Recap last lesson…! Use your whiteboard and write on one side… True and on the other… False ….. & be prepared to make a ‘quick’ decision!

True or False? A trademark protects a new invention? False Trademarks protects signs and symbols!

True or False? A new product is automatically patented? False You have to apply for the legal protection through the UK Patent Office

True or False? A copyright applies to written work and music? True Copyright protects creative work – written, music, art & broadcasts

Other recap Q’s State two possible sources of new business ideas. State two factors that can determine the success of a new business idea. Product Niche & Market Niche

Adding Value

Aims To be aware of the concept of value added To be able to identify the different sector of productions To know the different factors of production

How can Bob add value????

Inputs and Outputs Inputs Outputs Transformation Process Transformation Process The transformation process describes what happens inside the business. This is where value is added to inputs to create outputs

INPUTPROCESSOUTPUT What’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 Painting Finished new house Added Value = £58,000 £31,000£89,000

Some theory..

What are the different sectors of production?

Sectors of Production Primary Secondary Tertiary Quaternary You should have covered this in humanities!

Print next 4 slides as a handout!

Sectors of Production in the Economy Primary sector: –This involves extraction of natural resources e.g. agriculture, forestry, fishing, quarrying, and mining Diamond mining Bauxite miners (for copper)

Sectors of Production in the Economy Secondary sector: –This involves the production of goods in the economy, i.e. transforming materials produced by the primary sector e.g. manufacturing and the construction industry

Sectors of Production in the Economy Tertiary sector: –The tertiary sector provided services such as banking, finance, insurance, retail, education and travel and tourism

Sectors of Production in the Economy Quaternary sector: The quaternary sector consists of those industries providing information services, such as computing and ICT (information and communication technologies), consultancy (offering advice to businesses) and R&D (research, particular in scientific fields).

Guess the sector of production

Which sector of production does the following belong to? 1.Churchill Shell 2.Double glazing manufacturer 3.Auto electrician 4.Microsoft 5.Nike 6.Odeon 7.Levis 8.Florist 9.Gym 10.McDonalds 11.HSBC 12.Matalan 13.BBC 14.Pepsi 15.Amazon 16.Mercedes 17.Vodaphone

Which sector of production does the following belong to?

So what’s Adding Value?

Inputs and Outputs Inputs Outputs Transformation Process Transformation Process The transformation process describes what happens inside the business. This is where value is added to inputs to create outputs

Inputs ….. Aka factors of Production Adding value takes ‘raw’ materials & skills to create a product… while any business wanting to ‘add value’ creates a little something extra that allows them to increase the price! The ‘factors’ of production that businesses use are ‘categorised’ by the abbreviations… C E L L!

Factor of Production… Labour Input Land Capital So what’s the ‘E’?

Enterprise!

How to add value? Design – new features, high quality Production – value added production Marketing – USP How can you add value to marmite?

How to add value? Design – Production – Marketing – Textbook – great example of Marmite limited addition jars – normal retail £2:10 – sold orignially for £2.99 – now on Ebay from £3 to £7 bids!

Another Example of value added Tyrrells Potato Chips –Will Chase had been farming potatoes for 20 years (loss-making) –Wanted to produce something with more added value –Came up with idea to make hand-fried chips with distinctive flavours and packaging –Successfully created a premium product and turned Tyrrells into a profitable business

So what is ‘adding value’?

Clean clothes Campaign Actual cost of INPUT = $15.50 Value added = $84.50?

Some extreme examples.. World’s most expensive…

An £85 sandwich? The McDonald sandwich named after its creator Scott McDonald, the chef at London department store Selfridges - is said to be the world's most expensive. The ingredients of the sandwich are: Wagyu beef, fresh lobe foie gras, black truffle mayonnaise, brie de meaux, rocket, red pepper and mustard confit and English plum tomatoes. It’s cost is down to the Wagyu beef that makes up most of the filling, packed in a 24-hour fermented sour dough bread. Wagyu cattle are one of the most expensive breeds in the world. The Japanese cows are raised on a special diet, including beer and grain.

$1000 sundae? One of the most expensive deserts in the world, served at Serendipity 3, a popular restaurant in the Upper East Side of Manhattan. The $1000 sundae was introduced in 2004 and was listed in the Guinness Book of World Records as the most expensive dessert. It’s made up of 5 scoops of the richest Tahitian vanilla bean ice cream, Madagascar vanilla, 23K edible gold leaf and one of the most expensive chocolates in the world, Amedei Porceleana.

Tea bag for £7,500? The world’s most expensive tea bag for the PG company, to celebrate their 75th anniversary. Manually decorated with 280 diamonds, the bag made to remind people just how much they love the great British cup of tea is worth £7,500.

So why bother with Adding Value?

Ways to add value Build a brand Deliver excellent customer service Add product features and benefits that customers want Operate efficiently

Benefits of adding value Charge a higher price – increase profit margins? Create a difference with competitors - Unique selling point Protection against competitors offering lower prices Focuses business on its target market segment Customer loyalty

Signs that a start-up business is adding value Strong gross profit margins –Gross profit / Total Sales –A strong signal Repeat custom –Sign of satisfied customers –Suggests customers feel they are getting value for money Brand or name recognition –Important for word-of-mouth recommendation

Plenary What is the difference between Primary, Secondary, Tertiary and Quaternary sectors? What are the 4 factors of production? How would you define ‘adding value’? Why do businesses bother with value added?