as business transforming resources
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AS BusinessTransforming resources into goods
and services
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Starter
?
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Objectives
• To understand the terms “Adding value” and “added value”
• Explain how a business can add value to resources
• Be able to apply the classification of business activity by sector
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Spot the difference…
£8,750 £99
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50P
What is added value?• Added value is the increased worth
that a business creates for itselfFor example:If it costs Cadbury’s £0.25p to make this
And they sell it for £0.75p.
How much added value do they make?
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Added value formula
• Added value = Price of finished product –cost of resources
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Objectives
• To understand the terms “Adding value” and “added value”
• Explain how a business can add value to resources
• Be able to apply the classification of business activity by sector
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How can you add value to your resources?
Product
Quality
Design
Formula
Customer Service
Convenience
Branding
USP
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The benefits of adding value
• Differentiation from the competition• Charging a higher price• Higher profit margins• Targeting product or service at a
different market segment
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So back to your ideas
• How will it cost to buy the resources?
• What will the selling price for your finished product be?
• How much value have you added?
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Objectives
• To understand the terms “Adding value” and “added value”
• Explain how a business can add value to resources
• Be able to apply the classification of business activity by sector
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Key Terms
At its simplest, a business is a process whereby inputs are processed to produce outputs.• Input –something that contributes to
the production of a product or service
• Output –something that occurs as a result of the transformation of business inputs
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Different Business Sectors
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Primary Sector
• Primary Sector – extract raw materials from land or sea, e.g. Mining, Farming, Fishing, Oil, Gas, Forestry.
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Secondary Sector
• Secondary Sector – use raw materials to make finished goods, e.g. Cars, Ships, Furniture, Roads, Buildings, Bridges
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Tertiary Sector
• Tertiary Sector – provides a service to industry/consumers, e.g. Retail /
plumbers/ electricians / education / health..
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Quaternary Sector
• Quaternary Sector – businesses that transform information e.g Google /
facebook / ICT
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P, S or T?
• Cadburys chocolate• Sainsbury’s• Pick your own strawberry farm• Ryanair• Twitter• Innocent• Big Kenny’s Kebab Kave
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Objectives
• To understand the terms “Adding value” and “added value”
• Explain how a business can add value to resources
• Be able to apply the classification of business activity by sector
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Questions
• List up to three ways in which a hotel could improve its added value
• Identify three benefits of a business that successfully manages to add value in the production process
• Explain why added value is not the same as the profit earned by a business
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Risk
• Identify the main risk from each of the following:
• Doubling the advertising budget when a firms sales haven’t increased compared with last year
• A bakery switching to a new supplier of flour
• A entrepreneur borrowing £80,000 secured against his house.
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Quick Quiz!
• http://www.tutor2u.net/business/quiz/buss1/addedvalue/quiz.html