Cambridge Syllabus Notes

Cambridge International AS & A Level Business (9609) – Complete Revision Notes

1. Business and Its Environment (AS)

1.1 Enterprise, Objectives & Stakeholders

Factors of production – land, labour, capital, entrepreneurship.
Opportunity cost – the value of the next best alternative fore‑gone.
Dynamic environment – markets, technology and consumer tastes change over time.
Intrapreneurship – employees acting like entrepreneurs within an organisation.
Barriers to entry – economies of scale, patents, brand loyalty, legal restrictions.
Risk & uncertainty – known probabilities vs unknown outcomes.
Business plan – key elements:
- Executive summary
- Market analysis
- Marketing plan
- Operations plan
- Financial forecasts
Objectives – use the SMART criteria (Specific, Measurable, Achievable, Realistic, Time‑bound). Types:
- Profit‑maximising
- Growth (sales, market share)
- Survival
- Social/CSR objectives
Stakeholders – owners/shareholders, employees, customers, suppliers, government, community, creditors.
- Rights & responsibilities (e.g., shareholders – right to dividends, responsibility to monitor directors).
- Potential conflicts (e.g., profit vs employee welfare) and negotiation strategies.

1.2 Business Sectors & Ownership

Sectors – Primary, Secondary, Tertiary, Quaternary.
Public vs Private sector – ownership, funding, objectives.
Forms of ownership – sole trader, partnership, private limited (Ltd), public limited (PLC), franchise, joint venture.
Growth strategies:
- Internal/organic – new products, market penetration.
- External – horizontal, vertical, conglomerate, strategic alliance, joint venture.

1.3 Business Size & Structure

Measuring size – turnover, number of employees, total assets, market share.
Economies of scale – cost advantage from larger output.
Organisational structures:
- Functional
- Divisional (product, geographic, market)
- Matrix (dual reporting)
- Flat & network (few layers, high flexibility)

1.4 Aims, Objectives & Decision‑Making

CSR & triple‑bottom‑line – People, Planet, Profit.
Mission, aims, objectives, strategy, tactics – hierarchy from purpose to day‑to‑day actions.
Decision‑making stages:
1. Identify the problem.
2. Generate alternatives.
3. Evaluate alternatives (using criteria such as cost, risk, impact).
4. Choose the best alternative.
5. Implement.
6. Review.
Translation into targets & budgets – quantitative statements that make objectives measurable.
Ethical influences – legal requirements, professional codes, personal morals.

1.5 Stakeholder Relationships

Rights & responsibilities (e.g., employees – right to safe work, responsibility to perform).
Potential conflicts and negotiation techniques (e.g., interest‑based bargaining).
Importance of clear communication and stakeholder analysis.

2. Human Resource Management (AS)

2.1 Workforce Planning, Recruitment & Selection

Job analysis → job description & person specification.
Recruitment methods:
- Internal – promotions, transfers.
- External – advertising, recruitment agencies, online portals, university fairs.
Selection tools – application forms, structured interviews, psychometric tests, assessment centres, work samples.

2.2 Motivation Theories

Maslow’s hierarchy of needs.
Herzberg’s two‑factor theory (hygiene vs motivators).
McGregor’s Theory X & Y.
Vroom’s expectancy theory.
Alderfer’s ERG theory.
Equity theory (fairness).

2.3 Leadership Styles & Theories

Autocratic, democratic, laissez‑faire.
Transformational & transactional.
Situational/contingency (Fiedler, Path‑Goal).

2.4 Training, Development & Performance Management

Training types – induction, on‑the‑job, off‑the‑job (classroom, e‑learning, apprenticeships).
Development – career planning, mentoring, succession planning.
Appraisal methods – Management by Objectives (MBO), 360° feedback, rating scales, behaviorally anchored rating scales (BARS).

2.5 Industrial Relations & Employment Law

Trade unions, collective bargaining, grievance procedures.
Redundancy vs dismissal; fair and unfair dismissal criteria.
Morale & welfare – work‑life balance, diversity, equality, health & safety.

