Notes For Miss Hughes Class

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  • Created by: Chantelle
  • Created on: 09-06-10 20:39

added value can be defined as the difference between a particular products final setting price and the cost of the direct and in-direct inputs used in making that product. value added is calculated as sales revenue less the cost of bought in goods and services & measures the wealth created by a company.

two ways in which a company can increase its added value...

1. by introducing new or improved products and services that provide even greater to its customers

2. by reducing the cost of bought in items through more effective procurement [buying] and more efficient use of all inputs.

competitive advantage

refers to the advantage that a firm has over its competitors, which allows it to attract and retain more customers than its rivals and therefore generate greater sales & profits.

  • cost advantage
  • differentation advantage

cost advantage - the term cost advantage refers to the ability of a particular firm to produce a good or service at a lower cost than its rivals. if a firm has cost advantage then it will be able to sell its output at a lower price than its main competitors and so able to gain a larger market share.

having a cost advantage simply means that the firm has the ability to produce the goods and services that consumers require at a cost which is consistently below that of its main rivals.

  • trade discount - % off
  • credit terms - how long a business has to pay

differentation advantage - having a competitive cost position is a very effective tool in helping a firm compete but the problem with pursuing a cost advantage as a basis for your competitve advantage is that there is normally only enough room in an industry for one or two cost leaders, who are normally the largest firms in the industry.

differentation refers to a firms ability to seperate itself and its products from that of its main competitors and therefore make its offering more attractive to a particular target market.

  • create a unique selling point [USP]
  • create a strong brand


a unique selling point is something that sets one firms product or service apart from that of its competitors in the eyes and minds of


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