Cambridge IGCSE/A‑Level Business (9609) – Complete Revision Notes

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AS‑Level Topic 1 – Business & Its Environment

1.1 Nature and Purpose of Business

• Enterprise – a venture that combines resources to produce goods or services for profit.
• Economic sectors:
  • Primary – extraction of raw materials (e.g., farming, mining).
  • Secondary – manufacturing and construction.
  • Tertiary – services such as retail, finance, education.
  • Quaternary – knowledge‑based services (IT, research, consultancy).
• Growth types: internal (organic) vs. external (mergers, acquisitions, joint ventures).

1.2 Types of Business Ownership

Form	Key Features	Advantages	Disadvantages
Sole trader	One owner, unlimited liability	Full control, simple to set up	Unlimited liability, limited finance
Partnership	Two or more owners, shared liability	More capital, shared skills	Potential conflict, unlimited liability (unless limited partnership)
Private limited company (Ltd)	Separate legal entity, limited liability	Limited liability, easier to raise finance	More regulation, profit sharing
Public limited company (PLC)	Shares traded on a stock exchange	Access to large capital, limited liability	Strict regulatory compliance, share dilution
Co‑operative	Member‑owned, democratic control	Member focus, profit sharing	Decision‑making can be slow
Franchise	License to use brand & operating system	Established brand, support from franchisor	Royalty payments, limited autonomy
Social enterprise	Combines profit motive with social mission	Enhanced reputation, access to CSR funding	Balancing profit & purpose can be challenging

1.3 Size of Business

• Measurement methods: turnover, number of employees, market share, asset base.
• Small‑business advantages: flexibility, close customer relationships.
• Growth strategies: organic growth, mergers & acquisitions, joint ventures, strategic alliances.

1.4 Business Objectives

• Common objectives: profit maximisation, growth, market share, survival, CSR, triple‑bottom‑line (people, planet, profit).
• SMART criteria – Specific, Measurable, Achievable, Relevant, Time‑bound.
• Link to mission and vision statements.

1.5 Stakeholders

• Internal – owners, managers, employees.
• External – customers, suppliers, lenders, government, community, NGOs, trade unions.
• Stakeholder analysis – identify interests, influence, potential impact; manage conflicts through communication and negotiation.

1.6 External Environment – PESTLE

Factor	Key Issues for Business
Political	Taxation, trade policies, regulation, stability, government subsidies.
Economic	Inflation, interest rates, exchange rates, consumer confidence, unemployment.
Social	Demographics, lifestyle trends, cultural attitudes, health consciousness.
Technological	Automation, R&D, ICT, e‑commerce, intellectual property.
Legal	Employment law, health & safety, consumer protection, data protection.
Environmental	Sustainability, carbon taxes, waste management, climate change legislation.

1.7 Market Structures

• Perfect competition – many sellers, identical products, price takers.
• Monopolistic competition – many sellers, differentiated products, some price‑setting power.
• Oligopoly – few dominant firms, inter‑dependence, possible collusion.
• Monopoly – single supplier, price maker, high barriers to entry.

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AS‑Level Topic 2 – Human Resource Management

2.1 Workforce Planning & Labour Turnover

• Analyse current labour force, forecast future needs, identify gaps.
• Turnover types: voluntary, involuntary, functional, dysfunctional; costs of turnover.

2.2 Recruitment & Selection

• Process: job analysis → person specification → advert → shortlisting → interview → offer → induction.
• Selection methods: CV screening, psychometric tests, assessment centres, structured interviews, work trials.

2.3 Training & Development

• Induction, on‑the‑job training, apprenticeships, e‑learning, mentoring, coaching.
• Development: career planning, leadership programmes, professional qualifications.

2.4 Motivation Theories

Theory	Key Drivers
Maslow’s Hierarchy of Needs	Physiological → Safety → Social → Esteem → Self‑actualisation
Herzberg’s Two‑Factor Theory	Hygiene factors (salary, conditions) & motivators (recognition, achievement)
McClelland’s Need Theory	Need for achievement, affiliation, power.
Vroom’s Expectancy Theory	Motivation = Expectancy × Instrumentality × Valence.
Taylor’s Scientific Management	Financial incentives linked to output.
Mayo’s Human Relations	Social needs, group dynamics, informal organisation.

