Cambridge IGCSE/A‑Level Business (9609) – Complete Syllabus Notes
1 Business & Its Environment (AS)
1.1 Enterprise & Entrepreneurship
- Definition of a business: an organisation that combines resources (factors of production) to produce goods or services for profit.
- Factors of production: land, labour, capital, entrepreneurship.
- Opportunity cost: the benefit foregone by choosing one alternative over another.
- Adding value: transformation of inputs into outputs that are worth more than the sum of the inputs.
- Entrepreneurial traits: risk‑taking, innovation, vision, determination, resilience.
- Business plans: purpose, elements (executive summary, market analysis, marketing mix, operations, finance) and limitations (uncertainty, bias).
1.2 Business Objectives & Ownership Forms
- Primary objective: profit maximisation / wealth creation for shareholders.
- Secondary objectives (may conflict with profit): growth, market share, survival, corporate social responsibility (CSR), employee welfare, environmental sustainability.
- Economic sectors: primary, secondary, tertiary, quaternary.
- Ownership structures & liability:
| Form | Key Features | Liability |
|---|
| Sole trader | One owner, full control | Unlimited |
| Partnership | Two or more owners, shared control | Unlimited (unless limited partnership) |
| Private limited company (Ltd) | Separate legal entity, shares not publicly traded | Limited to amount unpaid on shares |
| Public limited company (PLC) | Shares traded on a stock exchange | Limited |
| Franchise | Right to use brand & business model | Limited to franchise agreement |
| Co‑operative | Member‑owned, democratic control | Limited |
| Joint venture | Two or more firms share resources for a specific project | Limited to contribution |
| Social enterprise | Primary aim is social/environmental benefit; profit is reinvested | Varies |
1.3 Size, Growth & Stakeholders
- Measuring size: turnover, number of employees, total assets, market share.
- Advantages/disadvantages of small/family businesses: flexibility & personal service vs. limited finance & succession risk.
- Growth strategies:
- Organic (internal) growth – new products, market penetration.
- Inorganic (external) growth – mergers, acquisitions, joint ventures.
- Stakeholder categories:
- Internal – owners/shareholders, directors, managers, employees.
- External – customers, suppliers, creditors, government, local community, trade unions, NGOs.
- Stakeholder rights & responsibilities: e.g., employees’ right to safe work vs. employer’s duty to provide it.
- Conflict management: negotiation, compromise, stakeholder analysis matrix (interest vs. power).
1.4 Business Structure, Size & CSR
- Organisational structures: functional, divisional, matrix, flat, networked – impact on communication, decision‑making speed and flexibility.
- Corporate Social Responsibility (CSR): ethical, legal, economic, philanthropic responsibilities; triple‑bottom‑line (people, planet, profit).
- SMART objectives: Specific, Measurable, Achievable, Relevant, Time‑bound.
- Link between mission, aims, strategy & tactics: mission → long‑term aims → strategic options → operational tactics.
1.5 External Environment (PESTLE)
- Political‑Legal: stability, tax policy, regulation, trade restrictions.
- Economic: inflation, interest rates, exchange rates, economic growth, unemployment.
- Social‑Demographic: population age, lifestyle trends, cultural attitudes, education levels.
- Technological: R&D, automation, e‑commerce, ICT advances.
- Environmental: sustainability, climate change legislation, resource scarcity.
- International: global competition, export/import barriers, multinational operations.
- Impact on decision‑making: businesses must scan, anticipate change and adapt strategy (e.g., product diversification, market entry, cost control).
2 Human Resource Management (AS)
2.1 Purpose & Core Functions of HRM
- Recruitment, selection & induction.
- Training & development (induction, on‑the‑job, off‑the‑job, e‑learning).
- Performance management & appraisal (KPIs, 360° feedback).
- Reward & motivation (financial: salary, bonuses; non‑financial: recognition, career progression).
- Employee relations (trade unions, collective bargaining, grievance procedures).
- Health, safety & wellbeing (risk assessments, ergonomics, stress management).
- Workforce planning (forecasting demand, skills gap analysis, succession planning).
2.2 Motivation Theories & Practical Motivators
- Classical: Taylor’s Scientific Management (efficiency), Mayo’s Hawthorne Studies (social needs).
- Behavioural: Maslow’s Hierarchy of Needs, Herzberg’s Two‑Factor Theory (hygiene vs. motivators).
- Contemporary: McClelland’s Need Theory (achievement, affiliation, power), Vroom’s Expectancy Theory (expectancy × instrumentality × valence).
- Practical motivators:
- Financial – pay rise, profit‑share, commission.
- Non‑financial – job enrichment, flexible working, recognition awards, career development.
2.3 Management Functions & Styles
- Fayol’s 14 Functions: planning, organising, commanding, coordinating, controlling, etc.
