- 1 hours 30 minutes
- Social and Emotional Skills
4Schedule 09/28/21 08:00 AM CPV Triangle At the very heart of being entrepreneurial is the world of voluntary exchange and creating win-win. We make hundreds of mutually beneficial trades every week. With this in mind, we must see the whole picture and learn to become more productive at creating value on both sides of a trade, https://teacheverywhere.org/activity/cpv-triangle/Print
At the very heart of being entrepreneurial is the world of voluntary exchange and creating win-win. We make hundreds of mutually beneficial trades every week. With this in mind, we must see the whole picture and learn to become more productive at creating value on both sides of a trade, leading to prosperity for ourselves, our families, and our communities. The CPV Triangle is a graphic organizer and mental model that helps deconstruct and measure the components of transactions. The CPV Triangle helps build an entrepreneurial mindset with principled behavior as a foundation. Concepts learned through the CPV are transferable not only to business transactions but to all transactions we make as individuals. In this activity, student teams will draw, label, and discuss elements of the CPV Triangle to take a closer look at “What does win-win and creating value for others look like?”
- Ask your students, “Is it possible for the buyer to profit as well as the seller?”
- Record some student responses in the chat or share your screen to show your notes with the class.
- Tech Tip: Consider using an EdTech tool such as Padlet or Teams whiteboard feature that students can then utilize in their small groups.
- Explain that today’s activity will help us see what mutually beneficial trade and win-win look like examining whether it is possible for both the buyer and seller to profit in an exchange.
- Explain that history is filled with entrepreneurs who were masters of creating profit for themselves (Price – COGS = Profit), experiencing short-term success, but failing long-term (Blockbuster or examples relevant to your community), while others focused on long-term value creation leading to sustained success (M&M/Mars or examples relevant to your community). As we engage with the market, we want to make sure we have the vision necessary to see the whole picture.
Social and Emotional Skills
- Students develop Social Awareness skills during this activity. They are challenged to consider what it is like to be an Owner of Hershey’s and Mars chocolates. On day 2, they are also challenged to be the customer of both company’s products. Through educator prompts, students are practicing social awareness elements like perspective taking when considering subjective value, and empathy when thinking about ways to cut costs and eliminate waste while continuing to meet the market’s demand. Students are learning that profit is not simply Price – COGS but includes an element of subjective value that can be learned and identified through exploration and identification with consumers and their values, backgrounds, cultures, etc.
- Students are also learning steps toward Responsible Decision Making as they are challenged to consider factors related to cost of goods sold and price as well as analyzing market signals and evaluating for subjective value (i.e. Seller’s Profit). Students will hear stories about entrepreneurs that did not make responsible decisions that then led to the decimation of their business.
- Determine how you will share the activity with students.
- Read and understand the CPV Triangle activity guide.
- Read and understand the CPV Triangle Teacher Overview.
- For additional resources to build knowledge, check out the CPV Triangle within the Core Field Guide pages 29-38.
- Prepare materials listed and mail/deliver candy bars/carrots to students (optional).
- Decide how you will pair groups.
- Decide how you would like students to respond to any of the debrief questions.
- Protip: Be prepared to make this lesson fun and to bring in real-world examples that students can relate to in order to enrich the discussion. While this guide incorporates Hershey’s, Mars, and baby carrots, feel free to make it your own!
- Tell students it is important they begin to think like owners; therefore, it is important they view the CPV Triangle as an owner.
- If you mailed students chocolate, tell them that today we are going to learn about the CPV triangle while eating chocolate! We are going to apply Hershey’s and Mars candy bars to the CPV triangle. Feel free to open your chocolate and eat it if you like it or are able to.
- Begin by drawing the CPV Triangle via a virtual whiteboard that can be shared with the class, having a pre-built PowerPoint or video with the triangle, showing a physical whiteboard with your webcam, etc.
- While you are drawing, have students following along by drawing and labeling their own CPV on paper. They could also choose to digitally draw it in Padlet, Teams whiteboard feature, Paint, Sketchpad, etc.
- Focus on the left side of the triangle first.
- Students will continue labeling their CPV as you work your way through the lesson.
- Tell students the “C” is for costs and the “P” is for price.
- Take out your large Hershey’s and Mars bars. Ask them what they think they each cost. What is the typical price for each?
- Ask students what we call the difference between the price and cost? (Profit)
- Ask “Whose profit?” (label Seller’s Profit on their CPV)
- During the next steps, continue to use specific examples of a product a business might sell.
