Celine has bought an apple farm which has a warehouse for tools and equipment. She needs insurance cover. Fig. 4.1 shows the six stages she needs to follow to take out insurance. [Figure 4.1] Use Fig. 4.1 to help you answer the following questions.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [1] Proposal form / proposal
2. [1] Celine / Celine's apple farm
3. [1] Provide compensation / payment / receive money / financial aid (1) minimise losses / or example such as against fire / theft / damage (1)
4. [1] Risk reduction / reduce risks (1) taking cover for the risk or example of risk transferring risk to the insurer (1)
5. [1] Protection (1) from losses / to replace losses / so Celine does not lose out/can continue in business (1)
6. [1] Confidence in the business (1) to take risks / to want to continue in business / because losses can be recovered / returned to previous position / gives her peace of mind / reduce stress (1)
7. [1] Laws/legal requirement (1) e.g. public liability insurance (1)
8. [1] Need to cover employees / employer's liability (1) employees injured / accidents at work (1)
9. [1] To cover risks of international trading (1) e.g. export credit guarantees (1)
10. [1] By storing / keeping / harvesting large amounts of apples (1) and releasing it gradually over the year (1) to prevent shortages (1) by having constant/controlling supply (1) when price of apples increases (1) Celine can reduce the wider price fluctuations (1) by meeting the demand by supplying apples (1) to charge an equilibrium price. (1)
11. [1] Apples that can be produced at only certain times of year (1) can be stored / kept (1) and released / supplied throughout the year (1) enabling everyone to have / sold these goods off-season / out of season / when season is over / all seasons (1) when there is no production (1) so there are no shortages. (1)
12. [8] Level 3 (7-8 marks): The candidate is able to offer a thorough evaluation, with a recommendation, of whether Celine should be selling her apples in a street market stall or to a local supermarket.
13. Level 2 (5-6 marks): Candidate offers a satisfactory analysis of the advantages and/or disadvantages of whether Celine should be selling her apples in a street market stall or to a local supermarket, with or without a recommendation.
14. Level 1 (1-4 marks): Candidate demonstrates some knowledge and understanding, with application to Celine using a street market stall or local supermarket to sell her apples.
15. Level 0 (0 marks): No creditable response.
16. [1] A street market is a collection of stalls in an open area small-scale retailer / business.
17. [1] A supermarket is a large-scale retailer / business, self-service store selling mainly food and household goods / variety of goods.
18. Street market stall:
19. [1] Street markets bring together many customers in one place / busy area so there are many potential customers.
20. [1] The start-up costs / fixed costs are low e.g. low rent/hire of stall so cheaper than having a physical store.
21. [1] The apples will be sold directly to customers so Celine will have direct contact with them who can give her feedback about their needs and wants.
22. [1] Celine can be paid right away in cash helping her cash flow.
23. [1] Street markets mainly deal in cash so no risk of bad debt.
24. [1] Celine will need a van to transport her apples to the market, adding to her costs.
25. [1] Street markets require a lot of labour time away from the farm for Celine.
26. [1] There can be a lot of competition at the market from other apple stalls.
27. [1] There is a lack of storage for the apples apart from in her vehicle.
28. [1] If Celine does not like talking directly with customers, she will find it more difficult to increase sales.
29. [1] Street markets are very dependent on the weather. On a rainy day, she could find few customers.
30. [1] If her stall is poorly located in the street market, this will impact on the amount of trade she receives.
31. [1] Celine might provide informal credit so increasing customer loyalty.
32. Supermarket:
33. [1] Easier to deal with one large customer rather than a number of smaller independent customers.
34. [1] Increase in sales with access to a larger customer base.
35. [1] Increase in brand awareness of her apples with possible nationwide coverage.
36. [1] It may be easier to access financial assistance as banks may be more willing to lend to a business if they have a supplier contract with a well-known supermarket.
37. [1] Supermarkets have a lot of experience in selling different products and may be able to offer Celine advice that will help increase her sales, e.g. through packaging design.
38. [1] The price Celine might receive for her apples will be much less than if you sell direct to customers at a street market.
39. [1] Celine could become vulnerable to a drop in demand, price decreases or a squeeze on profit margins from the supermarket.
40. [1] Supermarkets can only store small quantities, so more deliveries are required increasing her costs.
41. [1] Celine will face competition from other brands which might affect her sales.
42. [1] Celine will be under pressure to keep up with demand if her apples sell well.
43. [1] She may have to invest in new equipment or expand her premises to produce more apples.
44. [1] Her apples may only be given a trial period on the supermarket shelf.
45. [1] Some supermarkets may insist on being the only exclusive seller of her apples or may insist on Celine selling elsewhere at a higher price.
46. [1] Some supermarkets may audit their supplier to ensure certain criteria are met or insist on a business achieving certain food safety accreditations before being considered as a supplier which will take time to sell the apples.
47. Evaluation: Celine will have to weigh up the advantages of selling directly to customers at a street market where she can increase her profit margin compared to an impersonal service at a local supermarket where she can maximise her sales but at a reduced profit margin. As has no experience selling apples, so it might be a good idea to talk to the local supermarket about the possibility of selling her apples there and then if that fails, rent a street market stall.