- Mintzberg’s Managerial Roles: interpersonal, informational, decisional.
- Leadership styles:
| Style | Key Characteristics | When Effective |
|---|
| Autocratic | Clear direction, tight control | Crisis, routine tasks |
| Democratic | Consultation, participation | Creative work, skilled teams |
| Laissez‑faire | Minimal supervision | Highly skilled, self‑motivated staff |
| Paternalistic | Leader looks after staff welfare | Family‑run firms |
| Theory X / Theory Y | Assumptions about employee motivation | Guides management approach |
3 Marketing (AS)
3.1 Role of Marketing & Market Types
- Identify and satisfy customer needs profitably.
- Creates value, builds brand equity, supports market growth.
- Market types: consumer vs. industrial, local vs. national vs. international, mass market vs. niche market.
- Orientation: product‑oriented, sales‑oriented, market‑oriented, societal‑marketing.
3.2 Market Research & Segmentation
- Primary research: surveys, interviews, focus groups, observations – provides current, specific data.
- Secondary research: published reports, statistics, internet – cheaper, broader.
- Sampling: random, stratified, convenience – impacts reliability & validity.
- Segmentation criteria:
| Basis | Example |
|---|
| Demographic | Age, gender, income |
| Geographic | Region, climate |
| Psychographic | Lifestyle, personality |
| Behavioural | Usage rate, loyalty |
- Targeting & Positioning (STP): select segment(s) → decide on market positioning statement → design marketing mix.
3.3 Marketing Mix (4 Ps) & Product Strategies
| Element | Key Decisions & Examples |
|---|
| Product | Features, quality, branding, packaging, warranty, life‑cycle stage; product line depth, product mix breadth. |
| Price | Pricing objectives (profit, market share), strategies (penetration, skimming, price discrimination, dynamic, psychological), discounts, credit terms. |
| Place | Distribution channels (direct, indirect, intensive, selective, exclusive), logistics, retail formats, e‑commerce, channel power. |
| Promotion | Advertising, sales promotion, public relations, personal selling, direct marketing, digital/social media, branding. |
- Product Life‑Cycle (PLC): introduction, growth, maturity, decline – each stage requires different marketing mix adjustments.
- Boston (BCG) Matrix: Stars, Cash Cows, Question Marks, Dogs – helps allocate resources.
4 Operations Management (AS)
4.1 Transformational Process & Production Methods
- Inputs → Process → Outputs – the core transformation.
- Types of operations:
- Capital‑intensive vs. labour‑intensive.
- Job production (customised), batch production (small runs), flow production (continuous), mass‑customisation.
- Change‑over time: set‑up, cleaning, adjustment – impacts flexibility and cost.
4.2 Efficiency, Capacity Utilisation & Quality
- Productivity = Output ÷ Input (e.g., units per labour‑hour).
- Capacity utilisation = (Actual output ÷ Maximum possible output) × 100 %.
- High utilisation → economies of scale but risk of bottlenecks.
- Low utilisation → excess idle capacity, higher unit costs.
- Quality management techniques: Total Quality Management (TQM), ISO standards, Six Sigma, Kaizen.
- Lean production & Just‑In‑Time (JIT): minimise waste, reduce inventory holding.
4.3 Inventory Management & Outsourcing
5 Finance & Accounting (AS)
5.1 Sources of Finance
| Source | Nature | Typical Use | Advantages | Disadvantages |
|---|
| Retained profits | Internal, long‑term | Expansion, R&D | No interest, no dilution | Limited by profitability |
| Bank overdraft | External, short‑term | Working‑capital gaps | Flexible, quick access | High interest, repayment on demand |
| Debentures / Loans | External, long‑term | Plant & equipment | Fixed interest, no ownership loss | Repayment obligation |
| Equity (share issue) | External, long‑term | Large projects, acquisitions | No repayment, spreads risk | Dilutes ownership, dividend expectations |
| Trade credit | External, short‑term | Purchasing inventory | Free finance if paid on time | May affect supplier relationships |
5.2 Liquidity Ratios (Section 10.2)
Current Ratio
Formula: Current Ratio = Current Assets ÷ Current Liabilities
Interpretation:
- 1.5 – 2.0 – generally healthy (industry dependent).
- >2.0 – strong liquidity but may indicate excess idle assets.
- <1.0 – potential short‑term solvency problem.
Acid‑Test (Quick) Ratio
Formula: Acid‑Test Ratio = (Current Assets – Inventory) ÷ Current Liabilities
Removes inventory because it is often the least liquid current asset.
Cash Ratio
Formula: Cash Ratio = (Cash & Cash Equivalents) ÷ Current Liabilities
Most conservative measure – shows ability to meet current liabilities with cash alone.