- Ask students “As a business owner at Hershey’s and Mars, how can we increase our profits?”
- Students usually respond first with “raise the price”, so it is a good time to discuss the effects of raising prices and how the business owner must use sound judgment in making pricing decisions. Ask students how many of them would pay $1.50 for the Mars bar, $1.75, $2.00, $3.00, etc. What happens as the price rises?
- Let’s say we can’t raise prices; how else can we increase our profits? A second response is typically “cut costs”. Now is a good time to send students into breakout groups of 3-4 to come up with all the ways a business owner might cut costs. They could continue to use the candy bars as a lens to think from or another idea would be to think about a hot dog business such as Oscar Meyer. Instruct the groups to write their list to the left of their CPV Triangle.
- Come back together as a whole group to discuss.
- Some potential responses to cost-cutting might include items related to COGS or operating costs, like cut quality, cut staff, change suppliers, buy in quantity, share space, cut advertising, downsize, outsource, use of virtual or independent contractors, change suppliers, etc.
- A great discussion can be had over “raising the price” versus “cutting costs”. You may want to ask students if there are any limits to raising prices and/or cutting costs.
- For example – if the company cut costs by using imitation chocolate, would they still be able to charge the same amount for their candy bar? Other examples students may relate to would be generic Gatorade, soda pop, etc.
- Protip: The number 2 reason small businesses fail is that the business owner does not control their costs. If leading into Market Day, you could share that you guarantee someone in the class will end up selling their product for less than it costs to make.
- Protip: You can have students draw a square at the left end of the line extending from the bottom of their triangle. This illustrates that there are limits to cutting the cost of providing your good or service.
- Hold up both the Hershey’s and Mars candy bars again and share with students in the early 1900s Hershey’s had an 82% market share, with all the other competitors like Mars, Cadbury, Wonka, Brachs, etc. combined only having 18%. Hershey’s had a town named after them, a theme park, etc. meanwhile Mars was the small guy in the market. Everyone look at your chocolate bars.
- What’s the primary ingredient in Hershey’s? – chocolate.
- What’s the primary ingredient in the Mars (3 Musketeers)? -fluffy stuff/nougat. How do you make nougat? – You whip ingredients fast and insert air. There is a lot of AIR!
- So which chocolate bar has a higher primary ingredient cost? – Hershey’s
- Which one do you like more? – Mars (Snickers, 3 Musketeers, etc.)
- Okay, now let’s talk about how they are both made. Anyone have background knowledge on the different manufacturing processes to create candy bars? ProTip: Would be a good time to show a clip about how the candy bars are made. Example videos: Hershey’s Molding Video, Extrusion Process
- Hershey’s uses molding. The chocolate gets poured into a mold, cooled, it is then taken out of the mold, the mold is washed and the process is repeated.
- Mars uses a process called extrusion. The ingredients run through a series of 3 tubes, the tubes meat up to become one to form the candy bar, and then the dipping begins.
- Ask students which process is more cost-effective/cheaper?
- What about packaging? Look at both candy bar wrappers (show your large ones as well). How are they different? – Hershey’s has the silver lining, it must be glued, etc. Mars bars wrappers are cut and then sealed by crimping. Which process do you think is cheaper?
- Okay, based on everything we just discussed, are Hershey’s or Mars candy bars cheaper to produce?
- Who makes more profit between the two companies?
- You must prefer Hershey’s because its more expensive right? – wait for student responses.
- Wait, Mars is valued higher by you – how does this happen?
- Use student answers to build upon debrief for day one. Recap cost, price, profit, etc. Let them know that the next class we will be learning about the right side of the CPV triangle.
- Move to the right side of the triangle and explain that many business owners focus on the left side of the triangle or exchange. Does anyone know what the number 1 reason is that businesses fail? (Don’t forget to incentivize students throughout with YE Dollars/points). Although some businesses fail due to issues with price, costs and sellers profit, many are focused on this half of the exchange and successfully implement this side. However, this is a huge mistake, as it is only half the picture, leading many businesses to fail due to a lack of customer focus. There are two sides to every exchange, and their understanding and practical application of win-win transactions are what sets successful businesses apart.
- For part 1 of this activity, you all were thinking like entrepreneurs, owners of Hershey’s, and Mars. Today I want you to think through the lens of the customer and what they value.
