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
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
• 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