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AS Topic 1: Marketing and people

Mass market vs niche market: Mass market: a large number of customers, a standardised product and competitive pricing. Niche market: a small, specialised segment with lower volume and often a higher price.
Market size vs market share: Market size: total sales of all firms in the market, by value or volume. Market share: one firm's sales as a percentage of market size (firm's sales ÷ total market sales × 100).
Market growth formula, with an example: Market growth = change in market size ÷ original market size × 100. Example: a £4.0m market grows to £4.4m: 0.4 ÷ 4.0 × 100 = 10%.
How can a firm's sales rise while its market share falls?: If the market grows faster than the firm. Example: sales up 6% in a market growing 10%, so share falls even though sales rise.
Risk vs uncertainty: Risk: an outcome whose chance can be estimated from data (for example seasonal sales history). Uncertainty: an outcome whose chance cannot be reliably estimated. Research can reduce risk, not uncertainty.
What is a dynamic market?: One that keeps changing through new technology, shifting tastes, new entrants and online selling. Firms must watch the market and update products, channels and costs.
Three purposes of market research: Identify and anticipate customer needs and wants; quantify likely demand; gain insight into consumer behaviour.
Primary vs secondary research: one strength and one weakness of each: Primary (collected first-hand, e.g. surveys, focus groups, test marketing): specific and current, but costly and slow. Secondary (already exists, e.g. reports, websites, databases): cheap and fast, but possibly dated or off-target.
Quantitative vs qualitative research: Quantitative: numerical data (how many). Qualitative: opinions, attitudes and reasons (why).
Random, quota and stratified sampling: how each works: Random: everyone has an equal chance of selection (may miss small groups). Quota: fill set numbers from chosen groups (choice within the quota is not random). Stratified: groups in proportion to the population, chosen randomly within each.
Stratified sample: how many over-60s in a sample of 60 from 1,500 customers, 300 of them over 60?: Group size ÷ population × sample size = 300 ÷ 1,500 × 60 = 12.
Product orientation vs market orientation: Product orientation: make what the firm can make, then look for buyers. Market orientation: find out what customers want through research, then design the product to meet it.
Market map: what it shows and its limitation: A chart plotting competitors on two attributes (e.g. price and quality), showing crowded areas and gaps. Limitation: a gap shows no rival, not proof of demand; serving it may be unprofitable.
Competitive advantage, differentiation and adding value: Competitive advantage: something that lets a firm outperform rivals persistently (cost, brand, service, uniqueness). Differentiation: making a product distinct so buyers do not compare on price alone. Adding value: raising the gap between input cost and selling price.
Name four factors that shift the demand curve: Price of substitutes (rise → demand rises); price of complements (rise → demand falls); income (rise → demand for normal goods rises); fashion, tastes, advertising and branding; demographics; external shocks and seasonality.
Name four factors that shift the supply curve: Costs of production (lower → supply rises); new technology (supply rises); indirect taxes (raise → supply falls); subsidies (supply rises); external shocks such as a crop failure (supply falls).
Movement along vs shift of the demand curve: A change in the product's own price causes a movement along the curve. A change in any other factor (income, substitutes, tastes…) shifts the whole curve.
Equilibrium, and the effect of demand shifting right: Equilibrium is where quantity demanded = quantity supplied. If demand shifts right, equilibrium price and quantity both rise.
Effect on equilibrium of supply shifting left (e.g. costs rise): Price rises and quantity falls. (Supply shifting right does the reverse: price falls, quantity rises.)
Price elasticity of demand (PED): formula and interpretation: PED = % change in quantity demanded ÷ % change in price. Usually negative. Ignoring the sign: above 1 elastic, below 1 inelastic, equal to 1 unitary.
Price cut from £2.50 to £2.00; sales rise from 8,000 to 9,200. PED and revenue effect?: Price −20%, quantity +15%. PED = 15 ÷ −20 = −0.75 (inelastic). Revenue falls from £20,000 to £18,400.
PED and total revenue: the rule: Inelastic demand: a price rise raises revenue, a price cut lowers it. Elastic demand: a price rise lowers revenue, a price cut raises it (but profit still depends on costs).