- Tell students the “V” is for Value. This is a good time to discuss subjective value, and that value represents the subjective value a buyer places on a product or service.
- Ask students who have earned virtual YE dollars if any of them would be willing to trade a dollar for a dollar (you could also ask if any students have real dollars at home).
- Raise your hand if you want to trade 1 YE Dollar for 1 YE Dollar (or 1 real dollar for my 1 real dollar). Select a couple of students to virtually trade with. As you make a verbal agreement to trade, give each other a virtual high five and thank them for doing business. Then state, “we should do business more often, love making money”. Students will look confused, and you may begin to hear responses like “that’s stupid”, “doesn’t make sense”, and “pointless” (make sure students are unmuted for this part).
- This helps students see that consumers “don’t trade dollars for dollars” – they trade for something they value more (than the price). Exchanges aren’t made when a good or service is valued at an amount equal to the price. Trading for something we value more is why the seller and the buyer both typically say “thank you”, as they both benefit in the exchange. For example – when you go to a convenience store and buy an energy drink or snack. What happens after the sale is complete? The cashier says what? And you typically respond with what? – This is a win-win.
- To check for understanding, pull out a bottle/can of a beverage (or other product). Tell them you just purchased the beverage (or other snack) for $1 (or whatever price) from the store. Ask students “what is my value for this beverage”? (discuss)
- Once students understand the concept of value, split them into groups of 3-4 and send them to breakout rooms to answer the following question: “If we know my value of the beverage is more than $1 (or the price you stated), how can we find out more specifically? Do all consumers who purchase a beverage from the vending machine have the same value of the product?” Bring students back together to discuss further as a whole group.
- • Protip: This is a great place to reiterate a few key points.
- Value is subjective, we all value things differently. Ask students what they would pay for a bottle of water? Then ask what is the most they have ever paid for a bottle of water (or soda)? Lead them to think about how they may be willing to pay more in certain circumstances like at the movie theater, a concert, or at a sporting event.
- What about their value for a bottle of water, soda or a sports drink after they have exercised?
- Ask students ways they could use to find out what someone’s value is. Answers could include various types of formal or informal market research.
- Show students that the difference between a buyer’s value of a product and the price we will call “buyers-profit”. (Have students label buyers-profit.)
- Ask students to predict what influences “subjective value” and to write 3 examples on their CPV to the right of their triangle.
- Discuss student responses. Possible responses might include day, time, customer preference, scarcity, self-interest, history, culture, experience, circumstances, geographics, psychographics, the law of returns, sunk cost, and opportunity cost.
- Give students a few minutes to brainstorm individually (or break them up into partners or small groups using the breakout room feature) ways they could add or create value, pushing the right leg of the triangle to the right.
- Discuss student responses. Typical responses include: add quality, add services, R&D, advertising, price or product-related.
- Challenge students to dig deeper: Ask students to think about businesses they frequently visit. What do those businesses currently do, or what could they do that would add value for them? What would make them “raving-fan customers”? Responses might include user experience, quality, innovation, customer service, location, unique value propositions, distribution strategies, publicity, branding, social media, other marketing strategies, etc.
- Let’s think about Hershey’s and Mars again. How do they each create value for their customers?
- Example answers could be a sweet tooth, chocolate fix, Mars has additional ingredients, more variety, etc.
- In 1932 – the US needed nourishment for our troops. Hershey’s saw this need and invested lots of money in producing more bars to sell to the troops. One small problem though – the bars melted, became a sticky mess, and then the soldiers’ fingers were sticking to their gun triggers. Mars also realized there was a need to help create value for the soldiers, so they invested into research and development to solve for the issue of the bars melting.
- Show students the large box/bag and ask who can guess how Mars solved the problem of the troops needing nourishment and the chocolate bars melting?
- After taking a few guesses, pull out the m&m’s. They developed m&m’s because they provided quick energy and were candy-coated. This is where the slogan “melt in your mouth, not in your hand” came from.
- Then pull out the Uncle Ben’s Rice box. They also developed instant rice for the troops as another form of nourishment.
- SEL/CRT Tip: As an extension, you could spend time discussing as a class, small groups, etc. about why Mars has recently committed to changing the Uncle Ben’s brand. https://www.usatoday.com/story/money/food/2020/06/17/uncle-bens-rice-change-brand-identity-racial-equality/3205859001/. How will changing their brand create long-term value? How will it be a win-win?