3. Marketing (AS)

3.1 The Marketing Mix (4 Ps)

Product	Price	Place	Promotion
Features, quality, branding, life‑cycle, packaging.	Pricing objectives (profit, market share), strategies (penetration, skimming), price elasticity.	Distribution channels, logistics, retail formats, e‑commerce.	Advertising, sales promotion, public relations, personal selling, digital marketing.

3.2 Market Research & Segmentation

Primary vs secondary research; qualitative (focus groups, interviews) vs quantitative (surveys, questionnaires).
Segmentation criteria – demographic, geographic, psychographic, behavioural.
Targeting – intensive, selective, exclusive, niche.
Positioning – positioning map, value proposition.

3.3 Product Life‑Cycle (PLC)

Introduction – low sales, high costs, need for awareness.
Growth – rapid sales increase, economies of scale, possible price reductions.
Maturity – sales peak, market saturation, emphasis on differentiation.
Decline – falling sales, possible product withdrawal or re‑positioning.

3.4 Pricing & Break‑Even for Marketing Decisions

Contribution margin = Price – Variable cost per unit.
Break‑Even (units) = Fixed costs ÷ Contribution margin.
Example: FC = £120 000, Price = £30, VC = £15 → BE = 8 000 units.

3.5 Promotion Mix & Digital Marketing

Integrated marketing communications – ensuring consistency across channels.
Social media, SEO, content marketing, email campaigns.

4. Operations Management (AS)

4.1 Transformational Process

Inputs → transformation activities → outputs.
Process types: job, batch, flow, project.

4.2 Capacity, Location & Layout

Capacity utilisation = (Actual output ÷ Design capacity) × 100%.
Economies of scale vs diseconomies.
Location factors – cost, market access, labour, transport, government incentives, environmental impact.
Layout options – product, process, cellular, fixed‑position.

4.3 Inventory & Quality Management

Inventory types – raw materials, work‑in‑progress, finished goods.
EOQ = √[(2 × Demand × Ordering cost) ÷ Holding cost].
JIT – minimise holding costs, rely on reliable suppliers.
Quality tools – TQM, Six Sigma, ISO 9001, quality circles, statistical process control.

4.4 Outsourcing, Offshoring & Process Improvement

Reasons – cost reduction, focus on core activities, access to expertise.
Lean production – waste elimination (Muda).
Kaizen – continuous incremental improvement.
Business Process Re‑engineering (BPR) – radical redesign.

4.5 Project Management Basics

Gantt chart, Critical Path Method (CPM), PERT.
Risk identification & mitigation.

5. Finance and Accounting (AS)

5.1 Why Businesses Need Finance

Start‑up capital, working capital, plant & equipment, research & development, expansion, contingency reserves.

5.2 Sources of Finance

Source	Nature	Advantages	Disadvantages
Retained profits	Internal	No interest; retains control	Limited by profitability; may reduce dividends
Bank loan / overdraft	External – debt	Fixed repayments; interest tax‑deductible	Requires security; interest cost; covenants
Equity (share issue)	External – equity	No repayment; spreads risk	Dilutes ownership; dividends expected
Leasing	External – hybrid	Preserves cash; access to latest equipment	Higher total cost; no ownership unless purchase option
Venture capital / angel investors	External – equity	Large funds; expertise & networks	High share dilution; exit expectations
Trade credit	External – short‑term debt	Improves cash flow; no interest if paid on time	May affect supplier relationships; limited amount

5.3 Financial Statements & Key Ratios

Income statement – shows revenue, costs, profit.
Balance sheet – assets, liabilities, shareholders’ equity.
Cash‑flow statement – operating, investing, financing cash flows.

