Added Value

Question 1

What is meant by added value?

Answer 1

The difference between the actual price charged for a product/ service and the actual cost of producing.

Question 2

How is value added calculated?

Answer 2

Added value = output - input

Question 3

What are the advantages of adding value?

Answer 3

1) charge higher price —> higher profit level
2) opportunity to make product for unique —> est USP
3) higher price could enhance image
4) able to target chosen market easily

Question 4

What are the advantages of adding value to stakeholders?

Answer 4

1) shareholders —> profit inc = inc dividends
2) if leads to inc sales —> suppliers supply more and inc profits
3) consumers - gain additional service
4) consumers - may feel added features = better value for money

Question 5

Drawbacks of added value

Answer 5

• not promised that cost of adding value will be returned by inc price
• inc in price needed to gain may restrict sales + sales revenue
• degree of competition may affect ability to inc price and get money back for adding value
• elasticity (price, income and advertising) may make required price inc harder to be accepted in market