AS BusinessTransforming resources into goods

and services

Starter

?

Objectives

• To understand the terms “Adding value” and “added value”

• Explain how a business can add value to resources

• Be able to apply the classification of business activity by sector

Spot the difference…

£8,750 £99

50P

What is added value?• Added value is the increased worth

that a business creates for itselfFor example:If it costs Cadbury’s £0.25p to make this

And they sell it for £0.75p.

How much added value do they make?

Added value formula

• Added value = Price of finished product –cost of resources

Objectives

• To understand the terms “Adding value” and “added value”

• Explain how a business can add value to resources

• Be able to apply the classification of business activity by sector

How can you add value to your resources?

Product

Quality

Design

Formula

Customer Service

Convenience

Branding

USP

The benefits of adding value

• Differentiation from the competition• Charging a higher price• Higher profit margins• Targeting product or service at a

different market segment

So back to your ideas

• How will it cost to buy the resources?

• What will the selling price for your finished product be?

• How much value have you added?

Objectives

• To understand the terms “Adding value” and “added value”

• Explain how a business can add value to resources

• Be able to apply the classification of business activity by sector

Key Terms

At its simplest, a business is a process whereby inputs are processed to produce outputs.• Input –something that contributes to

the production of a product or service

• Output –something that occurs as a result of the transformation of business inputs

Different Business Sectors

Primary Sector

• Primary Sector – extract raw materials from land or sea, e.g. Mining, Farming, Fishing, Oil, Gas, Forestry.

Secondary Sector

• Secondary Sector – use raw materials to make finished goods, e.g. Cars, Ships, Furniture, Roads, Buildings, Bridges

Tertiary Sector

• Tertiary Sector – provides a service to industry/consumers, e.g. Retail /

plumbers/ electricians / education / health..

Quaternary Sector

• Quaternary Sector – businesses that transform information e.g Google /

facebook / ICT

P, S or T?

• Cadburys chocolate• Sainsbury’s• Pick your own strawberry farm• Ryanair• Twitter• Innocent• Big Kenny’s Kebab Kave

Objectives

• To understand the terms “Adding value” and “added value”

• Explain how a business can add value to resources

• Be able to apply the classification of business activity by sector

Questions

• List up to three ways in which a hotel could improve its added value

• Identify three benefits of a business that successfully manages to add value in the production process

• Explain why added value is not the same as the profit earned by a business

Risk

• Identify the main risk from each of the following:

• Doubling the advertising budget when a firms sales haven’t increased compared with last year

• A bakery switching to a new supplier of flour

• A entrepreneur borrowing £80,000 secured against his house.

Quick Quiz!

• http://www.tutor2u.net/business/quiz/buss1/addedvalue/quiz.html