1. Adding Value

2. Adding Value
Adding value is when a business increases the worth of its factor inputs (the factors of production) by creating new output (the new product).
Output
Input
Process
Added
Value + =

3. How much should added value be?
In some cases, the added value may be huge, such as the difference between the price of a Starbuck’s coffee and the cost of the coffee beans, milk and sugar.
In other cases, the added value may be quite slim, as in the case of a Ford Focus, which is assembled by Ford from lots of parts bought-in from other suppliers.

4. So how can value be added to a product or service?
1  To create an image that is so attractive or quirky that people are willing to pay more to be associated with the brand. At the time of writing, lots of people want jackets or jumpers that shout Jack Wills or SuperDry. Wonderfully for the producer, customers are paying a price premium to advertise the company’s brand.
2  To create a truly fantastic product or service. The Taj hotel chain has a wonderful reputation for good customer service – travellers will pay a premium for that.
3  To wrap the product up in a way that makes it seem remarkably clever (and perhaps costly to produce). There is a reluctance to spend a lot on an English breakfast because we all know how to cook it. But although it may be no cleverer to make waffles and maple syrup, customers may be more impressed. So a waffle with 20p of ingredients sells for £3, while a £2 breakfast sells for £4.

5. How have the following added value?

6. COULD YOU DEVALUE YOUR GOODS/SERVICES?

7. Review Questions
Identify three markets where age is a crucial factor in drawing up a market map.
The UK population is growing older, with a rising proportion of over 60s. Outline two business opportunities that may arise as the population gets older.
Give three possible sources of competitive advantage for an independent clothes shop.
Why might it be difficult to differentiate a mass market brand?
 What would you say is the USP of each of the following:
 a) Maltesers
 b) the latest iPhone
c) Marmite?
Suggest four ways in which value could be added to a plank of wood.
Explain how your school or college differentiates itself.

8. Data questions chapter 4