As a firm selling and servicing agricultural machinery in Armidale you first must understand the ways and reasons that value can be perceived. Firstly value is an amount of money a consumer is willing to pay for a specific good or service. (Baker). These values which can be added or subtracted take the form of attributes and create increased costs for the items which the customer is willing to pay for. In an enterprise such as the agricultural machinery distributor described the costings of stocks will be very high to the consumer, and the profit margins to the firm will be high, but the rate that the distributor sells, or the turnover, will be relatively low as an…show more content… As a further example a 10ft air seeder will sell for approx. $69,000 brand new but if the distributor were to offer immediate delivery, delivered on site and 3 free annual services, as well as a guarantee or similar the cost could be increased to over $70,000 given that the costomer finds these extra services or value there for increasing the net income of the product.
Other forms of value adding could be the dealer purchasing the product in a bulk order from the wholesaler or the producer in order to pay less variable costs. This method of value adding could prove risky in a market such as this with the variability of annual sales. Given this method of value adding the potential also arises for increased costs if the product isn’t sold. As an example if a manager were to preorder and have 10 John Deere 1590 direct drill air seeders delivered, the firm might be able to pay less for a bulk order but will incur increased storage costs and faces the risk of having to reduce the price to sell whatever stock is leftover at the release of the next years model in order to, not only make more room at the storage site but also to recover the expenditure that came with overinvesting in a product that didn’t sell.
Other considerations for this particular line of enterprise is