2.5 Leadership & Management Styles

• Trait, behavioural, situational/contingency, transformational, transactional.
• Management styles: autocratic, democratic, laissez‑faire, paternalistic, bureaucratic.

2.6 Employee Relations

• Trade unions, collective bargaining, industrial action, grievance procedures.
• Workplace welfare – health & safety, work‑life balance, diversity & equality, employee assistance programmes.

2.7 Performance Management & Reward

• Appraisal methods: self‑assessment, 360° feedback, Management by Objectives (MBO), rating scales.
• Reward options: salary, bonuses, commission, profit‑sharing, non‑monetary (recognition, flexible working).

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AS‑Level Topic 3 – Marketing

3.1 Market Research

• Primary research – surveys, interviews, focus groups, observation.
• Secondary research – published statistics, industry reports, company records.
• Qualitative vs. quantitative data; sampling techniques; reliability & validity.

3.2 Segmentation, Targeting & Positioning (STP)

• Segmentation criteria: demographic, geographic, psychographic, behavioural.
• Targeting strategies: undifferentiated, differentiated, concentrated, micro‑marketing.
• Positioning tools: perceptual mapping, unique selling proposition (USP), positioning statement.

3.3 The Marketing Mix – 4 P’s (extended to 7 P’s for services)

Element	Key Considerations
Product	Features, quality, branding, packaging, warranty, life‑cycle stages.
Price	Cost‑plus, penetration, skimming, psychological pricing, price elasticity.
Place	Distribution channels, logistics, coverage, retail format, e‑commerce.
Promotion	Advertising, sales promotion, public relations, personal selling, direct marketing.
People	Customer‑facing staff, training, service culture.
Process	Service delivery procedures, customer flow, technology use.
Physical evidence	Facilities, branding, online presence, receipts.

3.4 Product Life‑Cycle (PLC)

• Stages: introduction, growth, maturity, decline.
• Marketing objectives & tactics differ at each stage (e.g., heavy promotion in introduction, price cuts in maturity).

3.5 Pricing Strategies & Ethics

• Cost‑based (cost‑plus, target return), competition‑based, value‑based, dynamic pricing.
• Ethical considerations: price fixing, predatory pricing, price discrimination.

3.6 Promotion Mix & Digital Marketing

• Traditional media vs. online channels (social media, SEO, email marketing).
• Legal & ethical issues – truth‑in‑advertising, data protection, spam.

3.7 Distribution Strategies

• Intensive, selective, exclusive distribution.
• Channel management – franchising, licensing, direct selling, third‑party logistics.

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AS‑Level Topic 4 – Operations Management

4.1 Production Methods

• Job (one‑off) – custom, high skill, low volume.
• Batch – moderate volume, set‑up time between batches.
• Mass (flow) – high volume, low unit cost.
• Continuous – 24/7 operation, highly automated (e.g., oil refineries).

4.2 Quality Management

• Quality control – inspection, statistical process control (SPC).
• Quality assurance – ISO 9001, Total Quality Management (TQM), Six Sigma.
• Cost of quality: prevention, appraisal, internal failure, external failure.

4.3 Location Decisions

• Factors: market access, transport costs, labour availability, utilities, government incentives, environmental impact.
• Methods: centre‑of‑gravity, factor‑rating, break‑even analysis, GIS mapping.

4.4 Capacity Planning

• Capacity utilisation = (Actual output ÷ Design capacity) × 100 %.
• Strategies: lead capacity, lag capacity, match capacity to demand fluctuations.

4.5 Inventory Management

• Just‑in‑Time (JIT) – minimise stock, rely on reliable suppliers.
• Economic Order Quantity (EOQ) – $$EOQ = \sqrt{\frac{2DS}{H}}$$ where D = annual demand, S = ordering cost, H = holding cost per unit.
• Safety stock, reorder point, ABC analysis.

