Kasongo Foods (KF) is a medium-sized food processing company based in country Y. It buys cocoa beans from small farmers in several African countries. A char...

(a) An ethical business is one that considers the moral impact of its decisions on people and the environment. [1] This goes beyond simply following the law to include doing what is considered right, such as paying fair wages or avoiding exploitation of workers or suppliers. [1]

(b) Two possible benefits to KF of becoming Fairtrade-certified:

1. Improved brand reputation, as the Fairtrade logo signals ethical sourcing to consumers. [1]
2. Attracting ethically minded consumers who specifically seek out Fairtrade-certified products. [1]

(c) Two stakeholder groups affected by KF's decision on Fairtrade sourcing:

1. Cocoa farmers [1] - They would receive a guaranteed minimum price for their cocoa beans and work in safer conditions required by Fairtrade certification. This would improve their income and livelihoods compared to the current situation where the charity has criticised KF for paying very low prices. [1]
2. Shareholders/owners [1] - In the short term, they may see lower profits because Fairtrade cocoa costs 30% more than KF currently pays, raising production costs. However, in the longer term, stronger brand loyalty and the ability to charge premium prices could improve profitability. [1]

(d) Two possible disadvantages to KF of adopting Fairtrade sourcing:

1. Higher costs [1] - Fairtrade cocoa is 30% more expensive than what KF currently pays, which directly increases the variable cost per unit of chocolate produced. [1] If KF cannot raise selling prices to cover this, profit margins will fall. Since KF sells mainly to large supermarkets that compete on price, there may be little room to increase prices. [1]
2. Loss of competitiveness [1] - Supermarkets compete primarily on price, so if KF raises its prices to offset higher cocoa costs, the supermarkets may switch to cheaper suppliers who do not use Fairtrade cocoa. [1] This could result in KF losing its main sales channel and a significant drop in revenue. [1]

(e) The decision on whether KF should become Fairtrade-certified requires weighing both sides:

Arguments for certification:

• It directly addresses the charity's public criticism about paying low prices to farmers, protecting KF's reputation from further negative publicity.
• Growing consumer demand for ethical products means Fairtrade certification could open access to a premium segment of the market.
• A guaranteed minimum price to farmers could secure a more stable and reliable cocoa supply chain in the long term.

Arguments against certification:

• The 30% cost increase may be too large to absorb given that KF's main customers (supermarkets) compete on price.
• Certification involves additional fees, audits and administrative requirements, adding to overheads.
• Competitors who do not certify will have lower costs, potentially undercutting KF on price.

Conclusion: KF should consider a phased approach to Fairtrade certification. Rather than converting all sourcing at once, KF could begin with a Fairtrade product line alongside its existing range. This would allow the business to test consumer willingness to pay a premium without risking its existing supermarket contracts. If the Fairtrade line sells well, KF can gradually expand it. This balances the ethical benefits and reputation improvement against the financial risks. [5-6 marks for well-justified answer weighing both sides; 3-4 for adequate discussion; 1-2 for basic points]