AQA AS-Level Business: What Is Business? — Revision Notes

Condensed for the final weeks. For the full explanation, use the What Is Business? study guide. Covers 3.1.1 Business and objectives and 3.1.2 Forms of business and stakeholders only – 3.1.3 (Marketing management) and 3.1.4 (Financial management) are not covered by this set.

The two sub-topics (3.1.1-3.1.2)

• 3.1.1 — entrepreneurs, business planning and decisions, and business objectives.
• 3.1.2 — forms of business, comparing them, and stakeholders.

Remember: AS Business (7137) is a stand-alone qualification with its own full assessment — this content is not “worth less” than the identical A-level sub-topics.

Entrepreneurs (3.1.1)

• Reasons for setting up in business: financial (profit, income) and non-financial (independence, turning a passion into a career, filling a gap noticed in the market).
• Characteristics: risk taker, resilient, focused, passionate, innovative, adaptable.
• Challenges of setting up: funding, competition, uncertainty, limited track record.
• The entrepreneur’s role changes as the business grows — from doing everything personally to delegating and managing others.

Business planning and decisions (3.1.1)

• Business plan: its purpose and value (raising finance, setting direction, testing an idea before committing resources).
• Competitiveness: its meaning and importance to a new business.
• Influences on business decisions: objectives, risk, reward, resources, market conditions, ethics, opportunity costs.
• Risk and reward matter together — a decision is rarely judged on potential reward alone.
• Ethical dilemmas, including profit versus ethics, are examinable directly.

Business objectives and the SMART framework (3.1.1)

The specification requires the purpose and value of setting business objectives, and names SMART directly as the characteristics of an effective objective: Specific, Measurable, Accountable, Realistic, Time specific.

“We want to grow” states an objective in general terms; “increase market share by 5% within two years” states one that is SMART.

Business forms — compare, don’t just define (3.1.2)

	Liability	Access to finance	Control
Sole trader	Unlimited	Limited	Full
Private limited company (Ltd)	Limited	More	Reduced; must publish accounts
Public limited company (plc)	Limited	Most (shares on public markets)	Most diluted
Co-operative (worker/consumer/producer)	Usually limited	Limited, member-based	Shared among members
Social enterprise	Varies by legal form chosen	Often limited	Mission-led, not just profit-led

Always compare structures on liability, finance and control when recommending/evaluating a form for a scenario — that’s how exam questions are framed. Also revisable: distribution of profits, reasons to buy shares, and influences on share price and the significance of share price changes.

Stakeholders (3.1.2)

• Internal: employees, owners/shareholders.
• External: customers, suppliers, other creditors, community, government.
• Know the impact of business activity on stakeholders, and a business’s ethical responsibilities to stakeholders — both are examinable directly, not just background.

Worked example: dividend yield (3.1.2 formulae)

Market capitalisation = number of issued shares x current share price
Dividend per share     = total dividend paid / number of ordinary shares in issue
Dividend yield (%)     = (dividend per share / share price) x 100

A plc has 2,000,000 shares in issue at 150p, paying a total dividend of £160,000:

Dividend per share:  £160,000 / 2,000,000 = 8p
Dividend yield:       (8p / 150p) x 100 = 5.33%
Market capitalisation: 2,000,000 x 150p = £3,000,000

Worked example: recommending a business form

A sole trader running a successful bakery wants to expand to a second location, needing significant new investment in equipment and premises, but is reluctant to lose day-to-day control over decisions.

Current form:    sole trader -- unlimited liability, limited access
                 to finance, full control

Constraint:      needs significant new finance, but wants to retain
                 as much control as possible

Recommendation:  a private limited company allows outside investors
                 to buy shares (improving access to finance) while
                 remaining privately held (shares not offered to the
                 general public), which limits -- though does not
                 eliminate -- the loss of control compared with a
                 public limited company; the trade-off is limited
                 liability replacing unlimited liability (generally a
                 benefit) alongside the new requirement to publish
                 annual accounts and share profits more widely

Working through the specific constraint (needs finance, wants control) before recommending a form, rather than simply describing what a private limited company is, is what an evaluate/recommend-style question on this sub-topic actually rewards.

Why “business planning and decisions” resists a “list and define” approach

A common error is treating the influences on business decisions (objectives, risk, reward, resources, market conditions, ethics, opportunity costs) as a fixed list to memorise and recite. Exam questions almost always embed a named influence inside a specific scenario (for example, “explain how opportunity cost might affect an entrepreneur’s decision to expand”), so the useful revision unit is not the influence’s definition alone but a small bank of practised applications — at least one for each named influence, tied to a specific decision a business in a scenario is facing.

Exam traps

• Listing entrepreneurial characteristics or decision-making influences without applying them to the scenario in the question.
• Confusing dividend per share (an absolute amount, in pence) with dividend yield (a percentage relative to share price).
• Describing a business form’s features without comparing it against alternatives on liability, finance and control.
• Treating AS content as less rigorously examined than A-level — it is assessed as its own complete qualification.
• Stating an objective such as growth in general terms (“grow the business”) when a question asks how its achievement could be measured, instead of using SMART.
• Forgetting that stakeholder impact and ethical responsibility (3.1.2) are examinable in their own right, not just background to business forms.

Self-test

1. Name three characteristics of entrepreneurs named by the specification.
2. Name the seven influences on business decisions the specification lists.
3. What does SMART stand for, and which word does the specification use in place of “Achievable”?
4. Compare a sole trader and a private limited company on liability and access to finance.
5. Give the formula for dividend yield.
6. Name the two internal and five external stakeholder groups the specification lists.
7. Why should a business form recommendation start from the business’s specific constraint (e.g. needing finance while keeping control) rather than a general description of the form?

Answers: 1. Any three of: risk taker, resilient, focused, passionate, innovative, adaptable. 2. Objectives, risk, reward, resources, market conditions, ethics, opportunity costs. 3. Specific, Measurable, Accountable, Realistic, Time specific — the specification uses “Accountable”, not the more common “Achievable”. 4. A sole trader has unlimited liability and limited access to finance; a private limited company has limited liability and greater access to finance (at the cost of reduced control and a requirement to publish accounts). 5. Dividend yield (%) = (dividend per share / share price) x 100. 6. Internal: employees, owners/shareholders. External: customers, suppliers, other creditors, community, government. 7. Because exam questions ask candidates to recommend or evaluate a form for a specific scenario, and a recommendation grounded in the business’s actual constraint (its need for finance, its wish to retain control) demonstrates applied reasoning, whereas a general description of a form’s features alone does not show the same evaluative skill.