APT Initiatives
APT Business & Economics Resources
Minimising Workloads, Maximising Performance
Established in 1999

Special Items

Adding value

Concerns the fact that businesses take inputs (resources eg materials) and through various processes transform these into more valuable outputs (goods and services). For example: The Ingredients needed to produce a chocolate bar (eg cocoa, sugar, milk), may cost 20p, but the selling price may be £1. The materials required to produce a shoe, ie the treated leather and other materials such as cotton thread, glue, rubber, etc may only cost, say £3, but the price at which the shoe is sold may be £28. The materials required to produce a table, ie the oak, glue, bolts, etc may only cost, say £85, but the price at which the table is sold may be £300. In all cases, the original ingredients or materials have gone through various processes (eg cutting, colouring, glueing, stitching in the case of the shoe) which require the application of additional resources and this increases their worth. This increase in worth is known as the value added. See value added. Business is all about adding value. Adding value is all about creating a willingness in a customer to pay more for a product than the total cost of the inputs therefore making a profit. For businesses owned by private individuals, where profit is the prime objective, it is by adding value that such organisations make a profit. If they do not add value there is no justification for their existence.

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