added value

• what is the definition of added value ?

  Added value is found in the difference between the cost of purchasing raw materials and the price at which the finished foods are sold for.
• formula of added value

  Selling price – Bought-in goods and services
• Purchasing cheaper raw materials -How might added value be increased?

  however, care must be taken that quality is not compromised when doing this. As a business grows it may be able to take advantage of

  purchasing economies of scale and achieve greater added value as a result.
• Improving the efficiency of the production

  process -How might added value be increased?

  for example, this may be achieved by purchasing up-to-date machinery or by training the workforce.
• Raising the price of the product-How might added value be increased?

  price elasticity of demand is a key issue here. If the business

  raises the price of a product, the demand for which is price sensitive, it will result in a fall in overall revenue – which is clearly something it would not want to do.
• Achieving brand status -How might added value be increased?


  for a product can create added value. Chanel perfume sells for a great deal more than the majority of its competitors, but the processes involved in production will be virtually identical.
• Offering additional services-How might added value be increased?


  with a product can result in added value. A telephone helpline to

  help with technical questions, or the willingness to install new equipment and ethically dispose of old equipment are examples of this.
• Improving customer access -How might added value be increased?


  or convenience is a well-proven method of adding value. Drive- through fast-food outlets and home-delivery pizza are typical examples.