Five factors that make demand less price elastic: Few close substitutes; the product is a necessity; it takes a small share of income; strong brand loyalty; a short time period.
Income elasticity of demand (YED): formula and classification: YED = % change in quantity demanded ÷ % change in income. Positive = normal good (above 1 income elastic, 0 to 1 income inelastic). Negative = inferior good. Keep the sign.
Income rises 5% and demand for premium bikes rises 10%. YED?: 10 ÷ 5 = +2.0: a normal good, income elastic. Sales will be hit hard in a downturn.
Why does elasticity matter to a business?: With inelastic demand, a firm can raise price to lift revenue, so firms brand and differentiate to reduce PED. High-YED products suffer most in a downturn; inferior goods may gain when incomes fall.
Exam trap: base for percentage change: Percentage change = (new − old) ÷ old × 100. Always use the original figure as the base.
Marketing mix: The combination of marketing decisions (product, price, promotion, place) a business uses to meet its marketing objectives. The mix must be consistent.
Three marketing objectives named in the specification: Increase market share; increase revenue; build a brand.
Product life cycle: the five stages: Development (no sales, costs only); introduction (low, slowly rising sales); growth (sales rising fast); maturity (sales flat); decline (sales falling).
Extension strategies: examples and how to judge them: New packaging, new market, new use, new promotion, price change, new variant. Judge by whether the strategy fixes the cause of the stalled sales.
Boston Matrix: the four categories: Star: high growth, relative share above 1. Question mark: high growth, relative share below 1. Cash cow: low growth, relative share above 1. Dog: low growth, relative share below 1.
Relative market share: formula and example: Product's share ÷ largest rival's share. Example: 18% ÷ 36% = 0.5. With market growth above the cut-off, that is a question mark.
Design mix: the three elements: Function (does the job reliably); aesthetics (appearance, feel, packaging); cost/economic manufacture (can be made at a cost that allows profit at an acceptable price).
Three benefits of strong branding (specification list): Added value; ability to charge premium prices; reduced price elasticity of demand.
Types of branding: Corporate (family): one name across all products. Individual: a separate name for each product. Own-label: a retailer's own brand.
Price skimming vs penetration pricing: Skimming: a high launch price, lowered later; suits strong USPs, inelastic demand, a strong brand. Penetration: a low launch price to gain share; suits elastic demand, many rivals, scale economies.
Cost-plus price: formula and example: Price = unit cost × (1 + mark-up %). Unit cost £30 with a 50% mark-up: 30 × 1.5 = £45.
Predatory vs competitive pricing: Predatory: price below cost to force a rival out; needs a firm that can afford losses. Competitive: price close to rivals' prices; common in mature markets with similar products.
Mark-up vs margin: Mark-up is profit as a percentage of cost. Margin is profit as a percentage of the selling price. Example: cost £42, price £63: mark-up = 21 ÷ 42 = 50%; margin = 21 ÷ 63 ≈ 33.3%.
Shorter vs longer distribution channel: Channels: four stage (producer → wholesaler → retailer → consumer), three stage, two stage (direct). Shorter: more income per unit and more control, but the producer takes on storage, delivery and service. Longer: wider reach, but each middleman takes a margin.
Staff as an asset vs staff as a cost: Asset: people are a source of advantage worth investing in (training, pay). Cost: people are an expense to minimise, which risks low morale and high turnover.
Ways to create a flexible workforce: Multi-skilling; part-time and temporary contracts; zero-hour contracts; flexible hours and home working; outsourcing.
Dismissal vs redundancy: Dismissal: the contract is ended for a reason about the employee (fault-based). Redundancy: the job itself no longer exists, so the worker leaves through no fault of their own.
Internal vs external recruitment: Internal: cheaper, faster, a known person, but a narrow choice and it leaves another vacancy. External: a wider pool and new ideas, but dearer and slower to settle in.
Induction, on-the-job and off-the-job training: Induction: introduction to the firm for new staff. On-the-job: learning at the workstation. Off-the-job: learning away from work, such as a course.
