c which of these is not in the tertiary sector? q1 a b c d banking and insurance online publishing...
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c
Which of these is not in the tertiary sector?Q1
A
B
C
D
Banking and Insurance
Online Publishing
Cement Production
Law and Accountancy
c
The process of declining manufacturing in developed economies is known as:Q2
A
B
C
D
Nationalisation
Privatisation
Deindustrialisation
Outsourcing
c
Which of these is in the primary sector?Q3
A
B
C
D
Vehicle Assembly
Pharmaceutical Research
Crop Production
Legal Services
c
An automotive business like Jaguar Land Rover operates mainly in the:Q4
A
B
C
D
Primary Sector
Tertiary Sector
Public Sector
Secondary Sector
c
Which sector is usually biggest in developed economies like the UK and USA:Q5
A
B
C
D
Primary Sector
Tertiary Sector
Financial Sector
Secondary Sector
Added ValueAS Business Studies
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
Starter
•What do you think added value means?
Added Value
Added Value = the difference between the price of the
finished product/service and the cost of the inputs involved in making it.
Added Value Formula
Added Value = price of finished product-cost of raw
materials
Added Value
Mental Maths—Calculating Added ValueA Nidderdale farmer grows carrots. It costs him 2000 pounds and he sells them at the wholesalers for 4000 pounds. How much value has been added. Dodgy Dave’s 2nd Hand Car garage buys cars at auction for 50,000 pounds. He has to have 5000 pounds worth of work done on them and then sells them for a total of 100,000 pounds. How much value has been added?
Sources of Added Value• Businesses can add value to their
product/service by doing something with the raw materials and providing something ‘different’.
Task
Make a spider diagram with all the different ways you can think of that a business can ‘add value’
USP (unique selling
Point)
Branding
Speed
Convenience
Design
Quality
Sources of Added Value
Sources of Added ValueThink of all the reasons why a business can sell a
product or service for more than what they paid for it in the first place.
Quality
Speed of Service
Design
Branding
Unique Selling Point(USP)
Convenience
Inputs and Outputs
Inputs OutputsTransformationProcess
The transformation process describes what happens inside the business.
This is where value is added to inputs to create outputs
INPUT PROCESS OUTPUTWhat’s involved with adding value?
Land£18,000
Wood£2,500
Bricks£3,000
Tiles£1,500
Other materials£4,000
Glass£1,000
Frames£1,000
Plumbing
Brick laying
Roofing
Digging
Joining
PaintingFinished
new house
Added Value = £58,000£31,000 £89,000
Example of Added Value
Ingredients purchased
Ingredients made into achocolate bar
Chocolate bar sold tocustomers
30p per bar
+ 20p per bar
1.20p per bar
Value Added = 70p per bar of chocolate
Example of Added Value
Ingredients purchased
Ingredients made into ameal; café furnished
Meal sold tocustomers
£3 per meal
+ £6 per meal
£15 per meal
Value Added = £6 per meal
Importance of value added
• Every business must add value to survive and be successful
• The higher the added value, the more likely it is that a business will survive, grow and be successful in the long term
Added Value Example• Sales Revenue
– 1,000 units sold for £20 each = £20,000 revenue
• Costs– To make 1,000 units– Raw Materials - £7,500– Labour - £5,000– Other production costs - £2,500– Total Costs = £15,000
• Added Value– £20,000 less £15,000 = £5,000 Added Value
Calculate Added Value For 2000 Units
• Sales Revenue– 2,000 units sold for £30 each
• Costs– To make 2,000 units– Raw Materials - £8,000– Labour - £5,000– Other production costs - £4,000
• Added Value
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.php/business-studies/comments/adding-value-turning-waste-into-gold
Ways of Adding Value
• What methods can you think of to add value?
• In other words, what would allow you to charge a high price and cut costs to increase added value?
Adding Value through• Production: People place a higher value on a television
set than on the bits and pieces used to make it.
• Build: Mercedes, BMW and Sony not only benefit from good design but also build quality.
• Customer service: After sales service, warranty, availability.
• Marketing: Gaining better understanding than competitors of Customer Needs and through a USP.
USP – Unique Selling Point
• A feature of a product / service that allows it to be different from other products.
• Increase “Loyal customers”, “Sales Volume”, “Price”
• Can improve peoples desire for a product and thus add value, e.g. Coffee, people pay a lot more for the Coffee than the ingredients it took to make it.
How to create a USP• Brand Names: have persuaded customers that certain
coffees are superior to others.• Images: created by advertising, e.g. “Lynx deodorant will
make girls attracted to you” “Gold Blend image makes people want to relate to it”
• Packaging: may enhance perceived quality.• Service Provided: People prepared to pay a lot more for
the same meal in a restaurant than a take away. Pay a lot more for a coffee in Starbucks because of its attractive environment.
• Note:Partially as a result of this Marketing Activity Coffee is now
the UK’s 2nd largest commodity after Oil
Aero vs Dairy Milk
Nestle Aero 46 grams Price:
Cadbury’s Dairy Milk 49 gramsPrice:
Which Chocolate bar has the most added value?
What makes this chocolate bar have a higher added value?
Ways of Adding Value
Build a successful
brand
Deliver great customer
service
Add product features
customer want
Operate efficiently
Offer convenience and speed
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 product’s USPs can you think
of?
The Importance of a USP
• What may be the benefits of having a USP?
A way to differentiate
compared with competitors
Don’t have to compete on
price
Higher profitability
USP Evaluation
• Reaction of competitors • Demand being maintained over time• Advertising and publicity of USP
What does the maintaining of a USP depend on?
Benefits of Adding Value
• What may be the benefits of having a USP?
• Charge a higher price• Create a point of
difference with competitors
• Focuses business on its target market segment
Signs That a Small Business Is Adding Value
• Strong gross profit margins– Gross profit/Sales– A strong signal
• Repeat Business– Sign of satisfied customers– Suggests customers feel they are getting value
for money• Good brand or name recognition– Important for word of mouth recommendation
1 Explain one reason why personalising T-shirts might be an effective way to add value
(10 marks)
Plenary Quiz
• Define added value.• What is the formula for calculating added
value.• Explain three methods of adding value.• Define a USP.• What does the maintenance of a USP
depend on?• Give two signals that a small business is
adding value.