Value Added

  

Categories: Company Valuation

Ford doesn't actually make all of the parts that go in its cars. In many cases, the parts are made by vendors. Ford buys them at scale in bulk at good prices for Ford, and then adds value simply assembling and testing them to be sure that, when fitted, they actually work.

Their value add is the final "packaging" of the car as much as it is building any one piece. The whole notion of value added is a core component of profit margins in a busienss. That is, how much value add does an operating system have for a computer? Answer: lots. If you don't have one that works, it's likely your entire computer doesn't work. Usually, the more value added, the more power that the builder/supplier/maker has, and thus better margins when they go to sell the products into their markets.

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