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Arab Open UniversityFaculty of Business StudiesT306A TMA- 2017-2018Please read these instructions carefully. However, contact your tutor in case anydifficulties with the instructions. You should submit your completed assignment toyour tutor no later thanthe date will be announced later on LMS.Please use standard A4 size paper for your TMA. Your name, personal identifier,course and assignment numbers must appear at the top of each sheet. Pleaseleave wide margins and space at the end of each sheet for tutor comments. It isbetter to use double spacing so that you can easily handwrite corrections to yourdrafts and tutors have space to encourage with your points as you make them.Start each question in the assignment on a new page. Any extended text shouldideally be word-processed, but, diagrams and accompanying notes may be handdrawn and you can use large sheets of paper.Completing and sending your assignmentsWhen you have completed each of your TMA, fill in an assignment form (PT3),taking care to enter correctly your personal identifier course and assignmentnumbers. Each TMA and its PT3 form should be sent to your tutor with yourname, address and personal identifier written on it. Keep a copy of your TMA forsecurity. The copy that is eventually returned to you after the assessmentprocess will have comments written on it. All assignments are treated in strictconfidence.It is very important that you ensure that your tutor receives each assignment bythe cut-off date given. If you feel that you are unable to meet the cut-off date forany of the TMA, please contact your tutor as soon as possible to discuss yoursituation.PlagiarismYou can score very well on this assignment using the materials provided as partof the course. However, if you have access to other sources of information suchas reference books or the Internet, you may find it interesting to look there foradditional relevant information. Very short extract from published sources may beincluded in context but you should avoid copying significant amounts of text fromother authors. You should note that whilst the internet can provide lots ofinformation much of it is not refereed and should be treated with caution.If you take material from the course or elsewhere and incorporate it in youranswer word-for-word, you must indicate where you have taken it. Not to do so is1
regarded as ‘plagiarism’ and is regarded as an infringement of copyright. Toattempt to pass off such work as your own is cheating.You must therefore acknowledge all your sources of information.Plagiarism will lead to a loss of marks and extensive plagiarism could mean thatyou fail this TMA. For more information about what constitutes plagiarism orcheating, you should refer to the currentAssessment Handbook.GeneralThere are three questions in this TMA at the end of this case study. You shouldanswer them all. You should notice the mark allocations for each question andallocate your effort accordingly. Appropriate use of diagrams is expectedthroughout the TMA.Fair Trade Coffee: The Mainstream Debate08-069August 27, 2010Richard M. Locke, Cate Reavis, Diane CameronIn November 2008, Shaw’s supermarkets sold a 10-ounce bag of GreenMountain Fair Trade certified coffee for $8.49. The bag which was adornedwith the Fair Trade certified logo, did not explain the meaning of Fair Trade.Consumers were directed to a website or a phone number to get moreinformation. However, the bag did say the following:A good cup of coffee can change your day. A great cup of coffee can helpchange the world. By supporting farming communities, promoting soundenvironmental practices and sourcing only the highest quality beans we work toensure that everyone who comes in contact with our coffee benefits. So whileyou appreciate the results in your cup, you can also rest assured that this coffeehas had a positive impact on every person it has touched which to us makesthese little beans a pretty big deal.The main premise of Fair Trade was that farmers were given a guaranteed “fairprice” for their coffee, a guarantee that became particularly appealing to farmersin the late 1990s and early 2000s when the price of coffee fell below the cost ofproduction. For knowledgeable consumers, this was a positive reinforcementknowing that they were helping a social cause even though it was not clear onany bag of Fair Trade coffee just how much farmers were being paid and howmuch they were profiting.2
The organization responsible for certifying food products (including coffee) asFair Trade was the Fairtrade Labeling Organization (FLO). Based in Bonn,Germany, FLO was an umbrella organization that united 20 labeling initiatives in21 countries and producer networks. But with a market share of Less than 3.8%of the coffee market and 6.1% of the specialty coffee market,and a growth ratethat had plunged from 97% in 2003 to 2% in 2007, the leadership of FLO founditself at a crossroads. Pressures were mounting inside and outside theorganization to grow market share for Fair Trade certified coffee, andstakeholders were divided on how best to dothis.Coffee IndustryCoffee was the world’s second most valuably traded commodity, second only tooil. More than 2 billion cups of coffee were consumed every day. According tothe International Coffee Organization (ICO), the size of the retail market forcoffee was over $70 billion in sales per year. An estimated 17- 20 millionfamilies in more than 50 developing countries produced and sold coffee. Morethan 80% of all coffee was produced by smallholder farmers, those who farmedon 2 hectares or less of land which yielded between 15 and 30 bags. In manyproducing countries, coffee accounted for over 75% of total export revenue. In2007, production was about 117 million bags and world consumption was 123millionbags.Coffee Crisis: The coffee crisis referred to a four-year period between 2001 and2005 when the price of coffee fell below the cost of production, a time whensupply far outweighed demand. The makings for the crisis, which began in theearly 1990s, could be called a perfect storm of sorts: deregulation which usheredin new producers, namely Vietnam, new technology and adverse climatic eventstogether created a volatile industry where the price for a pound of coffee wentfrom $.53/lb in 1993 to $1.19 in 1994 to $1.26 in 1995 before deflating back to$.82 in 1996.The deregulation of the coffee industry came as a result of thecollapse of the 1989 International Coffee Agreements (ICAs) between producingand consuming countries when the quota and supply control provisions of the1983 ICA were suspendedThe collapse of quotas ushered in new producers starting in the early 1990s.Vietnam, with help from international aid agencies, began a subsidized coffeegrowing program. The international market was flooded by cheap Robustabeans putting further downward pressure on prices.In 1990, Vietnam was the17thlargest coffee producer with 1 million 60kg sacks. In 2001, it had becomethe world’s second largest supplier after Brazil producing over 12 million 60 kgsacks.By the early 2000s, the International Coffee Agreement’s goal of3
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