GCSE Business Studies

Added Value

Mr M Young

Aims and Objectives

Aim:
Understand Added Value
Objectives:
Define Added Value
Calculate added value
Analyse methods of adding value
Evaluate the factors needed to maintain a
USP
Mr M Young

Starter

What do you think the

three most important
things to consider
when making and
selling a product are?
Mr M Young

Added Value
Added Value = the
difference between the
price of the finished
product/service and the
cost of the inputs
involved in making it.
Selling Price Cost
Price
Mr M Young

Calculating Added Value

The value added at each stage of production is

calculated using the following formula:

SELLING PRICE COST OF PRODUCTION = VALUE ADDED

Example:
A birthday card is sold for 2.50. The cost of production
including materials and labour comes to 1.10.
2.50 - 1.10 = value added
= 1.40
You try:
A juice drink is sold for 2.20. It costs 42p to produce the
drink. How much value has been added? (show your
workings)
Mr M Young

Added Value Question

Sales Revenue
1,000 units sold for 20 each =
Costs
To make 1,000 units:
Raw Materials - 7,500
Labour - 5,000
Other production costs - 2,500
Total Costs =
Added Value
=
Mr M Young

Calculate Added Value For 2000

Units
Sales Revenue
2,000 units sold for 30 each
Costs
To make 1,000 units
Raw Materials - 8,000
Labour - 5,000
Other production costs - 4,000
Added Value

Mr M Young

Added Value Example

Good quality potatoes make
great potato chips or crisps.
But what do you with the
smaller or mis-shapen
potatoes which fail the raw
material quality test for a
premium crisp brand? Simple,
you use them to create a
premium brand of vodka
http://
www.tutor2u.net/blog/index.p
hp/business-studies/comments
/adding-value-turning-wasteinto-gold
Mr M Young

Ways of Adding Value

Brainstorm in groups different
ways you could add value.
In other words, what would
allow you to charge a high
price and cut costs to
increase added value?
Mr M Young

Ways of Adding Value

Build a
successful
brand

Deliver
great
customer
service

Operate
efficiently

Offer
convenienc
e and speed
Mr M Young

Add product
features
customer
want
Have a
unique
selling point
(USP)

Unique Selling Points (USP)

A characteristic of a product that
makes it different from other
similar products being sold in the
market such as design, quality or
image.
One of the best ways to add
value!
How many products USPs can
you think of?
Mr M Young

The Importance of a USP

What may be the benefits of having a USP?

A way to
make your
product
different
from its
rivals.

Dont have
to compete
on price

Mr M Young

Higher
profits!

Re-Cap

What do you think the

three most important
things to consider
when making and
selling a product are?
Mr M Young

Benefits of Adding Value

What may be the
benefits of having
a USP?
Charge a higher
price
Make your product
stand out
Focuses business on
its target market
segment
Mr M Young

Adding Value To Eggs!

Task: brainstorm all of the ways in
which you could add value to
eggs!

Mr M Young

Plenary Quiz
Define added value.
What is the formula for
calculating added value.
Explain three methods of
adding value.
Define a USP.
What are the benefits of having
a USP?
Mr M Young