Let's crack on... so there are four main industrial sectors;
Primary: if the business' activity is extracting raw materials from the earth (e.g. mining, farming)
Secondary: if the business' activity uses raw materials to transform them into a product (e.g. manufacturer)
Tertiary: if the business does not produce a tangible product but provides a service (e.g. taxi firm, architect)
Quaternary: if the business' activity is to provide IT related services (e.g. IT consultant)
Once we have decided which industrial sector suits our business, we must then design our transformation process. This is where we take our inputs and we find a way to add value to those in order to create our outputs.
Inputs are required to make a product or provide a service. These can be:
- raw materials
- finance
- capital (equipment)
- people
- land
- entrepreneurship
BUT ALSO...
- ideas
- talent
So outputs are what the customers will get for their money.
- product (tangible / physical)
- service (intangible / non-physical - remember... you can't hold a massage!)
However, with the making of any product or service you will always have some form of waste.
Adding Value
So how on earth do we add value to our inputs?!?! I'm glad you asked...
Take these mere peanut butter cups... try not to reach into the screen and steal them! Now these little beauties are "delish" on their own, BUT...
Now consider this cold, scrummy bowlful of ice-creamy goodness. I can sense you all craving it. We love a little treat of ice cream, it's so yummy, BUT...
WHAT IF...
Oh no they didn't!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I promise there is a point to this... Ben & Jerry's took products that already exist but have made them better than what they were. By combining the flavours, B&J's are able to charge over £4 per tub of ice cream.
So we can add value by creating new versions of existing products. We can also:
- Create a brand - we pay more for well known and prestigious labels
- Introduce marketing - build brand awareness, offer deals, make a memorable moment
- Offer impeccable customer service - we pay more if we are treated well
- Operate efficiently - if we fulfill our orders on time without any errors, customers will return and stay loyal
How would you add value to this little bundle of gorgeousness?
Businesses want to add value to their products. It may be time consuming to design or maintain but it ultimately benefits them. By adding value they can:
- charge a higher price
- create a USP (unique selling point)
- give themselves protection from competitors offer the same/similar products at a lower price
- focus on who their target market are and what they need from the product/service
- create customer loyalty
Up next... Legal Structures...
