Fresh Farm (FF) FF is a partnership in country Q that grows a range of fruits and vegetables, such as apples, carrots and potatoes. FF also provides an advisory service to other farmers. The partnership was established in 2018 by three friends, Amrit, Harry and Sally, who provided the working capital. Their aim was to produce healthy and tasty food for themselves and others. FF grows crops using natural methods and practices. The produce is free from chemicals and pesticides. It only uses renewable energy sources, such as solar panels and wind turbines. It harvests the crops by hand or using simple machines that minimise damage or waste, but this is labour intensive. FF sells its products directly to consumers through its own farm shop and online delivery service. It also sells to local restaurants. Table 2.1 shows information on FF's revenue and costs in 2024. Table 2.1 Extract from FF's financial data for 2024 $000 Revenue | 120 Direct costs | 50 Indirect costs | 30 FF has gained a loyal customer base who appreciate the quality, flavour and nutrition of its products. However, FF also faces some challenges and risks in the competitive and uncertain food market. FF has limited capacity in producing crops. Weather conditions affect its yield and quality. It also must deal with pests, diseases and natural disasters that could damage or destroy its crops. Another challenge that FF faces is the high level of demand for its products in the market. The partnership must meet the expectations and requirements of its customers who want fresh, varied and consistent products throughout the year.

Mark scheme

Marking points from the official mark scheme (May/June 2025). The mark or mark type is shown in brackets.

