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Sample Response to GMAT AWA Argument Questions
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.”
The
author concluded that with long experience of 25 years, Olympic foods
will be able to maximize profits and minimize costs because the
processing cost has gone down in color film industry. The line of
reasoning is that the same approach in film processing industry should
be applicable to the other industries. This argument is not sound,
however, because it is not necessary that same thing would happen to
food industry. It depends upon many other factors.
Firstly,
the argument assumed that the color film industry is similar to food
industry. One must not forget that an Olympic food is an industry for
frozen foods or perishable products. These products require fast
transportation and special equipments in order to keep fresh or the
entire stock will get junked. These requirements can claim substantial
costs and it is very likely that they can never be cut. One the other
hand, color film is a consumer product which stays much longer and is
not perishable. Therefore, it is possible that the cost-cutting approach
is not applicable to the food industry.
Secondly,
the author failed to address other factors that are important to a
company’s success. It is well known that in the long run maximization
of profits occurs due to low cost of production. But it’s not the only
factor they consider. Other factors such as demand for the product,
selling price, and overall competition in the market should also be
taken into consideration. Today, buyers become the king in the market.
If other companies’ products are available at lower price with same
quality or at similar price with higher quality, then people don’t buy
the Olympic’s product. Therefore, if most consumers choose other
companies’ products, then the objects of higher profits and lower cost
can’t be attained.
Finally,
the speaker did not include any information on Olympic management
approach. Rather, it just mentioned the long experience of 25 years in
food industry. While there is rough correlation between long experience
and ability to maximize profit, it is not always the case. If the
Olympic fails to accumulate valuable management experience, such as
time-consuming strategic alliance, learning from failure, etc, then
Olympic long experience will not enable it to minimize costs and thus
maximize profits
In sum,
the argument is not compelling because it omitted many other factors
that must be addressed in order to make proper conclusion. If the author
has considered the difference between color film and food industry,
selling price, and product quality, the argument would be more
convincing.
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