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Adding ValueAdding Value
Learning objectives:be able to
understand …
… understand the meaning of the term adding
value
…appreciate the main
sources of added value
… explain the importance of added value in business survival
and success
Adding valueAdding value
DefinitionAdded value is the
increased worth that a business creates for a
product.
DefinitionAdded value is the
increased worth that a business creates for a
product.
MeasurementDifference between the
value placed on the cost of inputs and the value placed
on the product by the consumer
MeasurementDifference between the
value placed on the cost of inputs and the value placed
on the product by the consumer
If you were a business, an average sized unwashed potato would cost you about 4p to buy in. What could you do to persuade a customer to pay more
than 4p for it? Brainstorm your ideas as a group and record what you
come up with on flipchart paper. Be prepared to feedback to the rest of the
class.
Task 1: the humble Task 1: the humble potato – how would you potato – how would you add value?add value?
How businesses add value
QualityQuality
Design and
formula
Design and
formula
Convenience
Convenience
BrandingBranding
Unique Selling
Point (USP)
Unique Selling
Point (USP)
Speed and quality of service
Speed and quality of service
Task 2: work it outTask 2: work it out
Let’s have a go at working out value added Remember how to measure value added? if not look it up in your worksheet
When you are called to come up to the whiteboard choose a business decide where it should be placed in terms of value added –
high or low drag the business to your chosen position justify your decision to the rest of the class
Highest value added
Lowest value added
Toy manufacturerPays £3.75 for materials for a train and sells it to a retailer for £5.95
Small farmSells a bush to a garden centre for £1.50 which has cost £1 to grow
DesignerA magazine designer pays £1.75 to produce each magazine and sells a magazine for £4.95
RestaurantA restaurant buys a bottle of wine for £18 and sells it for £54
Dog grooming service
A dog grooming service costs £18 for each dog it grooms and charges £32 for this service
Task 3: group Task 3: group discussiondiscussion In your groups, identify why value added is
important to a business start by reminding yourselves what value added
is and how it is measured think about what benefits value added brings to
a business think about what would happen to a business
which didn’t add value
Jot down the thoughts of your group and be prepared to feedback to the class
Importance of value added
allows a business to pay its billswages, rent, tax, administration
allows a business to pay its billswages, rent, tax, administration
allows a business to reward its
shareholdersdividend payments
allows a business to reward its
shareholdersdividend payments
generates profit to reinvest
this allows the business to grow
generates profit to reinvest
this allows the business to grow
allows a business to
competeprice and
position in the market is defensible
allows a business to
competeprice and
position in the market is defensible
Task 4: exam practiceTask 4: exam practice
Complete the three multiple choice questions on the worksheet to check your understanding of the topic we have now completed.
Record your mark on your worksheet.
PlenaryPlenaryWatch the Cadbury Smash TV advert
from the 1970sHow did Smash create value added?
HomeworkHomework
Complete the extended writing task on added value by answering Questions 1 – 3. Make sure you make good use of the technique tips
provided and that your answers are fully EXPLAINED.