- Later Mars added cookie wafers, rice, etc. into their chocolate bars, which led to lower cost, but an increase in value to customers.
- Another difference between the two companies was that Hershey’s spent tons of money advertising on primetime TV for decades. Meanwhile, Mars advertised on Saturday mornings. Mars also helped invent the Point of Purchase sale – the snack candy, impulse buy at checkout, while Hershey’s insisted on being on a food aisle.
- Now that we have talked a lot about Hershey’s and Mars, what do you think Hershey’s and Mars market shares are now?
- Hershey’s went from 82% to approximately 25% market share. And Mars now has about 65% of the market share.
- Ask students to explain why this happened, referencing the CPV triangle in their answer. You could do this as a whole class, have them type their reflections, or utilize breakout rooms.
- Be sure to point out that we must look at the Big Picture. When we create value (profit for the buyer and seller) in a transaction, we create a win-win. This is a good profit. Mars found ways to reduce waste (cutting costs) while also creating more value for their customers.
- Another example to use would be the story of Mike Yurosek and baby carrots. If using this example, it would be a good time to have the student pull out their bags of carrots.
- Ask students what used to happen to carrots that had flaws and didn’t live up to the “Bugs Bunny” carrots that consumers wanted.
- Mike Yurosek was a carrot farmer in Bakersfield, CA. And the supermarkets wouldn’t take his carrots that looked “ugly”. One day Mike had an idea, – what if he created a process to take the “ugly” carrots and cut them into many smaller nice-looking carrots? And lo and behold, the baby carrot was born.
- Mike’s innovation eliminated waste – lowering his costs – while increasing the world’s value of carrots. Talk about a win-win!
- Begin to list some of the Foundational Values to the right of the right leg of the triangle. Ask students: “Do these add value in an exchange? Can you give examples that support your answers?”
- Protip: For the purposes of threading and repetition, save and compile completed CPV Triangles for easy reference throughout the year, as well as opportunities to add to them as students engage in the classroom market throughout the year.
- Protip: A great way to get students to begin to change their mindset is to intentionally talk about events that take place during the class and in the classroom market.
- For example, in the Trading Game, a student may behave unethically or “cheat”. This is a great point to discuss how free markets help to solve this problem (without government or teacher interference). The market doesn’t reward the “cheater” with long-term gain, as evidenced in the classroom market when students begin to refrain from trading with the “cheater”. There are always news events to bring in as well. Intentionally calling transactions into focus can be very powerful as behavior begins to interact with mindset.
- Protip: Implementation of CPV as a mental model for creating win-win will also serve the class well, as you talk about “customer focus” in relation to building business models.
Students can complete the debrief in many ways. Some options include writing their responses to tie in literacy, discussing in a group setting via any virtual call platform, or by recording their feedback using EdTech tools and sharing with their classmates.
- Does long-term success require principled behavior?
- Can the goal of cutting costs to increase sellers profit and creating value to increase buyer’s profit, both be achieved in a voluntary exchange? What does that look like? What might this look like in a Market Day business? Can you think of any examples?
- Protip: It is important to get students to think of the relationship between cutting costs and creating value for the customer. If we cut costs in a way that decreases the customers’ value of the product or service, we might increase the seller’s profit, while decreasing the buyer’s profit to the point we can no longer get the desired price. For example, we are selling hot dogs for $2 on Market Day and our cost is $1 to make the hot dog. We decide to cut costs by using turkey hot dogs instead of all-beef to cut our costs to $.75 (increasing our profit from $1 to $1.25 per hot dog). However, it may result in a decrease in value to the buyer, reducing the buyers’ profit, possibly creating one or more consequences: a) seller has to lower the price to make the trade b) the buyer will no longer buy the hot dog c) buyer will purchase this time, but is not a raving-fan and won’t tell other how great your business is.
- What does price allocate in an exchange? (Price allocates or determines the profit in an exchange.)
- What influences a customer’s value?
- Can we apply the CPV’s thought process to both business and personal transactions?
- Does an individual’s or business’s application of the Foundational Values matter in a transaction? How might the market respond to principled behavior? How might the market respond to unprincipled behavior?
- As you think about the CPV, are there links between responsibility and creating a win-win?
- As you think about the CPV, are there links between freedom and win-win?
- As you think about the CPV, are there links between passion and win-win?
- Why is sound judgment important in relation to cutting costs?
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