Span of control vs chain of command: Span of control: the number of people reporting directly to one manager. Chain of command: the route by which instructions pass down and reports pass up the hierarchy.
Tall vs flat structures: Tall: many levels, narrow spans; close control and clear promotion steps, but slow and costly. Flat: few levels, wide spans; quick and cheaper, more responsibility, but fewer promotion steps and risk of overload.
Centralised vs decentralised; matrix structure: Centralised: key decisions at the top. Decentralised: decisions pushed down. Matrix: project teams draw people from several departments; shares skills but staff may have two bosses.
Taylor and Mayo: key ideas: Taylor: break work into simple tasks, supervise closely and pay by output (piecework). Mayo: workers have social needs; attention and teamwork raise motivation.
Maslow's hierarchy of needs: the five levels: From the bottom: physiological, safety, social, esteem, self-actualisation. Managers should meet the lowest unmet need.
Herzberg: hygiene factors vs motivators: Hygiene factors (pay, conditions, supervision) prevent dissatisfaction but do not motivate by themselves. Motivators (achievement, recognition, responsibility) create satisfaction. So fix pay first, then enrich the job.
Financial methods of motivation: Piecework (paid per unit); commission (percentage of sales); bonus (for hitting a target); profit share; performance-related pay. Example: 3% commission on £80,000 sales = £2,400.
Job enrichment vs job enlargement vs job rotation: Enrichment: more responsibility and challenge (depth). Enlargement: more tasks at the same level (breadth). Rotation: switching between tasks.
Four leadership styles: Autocratic: leader decides alone. Paternalistic: leader decides but explains and cares for staff. Democratic: staff are involved in decisions. Laissez-faire: leader sets broad aims and staff decide how.
The roles of an entrepreneur: Creating and setting up a business (spot an opportunity, plan, raise finance); running it; expanding and developing it.
Intrapreneurship: Employees acting like entrepreneurs inside an existing business, developing new ideas or products.
Barriers to entrepreneurship: Lack of finance, lack of experience, red tape, competition, and fear of failure.
Characteristics and skills of an entrepreneur: Risk-taking, creativity, determination, self-confidence, organisation, communication and opportunity spotting.
Profit maximisation vs profit satisficing: Maximisation: aiming for the highest possible profit. Satisficing: aiming for a satisfactory profit that leaves the owner content, rather than the highest possible.
Non-financial motives of entrepreneurs: Ethical stance, social entrepreneurship, independence, and the chance of home working.
Survival as an objective: Common for new or struggling firms, where the priority is managing cash flow so the business keeps trading.
Sales maximisation vs profit maximisation: Sales maximisation aims for the highest sales revenue, which may mean lower prices and margins. Profit maximisation aims for the highest profit, which is hard to identify in practice.
Other business objectives besides profit and sales: Market share, cost efficiency (lower unit cost), employee welfare, customer satisfaction and social objectives.
Opportunity cost, with an example: The next best alternative given up. Two uses of £20,000 earn £3,000 and £2,600 a year; choosing the first has an opportunity cost of £2,600 (not the whole £20,000).
Trade-off: Having more of one aim means accepting less of another, for example growth against short-term profit.
Moving from entrepreneur to leader: As the business grows, the founder must delegate, trust managers and put systems in place. This is hard for someone used to controlling everything.
Management vs leadership: Management: planning, organising, coordinating and controlling. Leadership: setting direction and inspiring people.

AS Topic 2: Managing business activities

Business plan: definition and contents: A written document setting out the aims, market, operations and finances of a business and the finance it needs. Contents: idea and aims, market research, marketing plan, operations, owners and managers, financial forecasts.
Uses of a business plan: Inside: test the idea, set targets, compare actual results with the plan. Outside: persuade banks and investors to provide finance, by showing what is needed and how it will be repaid.
Three internal sources of finance: Owner's capital (personal savings), retained profit, and sale of assets.
Retained profit: advantages and drawback: No interest and no outside control. But a new or loss-making business has none, and it builds up slowly.
