Analysis of Argument # 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 organizationslearn how to do things better, they become more efficient. In colorfilm processing, for example, the cost of a 3-by-5-inch print fell from50 cents for five-day service in 1970 to 20 cents for one-day servicein 1984. The same principle applies to the processing of food. Andsince Olympic Foods will soon celebrate its twenty-fifth birthday, wecan expect that our long experience will enable us to minimize costsand thus maximize profits.”
Answer
The author argues, using facts from the color-film processingindustry's downward trend in cost over 24 years, that Olympic Foodswill be able to cut costs and thus maximize profits in the future. Theauthor bases his conclusion on the generalization that organizationslearn to reduce costs over time and, since Olympic Foods has 25 yearsexperience in the food processing industry, its costs should havedeclined considerably. There are two serious flaws in the argument.
First, the argument uses a faulty analogy between the color-filmprocessing industry and the food processing industry. Analogies drawnbetween the two fields are highly suspect because there are manyserious differences. While the film processing industry faces arelatively simply processing challenge, food producers must contendwith contamination, transportation and farm production (much moreserious challenges). Thus, it is likely much more difficult to wringefficiency improvements in the food industry.
Second, the author uses a sweeping generalization. the author'sprediction of margin improvements relies on the optimistic assumptionthat Olympic Foods' 25 years of experience will automatically result inoperational efficiencies. The problem with this is that improvements inprocesses do not occur automatically over time, they require tremendouseffort at continuous improvement and they require potential room forimprovement. It is possible Olympic Food has limited room forimprovement or lacks the managerial will to improve its operations.Thus, there is no guarantee of improved operational efficiency overtime.
The author's argument has two seriously flawed assumptions. Theauthor could strengthen his conclusion by providing examples of how thecompany has learned how to improve its operations over 25 years andimplemented those changes.

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