CORE CONCEPTS
COST, PRICE and VALUE
TPB thinking circa 2003
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Note: CCSD stands for Community Centric Sustainable Development. This diagram was originally prepared in connection with the development of the CCSD idea.
A thorough understanding of cost, price and value makes the analysis of economic performance much more useful. Most managers in business understand cost and price because this results in understanding profit ... but few managers have anything like the same understanding of cost and value.
This problem is even more serious in the public sector and especially in the international relief and development sector which lack even the discipline of profit performance.
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CORE CONCEPTS
VALUE ADD & VALUE DESTRUCTION
TPB thinking circa 2003
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While cost, price and value are usually measured using the same metric ... that is a money metric ... they are three very different measures. Too many people in casual writing and conversation are not clear about which a number applies.
Cost changes based on technological progress and production methods. It changes when technology and process are changed and input costs change.
Value changes depending on the needs of the customer and how the items satisfies a need. Food has a huge value to a starving person.
Price changes depending on market conditions ... on supply and demand. Prices can and are 'managed' and manipulated by companies to get the biggest profit for the company.
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