Page 5: Adding value
An increasingly important method of adding value to manufactured products comes in the form of after-sales service. Such a facility enables the manufacturer to differentiate its product and offer products that are tailored to customer needs.
Overall, the company has taken a number of inputs including labour, raw material and components and has added value to those inputs through design, innovation, production and marketing.
The money the company receives from its customers will form its revenue; the money it pays to suppliers, its costs. The revenue received minus the costs will equate to the company’s profits. A percentage of the profit made will be liable for corporation tax, whilst some of it may be used to invest in the company, e.g. into the research of new products. The company might have plans for a new product range, requiring investment, design and planning before production can take place.
Clearly some companies make greater profits than others. It is not simply a question of charging higher prices. Often higher profits come from those companies that innovate - come up with new ideas, have a skilled and trained labour force and who stay one step ahead of the competition!
Global competition has placed knowledge-intensive businesses in the best position to prosper. UK manufacturers strive to innovate and add value to both products and services through enhanced design, technological innovation and new skills.