4.6 Supply Chain & Lean Approaches

• Lean production – eliminate waste (Muda), use Kaizen, 5S, value‑stream mapping.
• Out‑sourcing vs. insourcing – cost, control, quality considerations.

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AS‑Level Topic 5 – Finance & Accounting

5.1 Sources of Finance

Source	Typical Cost	Advantages	Disadvantages
Bank loan	Interest 5‑10 %	Fixed repayments, retains control	Requires security, interest expense
Retained earnings	Opportunity cost of not paying dividends	No external control, no interest	Reduces dividend payouts, may limit growth
Equity (shares)	Dividends, share‑price expectations	No repayment obligation, spreads risk	Ownership dilution, higher cost of capital
Hire‑purchase	Interest + depreciation	Spreads cost, ownership at end	Higher total cost, asset not owned initially
Leasing	Rental payments	Preserves cash, flexible upgrades	No ownership, may be more expensive long‑term
Venture capital	High return expectations	Large funds, expertise	Loss of control, equity dilution

5.2 Basic Financial Statements

• Income Statement (Profit & Loss Account) – revenue, cost of sales, gross profit, operating expenses, profit before tax, profit after tax.
• Balance Sheet – assets (current & non‑current), liabilities (current & non‑current), shareholders’ equity.
• Cash Flow Statement – cash inflows/outflows from operating, investing, financing activities.

5.3 Simple Ratio Analysis

Ratio	Formula	Interpretation
Current Ratio	Current Assets ÷ Current Liabilities	Liquidity – >1 indicates ability to meet short‑term obligations.
Quick Ratio (Acid‑test)	(Current Assets – Inventory) ÷ Current Liabilities	Liquidity excluding stock.
Gross Profit Margin	Gross Profit ÷ Sales × 100 %	Efficiency of production & pricing.
Net Profit Margin	Net Profit ÷ Sales × 100 %	Overall profitability.
Return on Capital Employed (ROCE)	Operating Profit ÷ (Equity + Long‑term Debt) × 100 %	Profitability of capital used.
Debt‑to‑Equity Ratio	Total Debt ÷ Shareholders’ Equity	Financial risk – higher = more leverage.
Break‑Even Point (Units)	Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)	Sales level where profit = 0.

5.4 Budgeting & Cash Flow Forecasting

• Types of budgets – static, flexible, zero‑based.
• Cash flow forecast – projected cash inflows/outflows over a period; importance for liquidity management.

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A‑Level Topic 6 – External Influences & Strategic Management

6.1 Extended PESTLE Review

• Analyse each factor in depth and link to strategic options (e.g., new environmental legislation → opportunity for green products).
• Use PEST‑SWOT integration to match external trends with internal strengths/weaknesses.

6.2 Porter’s Five Forces

Force	Key Questions
Threat of new entrants	Barriers to entry, economies of scale, brand loyalty, capital requirements.
Bargaining power of suppliers	Number of suppliers, uniqueness of inputs, switching costs.
Bargaining power of buyers	Buyer concentration, price sensitivity, availability of alternatives.
Threat of substitutes	Availability, price‑performance trade‑off, switching costs.
Rivalry among existing competitors	Industry growth, product differentiation, fixed costs, exit barriers.

6.3 SWOT Analysis

• Internal: Strengths, Weaknesses.
  External: Opportunities, Threats.
• Develop strategic options (SO, ST, WO, WT) and evaluate using criteria such as feasibility, risk, impact.

6.4 Growth & Portfolio Strategies

• Ansoff Matrix – market penetration, market development, product development, diversification.
• BCG Growth‑Share Matrix – Stars, Cash Cows, Question Marks, Dogs; resource allocation decisions.
• Blue‑Ocean Strategy – create uncontested market space, value innovation.

6.5 Corporate Governance & Risk Management

• Board structure, stakeholder accountability, ethical codes.
• Risk identification, assessment, mitigation (e.g., financial, operational, reputational).