Ratio	Formula	Interpretation
Gross Profit %	GP ÷ Sales × 100	Efficiency of production & pricing.
Net Profit %	NP ÷ Sales × 100	Overall profitability.
Current Ratio	Current Assets ÷ Current Liabilities	Short‑term liquidity.
Quick Ratio	(Current Assets – Stock) ÷ Current Liabilities	Liquidity excluding inventory.
ROCE	Operating Profit ÷ Capital Employed × 100	Profit generated per £ of long‑term capital.
ROE	Net Profit ÷ Average Shareholders’ Equity × 100	Return to equity investors.
ROA	Net Profit ÷ Average Total Assets × 100	Efficiency of asset use.
Gearing	Debt ÷ (Debt + Equity) × 100	Financial risk level.
Dividend Yield	Dividend per Share ÷ Market Price per Share × 100	Cash return to shareholders.
Earnings per Share (EPS)	(Net Profit – Preferred Dividends) ÷ Weighted Avg. Ordinary Shares	Profit attributable to each ordinary share.
Price/Earnings (P/E) Ratio	Market Price per Share ÷ EPS	Market expectations of future growth.

5.4 Costing & Break‑Even Analysis

Variable cost (VC) – varies with output.
Fixed cost (FC) – unchanged in the short term.
Total cost (TC) = FC + VC.
Contribution margin per unit = Price – VC per unit.
Break‑Even (units) = FC ÷ Contribution margin.
Example: FC = £120 000, Price = £30, VC = £15 → BE = 8 000 units.

5.5 Budgeting & Variance Analysis

Types of budgets – sales, production, cash‑flow, master, flexible.
Variance = Actual – Budgeted.
- Favourable (F) – result better than expected.
- Unfavourable (U) – result worse than expected.
Common variances – sales volume, material price, labour efficiency.

5.6 Return to Investors – Meaning & Importance

Meaning: The financial benefit that owners or shareholders receive from holding an equity interest. It comprises three components:

Dividends – cash payments made out of profit.
Retained earnings – profit kept in the business, reflected in earnings per share (EPS) and ultimately in share‑price appreciation.
Capital gains – increase in market price of shares (or decrease for losses).

Why it matters:

Investment decision‑making – investors compare expected returns to allocate capital.
Performance benchmarking – shows how efficiently a company uses its capital relative to rivals.
Cost of capital assessment – if return < cost of capital, value is destroyed.
Shareholder confidence – consistent returns support share‑price stability or growth.
Strategic planning – management uses return figures to evaluate projects, set dividend policy, and justify growth strategies.

5.7 Using Investment Ratios Effectively

Extract figures from the income statement, balance sheet and market data (share price, dividend).
Calculate each ratio using the formulas above.
Compare:
- Against the firm’s own historical performance.
- With industry averages or key competitors.
- With the firm’s weighted average cost of capital (WACC).
Interpret in context – e.g., a high ROE may indicate good profit generation but could also signal high financial gearing.
Use findings to inform decisions on:
- Dividend policy (high dividend yield vs reinvestment).
- Capital‑raising (issue new shares vs retain earnings).
- Project appraisal (prefer projects that improve ROCE).

6. External Influences on Business (A‑Level)

Political‑Legal – regulations, taxes, trade agreements, stability, government policy.
Economic – inflation, interest rates, exchange rates, economic cycles, consumer confidence, unemployment.
Social‑Demographic – population age structure, lifestyle trends, cultural attitudes, education levels.
Technological – innovation, automation, R&D, diffusion of new technology, e‑commerce.
Competitive (Industry) Environment – market concentration, barriers to entry, rivalry intensity, threat of substitutes.
International – globalisation, outsourcing, foreign exchange risk, political risk abroad.
Environmental – sustainability, climate change, CSR, legislation on waste and emissions.

Example activity: Using a recent news article on post‑Brexit supply‑chain disruptions, identify at least three external factors and discuss likely impacts on a UK‑based retailer.

7. Business Strategy (A‑Level)

7.1 Strategic Analysis Tools

SWOT – internal Strengths & Weaknesses, external Opportunities & Threats.
PEST – Political, Economic, Social, Technological analysis.
Porter’s Five Forces – rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes.
Ansoff Matrix – market penetration, market development, product development, diversification.
BCG Growth‑Share Matrix – Stars, Cash Cows, Question Marks, Dogs.
Blue‑Ocean Strategy – creating uncontested market space.

