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Value Analysis

Concept of value: It may not be out of place here to understand the meaning of the term ‘value’. As a matter of fact, the term ‘value’ has different meanings for different persons. For example, for a designer the “value” means the quality of the product, for a salesman the term ‘value’ means the price which he can fetch for the product in the market, and for the top management the term ‘value’ means return on capital employed. However, an industrial product may have the following value:

1. Use value: This refers to the characteristics which the products should possess to provide a useful service for which it is intended. For instance, a watch is meant for indicating time. In case it gives fairly correct time, it is giving its full use value. The use value is measured in terms of quality of performance. In order to decide whether a product is giving good value, for the money spent on it, it will be appropriate to divide its worth for the concerned person by the price paid for it.

A product may perform several functions. Accordingly, its use value can be divided into three categories:

(a) Primary use value;

(b) Secondary use value; and

(c) Auxiliary use value.

For instance paint has different use values. It has primary use value when it is applied to protect some surface. It has a secondary use value when it is used for marking lines on the road for crossing pedestrians. It has an auxiliary use value when it pleases aesthetic sense. Such a functional classification would help one in identifying which paint one should use keeping in mind the objective. If this is not done, perhaps one may use costly enamel paint where use of ordinary paint would have been prudent.

2. Cost value: The value is measured in terms of cost in case product is manufactured in the organisation. It refers to the cost of production. In case a product is from outside, it refers to cost of its purchase.

3. Exchange value: It refers to sales value which a product would fetch. It is important for the sales department since the profit is excess of the selling price (i.e. exchange value) over the cost of the product. Hence, the sales department must ascertain what value the product has for the customers as compared to competitive products available in the market. It will help in advising the management in fixing the selling price of the product.

4. Esteem value: This may also be referred to as the prestige value certain products or articles have value simply because of their attractiveness or estimated features. A watch made of gold has an esteem value for its owner, though its utility is not more than that of an ordinary watch. For some people purchase of a gold watch may be waste. However, it commends a value for the person who wishes to impress upon others and thus have a personal satisfaction.