1. [1] Two or more people join but the exact number can vary depending on the type of partnership and legal regulations
2. [1] Unlimited liability
3. [1] Share profits / losses / risks
4. [1] Must have mutual trust and confidence in each other
5. [1] Formalised through a legal agreement
6. [1] Decisions usually made collaboratively / each partner has a say in the business operations
7. [1] Financial measure
8. [1] Difference between current assets and current liabilities
9. [1] A measure of a company's liquidity and short-term financial health
10. [1] Day-to-day finance required
11. [1] ensures firm can meet short-term liabilities
12. [1] indicates liquidity
13. [1] assesses how efficiently a company is using its resources to generate revenue
14. [1] can be used as a source of finance
15. [1] companies with positive working capital can invest in growth opportunities and expansion
16. [1] example/calculation
17. [1] Formula: price = revenue – (direct costs + fixed costs) OR Profit = Revenue – Total Costs
18. [1] Calculation of total costs $50 000 + $30 000 = $80 000
19. [2] Calculation of profit = $120 000 – $80 000 = $40 000
20. [3] Answer = $40 000
21. [1] Price of the product
22. [1] Production costs
23. [1] Technology/capacity
24. [1] Number of suppliers
25. [1] Government policies
26. [1] Season/harvest/weather conditions
27. [1] Prices of substitutes/complements
28. [1] Future expectations
29. [1] Productivity of workers
30. [1] Price of the product – When the price of a product increases, producers are generally willing to supply more because they can achieve higher revenue/vice-versa
31. [1] Production costs – A decrease in production costs (e.g., lower wages, cheaper raw materials) can increase supply as it becomes more profitable to produce/opposite for an increase in costs
32. [1] Technology/capacity – Improvements in technology can enhance production efficiency, leading to an increase in supply/availability of spare capacity
33. [1] Number of suppliers – An increase/decrease in the number of suppliers in the market can lead to a higher/lower overall supply
34. [1] Government policies – effect of subsidies/taxes
35. [1] Season/harvest/weather conditions – good harvest/weather conditions can increase the supply of agricultural products. Poor harvest/weather conditions can reduce supply
36. [1] Prices/availability of substitutes/complements – If the price of a substitute good rises, producers might switch to producing that good, reducing the supply of the original product. An increase in the supply of a complementary good can also increase the supply of the original product
37. [1] Future expectations – If producers expect higher prices in the future, they might reduce current supply to sell more later at higher prices/if lower prices are expected, producers might increase current supply to sell more before prices drop
38. [1] Productivity of workers - Increased worker productivity can lead to higher supply as more goods are produced in the same amount of time/decreased productivity can reduce supply
39. [1] Low level of supply
40. [1] Can only grow a limited number of crops
41. [1] Seasonal produce
42. [1] Yield and quality affected by weather conditions
43. [1] Labour intensive
44. [1] Competitive market
45. [1] Customers require fresh, varied and consistent products
46. [1] Greater choice
47. [1] Responsive to customer wants
48. [1] Meets customer requirements
49. [1] Reduce the impact of seasonal products.
50. [1] Create a strong brand image
51. [1] Spread risk
52. [1] Increase price/revenue/profit/added value
53. [1] Expand customer base/loyalty
54. [1] Improve competitiveness
55. [1] Loyal customers
56. [1] Customers want fresh and varied products throughout the year
57. [1] FF a reliable brand
58. [1] Appeals to customers who want natural products
59. [1] Customers appreciate quality, flavour and nutrition of products
60. [1] High demand
61. [1] Competitive market
62. [1] FF can expand market share – differentiation can attract a specific segment of the market, increasing the FF's overall market share/help it to grow
63. [1] Seasonal products – could ensure year around production
64. [1] Increase finance - able to re-invest in the business
65. [1] Competitive Advantage – helps create a unique selling proposition, making the product stand out from competitors
66. [1] Brand loyalty – highlighting unique features, FF can build brand loyalty and encourage repeat purchases
67. [1] Price flexibility – differentiated products can often command higher prices because consumers perceive them as offering greater value
68. [1] Reduced price sensitivity – customers may be less sensitive to price changes if they believe the product offers unique benefits
69. [1] Niche markets – allows FF to target niche markets with specific needs and preferences
70. [1] Customer satisfaction – meet specific customer needs, leading to higher customer satisfaction
71. [1] Brand Identity – strong differentiation helps in building a distinct brand identity that is hard for competitors to copy
72. [1] The process of improving some measure of an enterprise's success.
73. [1] Can be achieved through various strategies
74. [1] The increase in the size, revenue, market share, or profitability of a business over time.
75. [1] Can be measured in different ways
76. [1] External/internal growth
77. [1] Organic growth
78. [1] Mergers / joint ventures
79. [1] Strategic alliance
80. [1] Business objectives are specific, measurable goals that an organisation aims to achieve within a certain timeframe
81. [1] Provide direction and a clear focus for the company's efforts and resources.
82. [1] Guide decision-making
83. [1] Help allocate resources effectively
84. [1] Used to measure the success of various initiatives.
85. [1] Limited production capacity
86. [1] Ethical approach – organic methods / renewable energy sources
87. [1] High level of demand
88. [1] Labour-intensive
89. [1] Highly competitive market
90. [1] Impacted by weather conditions
91. [1] Affected by pests, diseases and natural disasters
92. [1] Expectations of customers for fresh, varied and consistent products/quality, flavour and nutrition
93. [1] allows a business to increase profits – reduce costs by using external resources
94. [1] can improve quality, efficiency or productivity – using experienced providers
95. [1] reduce risks or liabilities - share with other firms
96. [1] compromise the quality and consistency of FF's products – lose customers
97. [1] expose FF to more risks and uncertainties – such as reliability, delivery delays, contractual disputes etc
98. [1] increase costs – may not be able to afford internal growth
99. [1] increased market share – growth can help FF capture a larger share of the market, enhancing its competitive position
100. [1] economies of scale as businesses grow, they can achieve economies of scale, reducing the cost per unit of production and increasing profitability
101. [1] diversification – growth often allows businesses to diversify their product lines or enter new markets, spreading risk and creating new sources of revenue
102. [1] resource constraints – rapid growth can strain an organisation's resources, including finances, personnel, and infrastructure
103. [1] quality control – maintaining product or service quality can be more challenging as the business grows
104. [1] A recommendation whether growth is a suitable objective
105. [1] Elements that the recommendation could depend upon, including such as losing control over the quality and consistency of the products, compromising on the natural / organic approach
106. [1] A consideration of the implications for cost and ability to attract other firms
107. [1] Weighing up of the factors and their relative influence on growth.
108. [1] Depends upon the type of growth/how growth is achieved.
109. [1] FF should evaluate their strategic goals, market conditions, and internal capabilities to determine if growth is a suitable objective.
110. [1] Note: Only accept judgements about growth but reward alternative objectives if growth discussed.