Added Value

Question 1

what is it?

Answer 1

a vital concept - involves businesses charging consumers a price for a good/service that is higher than the cost of producing the good/service

any additional feature that may be added to a product can then allow the product to be sold at a price above the cost of the additional features - allows a profit to be made

selling price = £20
cost of inputs and materials etc. = £12
value added = £8

Question 2

usefulness of adding value to the business advantages

Answer 2

• charge a higher price and get a higher level of profit
• higher price enhances product image
• enables a business to target its market more easily
• offers the opportunity to make the product more distinct and establish a USP

Question 3

stakeholder benefits from adding value

Answer 3

• customers benefit from a more unique product
• may gain additional or repeat sales
• consumers feeling its better balue for money
• consumers recognising the brand name - assosicate the brand with the quality
• profit increase so better and higher dividends for shareholders
• suppliers will be able to supply more if theres additional sales by adding value - opportunity to increase profits

Question 4

disadvantages to adding value

Answer 4

• no guarantee that the cost of adding value can be covered by increasing the price
• price increase needed to gain from adding value may restrict sales/sales rev
• amount of competition may make it harder to increase the price in order to cover the cost of adding value
• the elasticty (PED YED AED) may make any required price increase difficult for the market to accept.