Worked Example (All Three Ratios)
| Item | £ |
|---|
| Cash & cash equivalents | 30,000 |
| Trade receivables | 25,000 |
| Inventory | 20,000 |
| Short‑term investments | 5,000 |
| Total Current Assets | 80,000 |
| Trade payables | 40,000 |
| Short‑term borrowings | 15,000 |
| Accrued expenses | 5,000 |
| Total Current Liabilities | 60,000 |
| Current Ratio | 80,000 ÷ 60,000 = 1.33 |
| Acid‑Test Ratio | (80,000 – 20,000) ÷ 60,000 = 1.00 |
| Cash Ratio | 30,000 ÷ 60,000 = 0.50 |
5.3 Cash‑Flow Forecasting
- Project cash inflows (sales receipts, loan proceeds, asset sales) and outflows (payments to suppliers, wages, tax, interest).
- Use a cash‑flow statement: Opening balance + Inflows – Outflows = Closing balance.
- Positive closing balance each period = adequate liquidity; a negative balance signals need for financing or cost reduction.
- Scenario analysis (best, most likely, worst case) helps manage risk.
5.4 Costing & Contribution Analysis
- Fixed costs: unchanged with output (e.g., rent, salaries).
- Variable costs: vary directly with output (e.g., raw material, direct labour).
- Contribution per unit: Selling price – Variable cost per unit.
- Total contribution: Contribution per unit × Quantity sold.
- Contribution margin ratio = (Contribution ÷ Sales) × 100 % – useful for pricing decisions.
5.5 Break‑Even Analysis
Break‑Even Point (units) = Fixed Costs ÷ Contribution per unit
| Item | £ |
|---|
| Fixed costs | 120,000 |
| Selling price per unit | 30 |
| Variable cost per unit | 18 |
| Contribution per unit | 12 |
| Break‑Even (units) | 120,000 ÷ 12 = 10,000 units |
Margin of safety (%) = (Actual sales – Break‑even sales) ÷ Actual sales × 100 %.
5.6 Budgeting & Variance Analysis
- Budgets: sales, production, cash, master – coordinate plans across departments.
- Variance: Variance = Actual – Budgeted.
- Favourable (F) – result better than budget (e.g., higher profit, lower cost).
- Unfavourable (U) – result worse than budget.
- Investigate significant variances (materiality, root‑cause analysis) to improve control.
6 External Influences on Business Activity (A‑Level)
PESTLE Framework (Expanded)
| Factor | Key Issues for Business |
|---|
| Political‑Legal | Government stability, taxation, regulation, trade policies, health & safety legislation. |
| Economic | Inflation, interest rates, exchange rates, economic growth, consumer confidence, unemployment. |
| Social‑Demographic | Population age structure, lifestyle trends, cultural attitudes, education, health. |
| Technological | Automation, R&D, e‑commerce, ICT, intellectual property. |
| Environmental | Sustainability, carbon taxes, waste disposal, resource scarcity, climate change legislation. |
| International | Global competition, export/import barriers, exchange‑rate volatility, multinational operations. |
Impact on Decision‑Making
- Scanning the environment → identifying opportunities/threats.
- Using tools such as SWOT, PESTLE, Porter’s Five Forces to evaluate strategic options.
- Adapting strategy (e.g., product diversification, market development, cost leadership) to mitigate threats and exploit opportunities.
7 Business Strategy (A‑Level)
Strategic Analysis Tools
- SWOT: internal Strengths & Weaknesses vs. external Opportunities & Threats.
- PEST / PESTLE: macro‑environmental analysis.
- Porter’s Five Forces: industry rivalry, threat of new entrants, threat of substitutes, buyer power, supplier power.
- Ansoff Matrix: market penetration, market development, product development, diversification.
- BCG Growth‑Share Matrix: Stars, Cash Cows, Question Marks, Dogs – guides resource allocation.
Corporate Planning & Change Management
- Strategic planning steps: vision → mission → SMART objectives → strategic options → implementation plan → monitoring & review.
- Change models:
- Lewin’s Unfreeze‑Change‑Refreeze.
- Kotter’s 8‑step process (create urgency, form coalition, vision, communicate, empower, generate short‑term wins, consolidate, anchor).
- Managing resistance: clear communication, employee participation, training, support, incentives.
8 Human Resource Management (A‑Level)
Organisational Structures & Impact
- Functional: departments by function – clear expertise, slow decision‑making.
- Divisional: by product/region – quicker response, duplication of functions.
- Matrix: dual reporting – flexibility, potential conflict.
- Flat: few hierarchical levels – fast communication, limited control.
- Networked: core firm plus external partners – agility, reliance on partners.
Leadership & Management Styles (A‑Level)
- Transactional leadership: focus on supervision, performance, reward‑punishment.