Source vs method of finance: A source is who provides the money (e.g. a bank, business angel, family). A method is the form it takes (e.g. a loan or an overdraft from a bank).
Business angel vs venture capital: Business angel: a wealthy individual who invests for a share and may advise. Venture capital: a specialist firm that buys shares in a risky, high-growth business.
Crowd funding and peer-to-peer funding: Crowd funding: many small contributions raised online, often for consumer products that attract public interest. Peer-to-peer: individuals lend to a business through an online platform, an alternative to a bank.
Loan vs overdraft: Loan: a fixed sum with interest and set repayments; suits long-term purchases. Overdraft: borrow up to a limit, flexible, interest only on what is used but costly; suits short-term cash gaps.
Share capital vs loan: Share capital gives investors ownership and needs no repayment or interest, but dilutes control. A loan gives no ownership but must be repaid with interest.
Dilution: an owner holds 70 of 100 shares and 30 new shares are sold. New stake?: 70 ÷ 130 = 53.8%. Ownership is diluted, but the company has gained funds.
Leasing, trade credit and grants: Leasing: use an asset without owning it, with regular payments. Trade credit: pay the supplier later; finances everyday inventory. Grants: often non-repayable, but conditions apply.
Unlimited vs limited liability: Unlimited: the owner is personally responsible for all business debts (sole traders, partners generally). Limited: a shareholder's loss is limited to the amount invested (Ltd and plc shareholders).
Private limited company (Ltd) vs public limited company (plc): A Ltd may not sell its shares to the public; shares go to chosen investors. A plc may sell shares to the public, raising large capital but with more cost, disclosure and takeover risk.
Franchise, social enterprise and lifestyle business: Franchise: pay a fee (often a share of revenue) to use a brand and system. Social enterprise: trades to meet social or environmental aims and reinvests most profit. Lifestyle business: run for a chosen way of life, with little wish to grow.
Sales revenue, total costs and average cost: Sales revenue = selling price × sales volume. Total costs = fixed costs + total variable costs. Average cost = total costs ÷ output.
Fixed vs variable costs: Fixed costs do not vary with output (e.g. rent). Variable costs vary with output (e.g. materials). Average cost falls as output rises because fixed costs are spread more widely.
Improving sales volume or revenue: Promotion, product improvement, wider distribution, or a price change. A price change moves volume and revenue per unit in opposite directions.
Sales forecasting: purpose and three factors that affect it: Purpose: a base for budgets and cash-flow forecasts, and for planning production, inventory and staffing. Factors: consumer trends, economic variables, actions of competitors.
Contribution per unit and break-even output: formulas: Contribution per unit = selling price − variable cost per unit. Break-even output = total fixed costs ÷ contribution per unit.
Price 24, variable cost 15, fixed costs 18,000. Break-even, and margin of safety at 2,600 units?: Contribution = 9. Break-even = 18,000 ÷ 9 = 2,000 units. Margin of safety = 2,600 − 2,000 = 600 units.
Margin of safety: Actual (or planned) output minus break-even output: how far sales can fall before a loss is made. Example: sales 4,000, break-even 3,000 → 1,000 units, or 25% of actual output.
Limitations of break-even analysis: Assumes all output is sold, constant price and variable cost per unit, and fixed costs that stay fixed; best for one product; relies on forecasts; ignores cash timing and competitor reactions.
Cash-flow forecast: layout: Each month: opening balance + inflows − outflows = closing balance (net cash flow = inflows − outflows). Next month's opening balance is this month's closing balance.
Uses of a cash-flow forecast: Spot shortages early, support borrowing requests, and time purchases.
Limitations of a cash-flow forecast: Forecast sales may be wrong; late payers and unplanned costs; it needs regular updates; it says nothing about profit.
Historical vs zero-based budgets: Historical: last period's figures adjusted; quick, but repeats old inefficiency. Zero-based: start from zero and justify every item; challenges waste, but slower.
