Added Value. Today… Understand what added value is Understand why added value is used in a business.

Added Value

Today…

• Understand what added value is

• Understand why added value is used in a business

What is Added Value?It is the difference between what a business pays

its suppliers, and the price that it is able to charge for the product/service.

Materials are bought,business costs arepaid (eg suppliers,

electricity)

Product or serviceis sold to the

customer

Something is “added”

Sources of Added Value• Businesses can add value to their

product/service by doing something with the raw materials and providing something ‘different’.

Task

Make a spider diagram with all the different ways you can think of that a business can ‘add value’

Sources of Added ValueThink of all the reasons why a business can sell a

product or service for more than what they paid for it in the first place.

Quality

Speed of Service

Design

Branding

Unique Selling Point(USP)

Convenience

USP (unique selling

Point)

Branding

Speed

Convenience

Design

Quality

Sources of Added Value

Example of Added Value

Ingredients purchased

Ingredients made into achocolate bar

Chocolate bar sold tocustomers

30p per bar

+ 20p per bar

1.20p per bar

Value Added = 70p per bar of chocolate

Example of Added Value

Ingredients purchased

Ingredients made into ameal; café furnished

Meal sold tocustomers

£3 per meal

+ £6 per meal

£15 per meal

Value Added = £6 per meal

Importance of value added

• Every business must add value to survive and be successful

• The higher the added value, the more likely it is that a business will survive, grow and be successful in the long term

Complete the activity ticking the correct column – for each

statement, is the action adding value?

Complete the worksheet by showing how the three

businesses could add value.

• Jacob Simms is a solo singer who tours the country appearing at concerts and revues. Select ONE answer.

The added value of his singing is:

A – the total cost of putting on the concerts minus the revenue earned from selling tickets

B – what he makes in fees plus his costs such as petrol and hotels

C – the total cost of his concerts at which he appears minus what he has to pay to concert hall owners

D – the revenue he earns minus what he spends

• Jacob Simms is a solo singer who tours the country appearing at concerts and revues. Select ONE answer.

The added value of his singing is

D – the revenue he earns minus what he spends

Which two of the following might be a source of added value for a farming business?

A – Quality of products grown on the farm

B – The wages of the farm workers

C – The profit earned by the farmer

D – Speed of delivery from harvesting to the customer

E – The receipts from the sales of the farm produce

Which two of the following might be a source of added value for a farming business?

A – Quality of products grown on the farm

D – Speed of delivery from harvesting to the customer

Why is added value important for the survival of a business? Select one answer

It is important because….

A – added value allows a business to target its customers successfully

B – added value always means a better quality of product

C – a business that has value added is one that is likely to make enough money to make a profit

D – all businesses have to have a unique selling point

Why is added value important for the survival of a business? Select one answer

It is important because….

C – a business that has value added is one that is likely to make enough money to make a profit