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A‑Level Topic 7 – Organisational Structure & Leadership

7.1 Organisational Designs

Structure	Features	Advantages	Disadvantages
Functional	Departments by expertise	Specialisation, clear career paths	Silos, slow decision‑making
Divisional	Product, geographic or customer divisions	Focus on market, flexibility	Duplication of functions
Matrix	Dual reporting – functional & project	Efficient resource use, dynamic	Complexity, potential conflict
Network/Virtual	Core firm plus outsourced partners	Low overhead, access to expertise	Control issues, dependence on partners

7.2 Leadership Theories

Theory	Core Idea
Trait Theory	Effective leaders possess innate characteristics (e.g., confidence, integrity).
Behavioural Theory	Leadership is observable behaviour – task‑oriented vs. people‑oriented.
Situational/Contingency	Leadership style must match follower maturity and task complexity.
Transformational	Leaders inspire, create vision, foster commitment.
Transactional	Focus on exchanges – rewards for performance, corrective action.

7.3 Motivation & Management of Change

• Apply motivation models to reward systems, job design, empowerment.
• Lewin’s Three‑Step Model – Unfreeze, Change, Refreeze.
• Kotter’s 8‑Step Process – sense of urgency, coalition, vision, communication, empowerment, short‑term wins, consolidation, anchoring.
• Resistance to change – sources (individual, group, organisational) and mitigation strategies.

7.4 Communication & Organisational Culture

• Channels – formal (reports, meetings) vs. informal (grapevine).
• Culture typologies – clan, adhocracy, market, hierarchy (Cameron & Quinn).
• Impact of culture on innovation, risk‑taking, employee engagement.

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A‑Level Topic 8 – Strategic Marketing

8.1 Marketing Planning Cycle

1. Situation analysis – PESTLE, SWOT, market research.
2. Set marketing objectives – SMART, market share, sales growth, brand awareness.
3. Develop strategic options – product, price, place, promotion (7 P’s for services).
4. Implementation – budgeting, timetabling, resource allocation, responsibility matrix.
5. Control – monitoring KPIs, sales data, market share, ROI; corrective action.

8.2 Advanced Segmentation & Positioning

• Behavioural segmentation – usage rate, loyalty, benefit sought.
• Positioning maps – compare perceived quality vs. price, or other relevant dimensions.
• Re‑positioning – product improvements, brand revitalisation, targeting new segments.

8.3 Extended Marketing Mix (7 P’s)

• Product – core, actual, augmented, potential.
• Price – price discrimination, dynamic pricing, bundle pricing.
• Place – omnichannel strategy, logistics optimisation.
• Promotion – integrated marketing communications, social media, influencer marketing.
• People – employee‑customer interaction, service culture.
• Process – service delivery standards, technology integration.
• Physical evidence – ambience, layout, online interface.

8.4 Branding & Digital Marketing

• Brand equity – awareness, loyalty, perceived quality, associations.
• Digital tools – SEO, PPC, email newsletters, analytics (Google Analytics, conversion rate).
• Ethical & legal issues – data protection (GDPR), copyright, online advertising standards.

8.5 International Marketing Strategies

• Standardisation vs. adaptation of the mix.
• Entry modes – exporting, licensing, franchising, joint venture, wholly‑owned subsidiary, strategic alliance.
• Barriers – tariffs, non‑tariff barriers, cultural differences, exchange‑rate risk.

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A‑Level Topic 9 – Operations Strategy

9.1 Process Choice & Technology

• Match process (job, batch, mass, continuous) to product volume & variety.
• Technology adoption – automation, robotics, AI‑driven predictive maintenance, Industry 4.0.
• Impact on labour skills, cost structure, flexibility.

9.2 Quality Management Systems

• Six Sigma – DMAIC (Define, Measure, Analyse, Improve, Control); target ≤ 3.4 defects per million opportunities.
• Total Quality Management (TQM) – continuous improvement, customer focus, employee involvement.
• Cost of quality – prevention, appraisal, internal failure, external failure.

9.3 Lean Production & Waste Elimination

• Seven wastes (Muda): over‑production, waiting, transport, over‑processing, inventory, motion, defects.
• Tools – Kaizen (continuous improvement), 5S (Sort, Set in order, Shine, Standardise, Sustain), Value‑stream mapping.

