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CMA Final · Entrepreneurship and Startup · Value Addition

A Pune-based startup buys raw millets from farmers and sells them as packaged, ready-to-cook millet mixes under its own brand. In value chain terms, the increase in the product's worth arising from this processing and branding is best described as:

The increase in worth from processing and branding raw millets into ready-to-cook mixes is value addition. The startup transforms inputs into something customers value more than the raw material, which lets it charge a higher price than the cost of the inputs.

  1. AValue addition, because inputs are transformed into something customers value more than the raw inputsCorrect
  2. BCost cutting, because the startup is reducing its purchase cost per kilogram
  3. CValue erosion, because packaging adds to expenses
  4. DDiversification, because the startup has entered a different industry from farming

Explanation

Value addition is the extra worth created when inputs are processed, packaged, branded or served so that customers will pay more than the input cost. Cost cutting would reduce spending without raising the offering's worth, so it does not describe the transformation here. Packaging expense is incurred to create higher value, not to erode it.

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