- Transformational leadership: inspires, motivates, fosters innovation.
- Strategic HRM: aligning HR policies (recruitment, training, reward) with overall business strategy.
- Impact of IT/AI: recruitment algorithms, performance dashboards, remote working platforms, data‑driven talent analytics.
Employee Relations & Motivation (Advanced)
- Trade unions & collective bargaining: negotiation of wages, conditions, grievance procedures.
- Industrial action: strikes, lock‑outs – impact on productivity and public image.
- Motivation in modern workplaces: work‑life balance, corporate culture, employee empowerment, career pathways.
- Legal framework: employment law, health & safety regulations, equality legislation.
9 Finance & Accounting (A‑Level – Expanded)
Advanced Ratio Analysis
- Liquidity ratios: current, acid‑test, cash ratio (see Section 5.2).
- Gearing ratio: Debt ÷ (Debt + Equity) – indicates financial risk.
- Profitability ratios: Gross profit margin, net profit margin, return on capital employed (ROCE).
- Efficiency ratios: Inventory turnover, receivables turnover, asset turnover.
Cash‑Flow Forecasting (Advanced)
- Include cash inflows from non‑operating activities (sale of assets, investment income).
- Use rolling 12‑month forecast to capture seasonal variation.
- Stress‑test the forecast against interest‑rate rises or exchange‑rate movements.
Budgeting Techniques
- Zero‑based budgeting: each expense justified from scratch.
- Rolling budgets: continuously updated each month/quarter.
- Flexible budgets: adjust for actual activity levels.
Variance Analysis (Extended)
| Variance Type | Formula | Interpretation |
|---|
| Sales price variance | (Actual price – Budgeted price) × Actual quantity | Favourable if actual price > budgeted. |
| Sales volume variance | (Actual quantity – Budgeted quantity) × Budgeted price | Favourable if actual quantity > budgeted. |
| Material price variance | (Actual price – Standard price) × Actual quantity | Shows purchasing efficiency. |
| Labour efficiency variance | (Actual hours – Standard hours) × Standard rate | Indicates productivity. |
10 Key Formulas & Quick Reference
| Topic | Formula | Typical Use |
|---|
| Current Ratio | Current Assets ÷ Current Liabilities | Assess short‑term liquidity. |
| Acid‑Test Ratio | (Current Assets – Inventory) ÷ Current Liabilities | Liquidity excluding least‑liquid asset. |
| Cash Ratio | Cash & Cash Equivalents ÷ Current Liabilities | Most conservative liquidity test. |
| EOQ | √(2DS / H) | Optimal order size to minimise total inventory cost. |
| Break‑Even (units) | Fixed Costs ÷ (Selling price – Variable cost per unit) | Determine sales needed to cover all costs. |
| Contribution Margin Ratio | (Selling price – Variable cost) ÷ Selling price × 100 % | Pricing and profit planning. |
| Gearing Ratio | Total Debt ÷ (Total Debt + Equity) | Measure financial risk. |
| ROCE | Operating Profit ÷ Capital Employed × 100 % | Assess efficiency of capital use. |
11 Examples & Practice Questions
Example 1 – Current Ratio Interpretation
Company A has current assets £150,000 and current liabilities £90,000.
Current Ratio = 150,000 ÷ 90,000 = 1.67.
Interpretation: The ratio falls within the 1.5–2.0 “healthy” band, suggesting adequate short‑term liquidity. If the industry average is 2.5, the company may be relatively less liquid than competitors and could consider improving cash management.
Example 2 – EOQ Calculation
Annual demand for a product = 12,000 units.
Ordering cost per order = £75.
Holding cost per unit per year = £2.5.
EOQ = √(2 × 12,000 × 75 ÷ 2.5) = √(1,800,000 ÷ 2.5) = √720,000 ≈ 848 units per order.
Practice Question
A firm has the following figures: Cash £20,000, Trade receivables £30,000, Inventory £25,000, Trade payables £35,000, Short‑term borrowings £10,000, Accrued expenses £5,000.
- Calculate the Current Ratio, Acid‑Test Ratio and Cash Ratio.
- Interpret each ratio and suggest one action the firm could take to improve its liquidity.
12 Summary Checklist for Exam Revision
- Know the definition, purpose and components of each major business function (HRM, Marketing, Operations, Finance).
- Be able to calculate and interpret the three key liquidity ratios, EOQ, break‑even point and contribution margin.
- Understand the advantages, disadvantages and typical uses of each source of finance.
- Remember the four growth strategies and the nine strategic analysis tools.
- Be able to explain the impact of each PESTLE factor on business decisions.
- Practice drawing and labeling organisational structures and the Boston Matrix.
- Review case‑study examples that illustrate stakeholder conflict, CSR, and change‑management processes.