7.2 Decision‑Making Techniques

Cost‑Benefit Analysis (CBA).
Net Present Value (NPV) and Internal Rate of Return (IRR) for investment appraisal.
Payback period and discounted payback.
Decision trees for risk‑adjusted choices.
Sensitivity analysis – testing impact of changes in key assumptions.

7.3 Strategic Choices

Growth – organic (new products, market penetration) or inorganic (mergers, acquisitions, strategic alliances).
Stability – maintaining current position.
Retrenchment – turnaround, divestiture, liquidation.
Competitive positioning – cost leadership, differentiation, focus (niche).

7.4 Implementation & Control

Set clear vision, mission and long‑term objectives.
Develop action plans, allocate resources, assign responsibility.
Use KPIs and balanced scorecard for monitoring.
Feedback loops – adjust strategy in response to performance data.

8. Organisational Structure & Leadership (A‑Level)

8.1 Organisational Structures

Structure	Key Features	Advantages	Disadvantages
Functional	Departments based on specialist activities	Clear career paths; expertise development	Potential silos; slow decision‑making
Divisional	Separate profit centres by product, geography or market	Responsiveness to market; accountability	Duplication of functions; higher costs
Matrix	Dual reporting – functional and project/ product lines	Flexibility; efficient resource use	Complex authority; potential conflict
Network/Flat	Few hierarchical layers; reliance on external partners	Speed; innovation	Control issues; dependence on partners

8.2 Delegation & Communication

Levels of delegation – full, partial, none.
Formal channels – reports, memos, meetings.
Informal channels – grapevine, social media.
Importance of feedback loops and two‑way communication.

8.3 Leadership Theories

Trait – focus on personal qualities.
Behavioural – consideration vs initiating structure.
Contingency – Fiedler’s LPC, Path‑Goal, Situational Leadership.
Transformational – vision, inspiration, intellectual stimulation.
Transactional – contingent reward, management by exception.

8.4 Motivation & Organisational Culture

Culture layers (Schein) – artefacts, espoused values, basic underlying assumptions.
Link between culture, employee motivation and performance (e.g., high‑trust cultures foster innovation).
Changing culture – role of leadership, communication, reward systems.

9. Marketing Strategy (A‑Level)

9.1 Advanced STP

Segmentation – deeper psychographic and behavioural analysis.
Targeting – evaluation of segment profitability, accessibility, compatibility with objectives.
Positioning – positioning map, unique selling proposition (USP), positioning statement.

9.2 Extended Marketing Mix (7 Ps for Services)

Product, Price, Place, Promotion, People, Process, Physical evidence.

9.3 Branding & Portfolio Management

Brand equity – awareness, perceived quality, loyalty.
Portfolio analysis – BCG matrix, GE/McKinsey matrix.
Brand extensions and line extensions.

9.4 Marketing Planning Process

Situation analysis (internal audit, external environment).
Set SMART marketing objectives.
Develop strategy (target market, positioning, marketing mix).
Implement tactics (campaigns, budgets, timelines).
Control – monitor KPIs, market share, sales, ROI; adjust as needed.

10. Operations & Change Management (A‑Level)

10.1 Operations Strategy

Aligning process choice, technology, capacity and quality with overall business strategy.
Lean production – waste reduction, pull systems.
Agile manufacturing – rapid response to demand changes.

10.2 Supply‑Chain Management

Key activities – sourcing, production, logistics, distribution.
Strategic relationships – vendor‑managed inventory, strategic alliances.
Risk management – diversification of suppliers, safety stock.

10.3 Change Management Models

Lewin’s 3‑Stage Model – Unfreeze, Change, Refreeze.
Kotter’s 8‑Step Model – create urgency, form coalition, develop vision, communicate, empower action, generate short‑term wins, consolidate gains, anchor changes.
Resistance to change – sources and mitigation strategies.

the meaning and importance of return to investors