2. 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
3. Adding valueAdding value
Definition
Added value is the increased
worth that a business creates
for a product.
Definition
Added value is the increased
worth that a business creates
for a product.
Measurement
Difference between the value
placed on the cost of inputs
and the value placed on the
product by the consumer
Measurement
Difference between the value
placed on the cost of inputs
and the value placed on the
product by the consumer
4. 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 potatoTask 1: the humble potato
– how would you add value?– how would you add value?
5. How businesses add value
QualityQuality
Design and
formula
Design and
formula
ConvenienceConvenience
BrandingBranding
Unique
Selling Point
(USP)
Unique
Selling Point
(USP)
Speed and quality
of service
Speed and quality
of service
6. 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
7. Highest value added
Lowest value added
Toy manufacturer
Pays £3.75 for materials for a
train and sells it to a retailer
for £5.95
Small farm
Sells a bush to a garden centre
for £1.50 which has cost £1 to
grow
Designer
A magazine designer pays £1.75
to produce each magazine and
sells a magazine for £4.95
Restaurant
A 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
8. Task 3: group discussionTask 3: group discussion
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
9. Importance of value added
allows a
business to
pay its bills
wages, rent, tax,
administration
allows a
business to
pay its bills
wages, rent, tax,
administration
allows a business
to reward its
shareholders
dividend payments
allows a business
to reward its
shareholders
dividend 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 compete
price and
position in the market is
defensible
allows a business
to compete
price and
position in the market is
defensible
10. 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.
12. 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.