9.4 Capacity Planning & Location Strategy

• Capacity utilisation, economies of scale, diseconomies of scale.
• Location tools – factor‑rating, break‑even analysis, centre‑of‑gravity, GIS mapping.
• Strategic considerations – proximity to market vs. proximity to suppliers, agglomeration economies.

9.5 Supply Chain Management

• Vertical integration vs. outsourcing.
• Just‑in‑Time (JIT) and Vendor‑Managed Inventory (VMI).
• Risk mitigation – multiple sourcing, safety stock, supply‑chain mapping.

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A‑Level Topic 10 – Advanced Finance – Investment Appraisal

10.1 Why Investment Appraisal is Needed

• Ensures scarce resources are allocated to projects that add maximum value.
• Provides a systematic basis for comparing alternative projects.
• Helps assess risk, cash‑flow timing, and alignment with strategic objectives.
• Facilitates communication with stakeholders (shareholders, lenders, board).

10.2 Types of Investment Appraisal Techniques

Technique	Key Features	Advantages	Limitations
Payback Period	Time taken for cumulative cash inflows to equal the initial outlay.	Simple, highlights liquidity risk.	Ignores cash flows after payback, ignores time value of money.
Accounting Rate of Return (ARR)	Average accounting profit ÷ Initial investment × 100 %.	Uses readily available accounting data.	Ignores cash flows, time value, and risk.
Net Present Value (NPV)	Σ (Cash flowt ÷ (1+r)t) – Initial investment.	Considers time value, cash‑flow magnitude, and risk via discount rate.	Requires accurate cash‑flow forecasts and appropriate discount rate.
Internal Rate of Return (IRR)	Discount rate that makes NPV = 0.	Provides a single “rate of return” for easy comparison.	Multiple IRRs possible with irregular cash flows; cannot be used if NPV is negative.
Discounted Payback Period	Payback period calculated using discounted cash flows.	Improves on simple payback by incorporating time value.	Still ignores cash flows after the discounted payback point.

10.3 Estimating Cash Flows

• Initial outlay – purchase price, installation, training, working‑capital changes.
• Operating cash inflows – incremental revenue, cost savings, tax shield on depreciation.
• Operating cash outflows – variable & fixed operating costs, tax payments.
• Terminal cash flow – salvage value, net working‑capital recovery, de‑commissioning costs.

10.4 Discount Rate & Risk Adjustment

• Weighted Average Cost of Capital (WACC) – proportionate cost of debt and equity.
• Risk‑adjusted discount rate – higher for riskier projects (e.g., new product launch) and lower for low‑risk projects (e.g., replacement of existing equipment).
• Use of scenario analysis, sensitivity analysis, and Monte‑Carlo simulation to test robustness.

10.5 Decision Rules

• Payback – accept if period ≤ firm’s maximum acceptable payback.
• ARR – accept if ARR ≥ required rate of return.
• NPV – accept if NPV > 0; choose project with highest positive NPV when capital is limited.
• IRR – accept if IRR ≥ required rate of return (or WACC); choose highest IRR when projects are mutually exclusive and cash‑flow patterns are similar.

10.6 Post‑Implementation Review

• Compare actual cash flows and NPV with forecasts.
• Identify reasons for variances – market changes, cost overruns, operational issues.
• Learnings feed into future appraisal accuracy and strategic planning.

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Cross‑Topic Skills – ICT, Sustainability & CSR

ICT for Business

• Use of spreadsheets for financial modelling, databases for customer relationship management (CRM), and cloud‑based collaboration tools.
• Data analytics – interpreting sales trends, forecasting demand.

Sustainability & Corporate Social Responsibility

• Triple‑bottom‑line reporting – economic, environmental, social performance.
• Stakeholder expectations – ethical sourcing, carbon reduction, community investment.
• Strategic advantage – brand differentiation, risk reduction, compliance with regulations.

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How to Use These Notes

• Read each sub‑section, then test yourself with past‑paper style questions.
• Create mind‑maps linking concepts across topics (e.g., how PESTLE influences investment appraisal).
• Practice calculations (break‑even, ratios, NPV, IRR) until you can do them without a calculator.
• Use the tables as quick revision sheets before exams.