Variance analysis: favourable vs adverse: Variance = actual − budget. Favourable raises profit; adverse lowers it. A cost above budget is adverse; revenue above budget is favourable. Example: cost budget 22,000, actual 24,200 → 2,200 adverse.
Gross profit, operating profit and profit for the year: Gross profit = revenue − cost of sales. Operating profit = gross profit − other operating expenses. Profit for the year (net profit) = operating profit − interest.
The three profit margins: Gross profit margin = gross profit ÷ revenue × 100. Operating profit margin = operating profit ÷ revenue × 100. Profit for the year margin = profit for the year ÷ revenue × 100.
Revenue 210,000; cost of sales 126,000; other operating expenses 52,500. Margins?: Gross profit 84,000 → gross margin 40%. Operating profit 84,000 − 52,500 = 31,500 → operating margin 15%.
Ways to improve profit margins: Raise prices; cut cost of sales (cheaper materials); cut other operating expenses; cut interest by repaying debt. Selling more raises profit but not always the margin.
Profit vs cash: Profit: revenue minus costs for a period, counted when earned or incurred. Cash: money actually received and paid, counted when it moves. Credit sales count as revenue at once but the cash arrives later.
How can a profitable business run out of cash?: By paying suppliers quickly, offering customers long credit and building up inventory, so cash leaves before it comes in. Wages and bills fall due on fixed dates whatever the profit.
Current ratio and acid test ratio: Current ratio = current assets ÷ current liabilities. Acid test ratio = (current assets − inventory) ÷ current liabilities.
Current assets 50,000 (inventory 32,000), current liabilities 40,000. Ratios?: Current ratio = 50,000 ÷ 40,000 = 1.25. Acid test = 18,000 ÷ 40,000 = 0.45: weak, because most current assets are inventory.
Working capital: Current assets − current liabilities: the funds for day-to-day running. Example: 55,000 − 38,000 = 17,000.
Four ways to improve liquidity, with a drawback each: Sell assets (lose their use); longer supplier credit (suppliers may refuse or raise prices); factoring (fee; customers deal with the factor); just in time inventory (depends on reliable suppliers).
Overtrading: Expanding output or sales faster than the business can fund the cash needed, so it runs short of cash even if profitable.
Internal causes of business failure: Poor management of cash flow, overestimation of sales, overtrading, poor inventory control, poor marketing, poor quality. These are within management's control.
External causes of business failure: Market conditions, competition, economic conditions, exchange rates, interest rates, government regulations, supplier problems, natural phenomena. Not controllable, but a firm can prepare for them.

A Level Topic 3: Business decisions and strategy

Ansoff's Matrix: the four strategies, by risk: Market penetration (existing products, existing markets) is lowest risk; market development (existing products, new markets); product development (new products, existing markets); diversification (new products, new markets) is highest risk.
Porter's Strategic Matrix (generic strategies): Cost leadership, differentiation, cost focus and differentiation focus. A firm competes either on cost or on difference, across a broad market or a narrow focus.
Porter's five forces: Rivalry among competitors, threat of new entrants, threat of substitutes, buyer power, supplier power. Example: few large buyers → high buyer power, prices squeezed.
Organic vs inorganic growth: Organic: new products, markets, outlets or capacity; slow but controlled and keeps the culture. Inorganic: merger (agreed combination) or takeover (buying control); fast but costly and risky.
Horizontal, vertical and conglomerate integration: Horizontal: same stage, same industry. Vertical: forward (towards customers) or backward (towards suppliers). Conglomerate: unrelated industries; spreads risk.
Payback: formula, with an example: Full years + (cost still to recover ÷ cash flow in the payback year). Cost 60,000; inflows 15,000, 25,000, 30,000: after 2 years 40,000 recovered; 20,000 ÷ 30,000 = 0.67 → 2.67 years.
Average rate of return (ARR): formula, with an example: (Total net return − cost) ÷ years ÷ cost × 100. Cost 60,000, total inflows 90,000 over 4 years: 30,000 ÷ 4 = 7,500; 7,500 ÷ 60,000 × 100 = 12.5%.
