Operations Management and Added Value

A set of flashcards focusing on key vocabulary related to operations management and the concept of added value in business.

What does the term ‘Added Value’ mean?

Added value is the process of increasing the worth of a resource by modifying it, essentially the difference between the cost of raw materials and the selling price of finished goods.

What is the equation for added value?

Added Value = Value of output – Value (Cost) of inputs

Name some ways a business can add value through the production process

Through the production process e.g. design, features/quality, USP

Name some ways a business can add value through distribution

By offering the product/service in a more convenient location e.g. more outlets, easy to navigate website or through delivery

What is the impact of added value on businesses

Added value positively affects businesses by increasing profitability and competitiveness (due to USP). It encourages customer loyalty and repeat purchasing, leading to greater market success.