 3-by-5-inch print feel from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. This argument makes some assumptions which is not supported with evidences.
The Olympic Foods wrongly compares itself with a color film processing industry. The techniques and environment applicable to the color film processing industry may not be applicable to the food processing industry. What applies to a color film may not apply to food. For example, irrespective of the company’s experience, the time taken for a food to ferment would not change significantly.
Just the 25 years of experience cannot be mentioned as a reason for increased profits. Other factors such as climate, market competition would also affect the profit of a company. With all such factors taken into consideration, if it can be proved that experience helps in reducing costs and maximizing profits, the argument would be strengthened.
Since the argument misses several key issues, it is not very sound. If it included the points discussed above, the argument could have been thorough and more convincing.
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