Value-added: Meaning, Usage & Importance - YouTube

Value Added

Hi, I’m Rose Jacobs, here with you for Kalkine TV.  Today we’re going to look at what is Value adding?  

But first, make sure you press the bell icon  for all the latest updates here on Kalkine TV.  

Value-added means any addition in the form  of either improvements or upgrades in any  

product or service. The additions considered  as value-added must all be made before the  

product or service reaches the end-users. All such  additions must enhance the value of the product or  

service. The concept is beneficial while  computing taxes that are charged on value-added.  

Such taxes are called Value-added taxes. The  concept of value addition can be applied to  

products, services, firms, management, or even  business areas. For example, providing better or  

extra services in the form of after-sales services  and better customer support or a retail seller  

of computers can add value by including  software or computer accessories with the  

computer's essential product. In addition,  strong branding can add value to a product  

by using a company's logo to sell a product.  What are the popular types of value added?

Gross Value Added (GVA) shows the contribution  made to the economy by an individual sector,  

region, industry, or entity. It measures the  gross value added by a particular product,  

service, or industry. It helps compute the Gross  Domestic Product. It indirectly indicates the  

state of the nation's entire economy. It is  computed using the value-added Statement.  

Economic Value Added (EVA) is the difference  between the rate of return and its capital cost.  

It is used to measure the value generated from  the funds invested. A lot of financial modelling  

is required to compute EVA.  Market Value Added  (MVA)- is defined as the difference between  

the market value and total capital invested. It  shows the capacity to increase shareholder value  

over time. A high MVA indicates effective  management, while a low MVA indicates  

that management's actions and investments  value less than investors' contributions.

Cash Value Added (CVA)- It is helpful to  measure the amount of cash a firm generates  

through its operations. CVA makes investors  

understand the company's ability  to generate cash between periods.

What are the ways to add value? Identifying  Gaps- this helps in adding in something missing,  

which is the base of value addition. Understanding  customer's perspective – producers can make  

correct value addition by understanding what  customers expect from the product or service.  

Getting customer satisfaction – To improve  customer satisfaction and add value to goods  

or services, getting the customer's  feedback is essential. Surveys, polls,  

and customer service professionals  add value to service this way.

Understanding shortfalls and constant evolution  – It is crucial to understand the shortfalls and  

keep evolving to provide customers with the  necessary satisfactory product or service.  

Constant improvement helps in perfect  value additions. Market Research – To  

get a return for the value addition, it is  essential to do intelligent market research.  

Understanding the trends and  adding value to the products  

accordingly helps in generating more significant  revenue. So Who gains from Value Addition?

There are four primary beneficiaries from  value added by a firm: the workers, investors,  

government, and the owners. It is the people who  facilitate value addition. Workers- they are a  

major claimant group of value-added. The payments  to the workers are all results of value addition.  

It may be in the form of wages,  bonuses, employer contributions,  

etc. Investors/ Providers of capital- Lenders  like banks, financing institutions, the public  

are all facilitators of funds needed for value  addition. They get returns on their funds from  

value-added services/ manufacturing undertaken.  Government- The government creates a conducive  

environment for value addition. The payment  it gets in return is in taxes applied on such  

value additions at each stage. Owners- At the  end, owners or shareholders get the final claim  

of the value-added. Returns are in the form of  capital gains or profits distributed as dividends.

Why do we need to measure value added? Value-added  shows the contribution of a team of employees,  

managers, shareholders, etc. Value-added, if  communicated in the form of returns, results in  

employees working harder. Assigning value added  to each process helps identify and eliminate  

unnecessary activities. Value added  is predictive of a process’s strength.

It can be used as a basis  for wage and salary policies.  

And that’s it for today. If you like what you’ve  learned then don’t forget to like, share and  

subscribe and go to kalkinemedia.com for all  our latest. I’m Rose Jacobs, see you next time!