OxfordAQA A-Level Business: What is Business? (9625/9725)

This guide covers Topic 1 What is Business?, the opening topic (3.1.1) of the subject content of OxfordAQA International AS & A-Level Business (9625), first teaching September 2018. (Topic numbers and the number of topics are those of 9625; 9725 revises the topic list, so they do not carry over to 9725.) Note that 9625 is being withdrawn and replaced by revised specification 9725 (first teaching September 2026 for AS, September 2027 for A2); students already partway through the course follow 9625 to completion, while new starts from September 2026 follow 9725.

A note on the two codes: this guide primarily follows 9625, which remains the code current students are examined against. Where 9725 changes something covered below, that is flagged inline rather than silently mixed in — the two codes genuinely disagree on several points (for example, the forms of ownership below, and the first-year/second-year placement of decision trees), so content correct for one code can be wrong for the other. Always confirm which code applies to your own cohort.

Where this fits in 9625

Topics 1-5 (What is business?, Marketing, Operational performance, Human resources, Finance) form the AS-level content. Topic 1 sets out the core concepts of business purpose and environment that later, more analytical A-level topics on strategy (topics 6-13) build directly on.

Syllabus coverage

OXFORDAQA INTERNATIONAL AS & A-LEVEL BUSINESS (9625) — TOPIC 1 WHAT IS BUSINESS?

Topic 1 covers the dynamic nature of business, business objectives and how they vary between organisations, and the stakeholders in a business, along with how the external environment (economic, legal and other factors) shapes business decision-making.

How to approach it

Because Topic 1 introduces the analytical concepts (stakeholders, objectives, the external environment) that the A-level’s later strategy topics depend on, treat it as more than an introductory topic – revisit it once you reach the strategic-decision-making content later in the course, since exam questions at A-level frequently expect candidates to apply these foundational ideas to complex strategic scenarios. Practise explaining how different stakeholder groups can have conflicting interests in a specific business scenario, since this is a recurring exam angle. Building a habit of linking business objectives to the external environment – for example, how an economic downturn might force a business to revise its objectives – pays off across the whole qualification, not just this topic.

Official syllabus

OxfordAQA International AS & A-Level Business (9625) qualification page — oxfordaqa.com.

The purpose of business

A business exists to satisfy customer needs profitably, transforming inputs into outputs and adding value along the way. Value is added by branding, quality, convenience, speed, design and service — not only by charging more.

Businesses are classified by sector (primary, secondary, tertiary), by ownership (private, public, not-for-profit), and by scale. Each classification changes the objectives that make sense: a charity measures success by impact, a start-up by survival, a mature plc by return to shareholders.

Ownership

Under 9625 (the current specification), types of business ownership are: sole traders; private limited companies and public limited companies; private sector and public sector organisations; non-profit organisations (social enterprises, charities); and co-operatives. The word “partnership” does not appear in the 9625 specification’s ownership content, and the private-sector/public-sector distinction is itself a separate examinable point, not just a label.

Structure	Liability	Note
Sole trader	Unlimited	Full control, keeps all profit, bears all risk
Private limited (Ltd)	Limited	Separate legal identity; shares not publicly traded
Public limited (plc)	Limited	Stock-market capital, but public accounts, takeover risk, and a divorce of ownership from control
Private sector vs public sector	Varies	Private-sector organisations are owned by individuals or shareholders and typically profit-driven; public-sector organisations are owned/run by government, typically for public benefit
Non-profit / social enterprise	Varies	Surplus reinvested rather than distributed to owners
Co-operative	Usually limited (member-owned)	Owned and run by, and for the benefit of, its members; profits are shared among members rather than external shareholders

Under 9725 (the successor specification, first teaching AS from September 2026), this list is reversed on two points: partnerships are added and co-operatives are dropped. A partnership is two or more people sharing ownership, capital, workload and expertise, with liability that is usually unlimited for each partner (limited partnerships exist but are the exception). Do not mix the two lists — under 9625, cite co-operatives, not partnerships; under 9725, cite partnerships, not co-operatives.

Unlimited liability means the owner’s personal assets can be seized to pay business debts — the phrase that earns the mark, not just naming the concept. The plc’s structural problem is the divorce of ownership from control: shareholders own the business but directors run it day to day, and their objectives can diverge, with directors sometimes pursuing growth or status while shareholders want returns. Share options and performance-linked pay exist specifically to realign the two.

Mission, objectives and strategy

Mission states why the business exists. Corporate objectives turn that into measurable targets — profit, growth, market share, diversification, survival. Strategy is the long-term plan for achieving them; tactics are the short-term actions within it.

Objectives conflict routinely. Rapid growth consumes cash and can damage quality; cost minimisation conflicts with differentiation; ethical sourcing raises input prices. Which objective dominates depends on the business’s stage, its market and the balance of stakeholder power.

Second-year note: the formal treatment of mission and objectives as part of strategy — including shareholder value versus shareholder returns as named objectives, and short-termism versus long-termism — sits in the 9625 specification’s second-year content (section 3.3.1 Mission, objectives and strategy), not in first-year Topic 1. The definitions above are a useful early foundation, but revisit this as A2/second-year strategy material once you reach that stage of the course, not as first-year exam scope.