Net present value (NPV): Sum of (each cash flow × its discount factor) − initial cost. A positive NPV supports investing, but depends on the discount rate and forecasts. Trap: giving the PV total without subtracting the cost.
Decision tree: method and limitations: Work right to left: expected value (EV) = Σ(probability × outcome) at each chance node, subtract the option's cost, choose the highest net EV. Example: 0.7 × 80 + 0.3 × 20 = 62; minus cost 30 = 32. Limits: subjective probabilities, money only.
Critical path analysis: total float: Total float = LFT at end node − EST at start node − duration. Example: 12 − 4 − 5 = 3 days. Activities with zero float are on the critical path. Forward pass takes the larger EST where paths merge.
Gearing and ROCE: Capital employed = non-current liabilities + total equity. Gearing = non-current liabilities ÷ capital employed × 100. ROCE = operating profit ÷ capital employed × 100.
Stakeholder model vs shareholder model: Stakeholder model: decisions consider all stakeholders (staff, customers, community…). Shareholder model: decisions focus on share price and dividends for owners.
Four types of organisational culture: Power, role, task and person cultures. Culture is formed by founders, history, leadership and structure, and is hard to change because of habit and resistance.
Business continuity and succession planning: Ways to mitigate risks such as natural disasters, IT systems failure and loss of key staff. Continuity planning keeps the business running in a crisis; succession planning prepares people to replace key staff.

A Level Topic 4: Global business

Developed, developing and emerging economies: Developed: high income per head, services-led, strong infrastructure. Developing: low income per head, more agriculture, weaker infrastructure. Emerging: fast growth, industrialising, opening up to trade.
GDP, GDP per capita and HDI: GDP: value of output in a period. GDP per capita = GDP ÷ population (45bn dollars ÷ 9m people = 5,000 dollars). HDI combines income with health and education measures.
Causes of globalisation: Trade liberalisation and the WTO; political change; falling transport and communication costs; MNCs; investment flows (FDI); migration; growth of the labour force; structural change.
Tariff vs import quota: Tariff: a tax on imports; raises the import price and brings the government revenue. Quota: a limit on the quantity imported; restricts supply and raises price but gives no tax revenue.
Trading blocs: examples and impact: EU single market, ASEAN, NAFTA. Members gain easier access and scale; outsiders face barriers, so they may invest inside the bloc.
Push vs pull factors for going global: Push: a saturated home market; strong competition at home. Pull: increased sales and profitability; risk spreading; economies of scale.
Off-shoring vs outsourcing: Off-shoring: moving the firm's own production abroad. Outsourcing: handing the work to another firm.
Exchange rate appreciation vs depreciation: Appreciation (stronger currency) makes exports dearer abroad and imports cheaper. Depreciation does the reverse. Example: a 300-dollar bike costs 1,200 zelds at 4 per dollar and 1,500 at 5, up 25%.
Reasons for global mergers and joint ventures: Spread risk and gain scale; enter markets or trading blocs; acquire brands or patents; secure supplies; reduce competition; use local knowledge; meet legal requirements; share costs and risks.
Ethnocentric, polycentric and geocentric marketing: Ethnocentric: home-market methods applied abroad. Polycentric: a different approach tailored to each country. Geocentric: a blend of standard and local approaches.
Glocalisation: A global brand adapted to local tastes and cultures, for example changing product, packaging or promotion for each market.
Cultural and social factors in global marketing: Cultural differences, tastes, language and unintended meanings, and inappropriate branding or promotion.
Impact of MNCs on a host economy: Local: jobs, wages, conditions, local businesses, community and environment. National: growth, FDI, balance of payments, technology and skills transfer, consumers, business culture, tax revenues.
Ways of controlling MNCs: Political influence, legal control, consumer pressure, pressure groups, social media, and self-regulation.

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Written for Pearson Edexcel International Advanced Level Business (YBS11 / XBS11), syllabus YBS11 (Issue 1, September 2017).

Cards by Marlbridge Academic Team; 3 restate definitions from the YBS11 revision notes. This deck was reviewed by Salman Ahmad on 2026-11-05. Report an error.

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