Market analysis

market share  = firm sales / total market sales x 100
market growth = change in market size / original size x 100
market size   = measured by volume (units sold) or value (revenue)

Markets are mass or niche: a niche strategy means lower volume but often higher margins, greater customer loyalty and less direct competition, while carrying concentration risk if that one segment declines. Markets are divided into segments using demographic, geographic, psychographic and behavioural criteria, so that products and marketing can be targeted rather than generic.

Price is set where demand meets supply, and demand itself shifts with income, the price of substitutes and complements, tastes, and marketing activity. Price elasticity of demand then determines whether a price rise actually raises revenue: it does where demand is inelastic, and it does not where demand is elastic — a single calculation that drives most pricing recommendations in exam answers. (Price elasticity of demand is formally Topic 2 Marketing content under 9625, not Topic 1 — it is included here because market analysis and pricing are closely linked, but treat it as Topic 2 scope in exam terms.)

The market and external environment (first-year, 3.1.1.3)

The genuinely first-year “external environment” content under 9625 covers market conditions — the degree of competition (number of businesses) and the extent of barriers to entry into a market — plus the ability to calculate and interpret market size, market growth/decline, and the concentration ratio. It then covers how changes in the wider environment affect costs, demand, decisions and profits: the effect of changes in incomes, interest rates, exchange rates, costs of inputs, government policies, and competition (including from abroad).

Concentration ratio — worked example. The four-firm concentration ratio sums the market share of the four largest firms in a market:

Market shares: Firm A 28%, Firm B 22%, Firm C 15%, Firm D 10%,
               all other firms 25% combined

Four-firm concentration ratio = 28 + 22 + 15 + 10 = 75%

A ratio this high (75%) indicates a highly concentrated, oligopolistic market dominated by a few large firms — useful context for barriers to entry and the degree of competition a new entrant would face.

Decision-making

The specification’s actual requirement is decision making, including constructing and interpreting basic decision trees and expected value and net gain calculations — plus ethical influences on decisions. (The commonly-taught “scientific versus intuitive decision-making” framework does not appear in the 9625 or 9725 specification — it belongs to a different board’s specification, and should not be revised as OxfordAQA content, even though the two boards’ specifications genuinely overlap on several other named models.)

Under 9625, decision trees sit in first-year content (section 3.1.1.1), so they are correctly Topic 1 scope. Under 9725, this content moves to second-year/A2 content (section 3.4.3) — so check which code applies before treating decision trees as first-year material.

Stakeholders and the external environment

Basic stakeholder identification (who the stakeholders are, and that their interests can conflict) is genuine first-year content (3.1.1.1). However, stakeholder mapping by power and interest, and the fuller treatment of the shareholder-versus-stakeholder debate, are second-year (A2) content under 9625 section 3.3.1 Mission, objectives and strategy — not first-year Topic 1. Likewise, PESTLE as a named framework does not appear in 9625 at all (9725 adds a PESTLE reference, but only in its second-year section 3.3.4); the genuinely first-year “external environment” content is the narrower market-and-economic set covered in the section above, not a full PESTLE sweep. Revisit stakeholder mapping and the broader political/economic/social/ technological/legal/environmental analysis once you reach the second-year strategy content, not as first-year Topic 1 scope.

Worked example: expected value and net gain

On a decision tree, a square marks a decision the business makes and a circle marks a chance event whose outcomes are uncertain; the probabilities on the branches leaving each circle add up to 1. The expected value of an option is the sum of each outcome multiplied by its probability. The net gain of an option is its expected value minus the cost of choosing it, and is the figure used to compare options that cost different amounts.

A firm must choose between two projects. Project A costs $150,000 and has a 60% chance of returning $500,000 and a 40% chance of returning $100,000. Project B costs $50,000 and returns $220,000 with certainty.

Expected value of A = (0.6 x 500 000) + (0.4 x 100 000)
                    = 300 000 + 40 000
                    = $340 000
Net gain of A       = 340 000 - 150 000 = $190 000

Expected value of B = $220 000 (certain)
Net gain of B       = 220 000 - 50 000  = $170 000

A has the higher net gain, by $20,000, but the recommendation depends on risk appetite: if A’s low outcome happens, it returns $100,000 against its $150,000 cost, a loss of $50,000, whereas B’s $170,000 gain is certain. A business short of cash may prefer B, and the probabilities behind A’s figure are only estimates. Stating that trade-off is what earns the evaluation marks.

Common mistakes

Confusing mission with objectives, or strategy with tactics. Treating added value as profit. Comparing options by expected value without subtracting each option’s cost to find its net gain. Calculating a net gain and stopping there, without considering risk and context. Citing “partnership” as a 9625 form of ownership (it belongs to 9725) or “co-operatives” as a 9725 form (it belongs to 9625). Treating stakeholder mapping, PESTLE or the full shareholder/stakeholder debate as first-year Topic 1 scope when they are second-year content. Assuming every business maximises profit, which ignores not-for-profits and survival-stage firms.

Quick revision checklist

• Define added value and explain how a business increases it.
• Distinguish mission, corporate objectives, strategy and tactics.
• Explain why objectives conflict and what determines which dominates.
• List the 9625 forms of ownership (including co-operatives, not partnerships) and know that 9725 reverses this.
• Construct and interpret a basic decision tree, including expected value and net gain calculations.
• Calculate a four-firm concentration ratio and interpret market size/growth data.
• Explain the first-year external environment items: degree of competition, barriers to entry, costs of inputs, government policies, and changes in incomes/interest rates/exchange rates.
• Know that stakeholder mapping and PESTLE are second-year (A2) content, not first-year Topic 1.