A Level Business: Business structure and Size of business (Cambridge 9609) – Revision Notes

These notes condense sections 1.2 (Business structure) and 1.3 (Size of business) of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028. They belong to the AS Level topic Business and its environment. For full explanations and worked examples, read the study guide. Then test yourself with the practice questions.

Related pages: Enterprise (1.1), topic revision notes, the Cambridge A Level Business hub, the checklist and the free diagnostics.

1.2.1 Sectors

Sector	Activity	Quick test
Primary	Extracting or growing raw materials	Is it taken from the ground, sea or land?
Secondary	Making and building	Does it turn materials into products?
Tertiary	Services	Is the output a service?
Quaternary	Knowledge and information	Is the output research, data or software?

• Public sector: owned and controlled by the state, usually providing services.
• Private sector: owned by individuals or shareholders, mostly profit-seeking.

Changing importance

• Reasons: rising incomes, mechanisation, production moving abroad, new technology, government policy.
• Consequences: structural unemployment, retraining needs, regional decline, new industries.

Distinction: reasons explain why the shift happened; consequences describe what follows. Do not mix them.

1.2.2 Ownership

Form	Liability	One strength	One weakness
Sole trader	Unlimited	Total control	All risk on one person
Partnership	Unlimited	Shared skills and capital	Disputes, joint risk
Private limited company	Limited	Owners protected	Shares not freely sold
Public limited company	Limited	Large capital from share sales	Takeover risk, control separate from ownership
Franchise	Depends on the form the franchisee takes	Proven brand	Fees and rules
Co-operative	Depends on how it is set up	Shared benefit	Slow decisions
Joint venture	Depends on how it is set up	Shared cost and expertise	Disagreements
Social enterprise	Depends on how it is set up	Social aim attracts support	Profit limited by the aim

Liability

• Unlimited: personal assets can pay business debts.
• Limited: owners lose only what they invested.
• It matters because it affects how willing people are to take risks and invest.

Method: choosing a form

1. Note the risk the owner faces.
2. Note how much finance is needed.
3. Note how much control the owner wants.
4. Note the aims: profit, social benefit, rapid spread, or shared ownership.
5. Pick the form where the key factor is best met, and state the trade-off.

Changing form

Move	Gain	Loss
Sole trader to private limited company	Limited liability, easier finance	Simplicity, privacy, more duties
Private to public limited company	Large capital, tradable shares	Control, takeover risk, scrutiny
Public to private	Control, less short-term pressure	Access to share capital

1.3.1 Measuring size

Measure	Standard form	Weakness
Employees	Headcount	Misleading if machines do the work
Revenue	Price times quantity sold	Ignores profit and assets
Capital employed	Issued shares + reserves + non-current liabilities (syllabus finance section)	Depends on asset values
Market share	Firm sales ÷ market sales × 100	Depends on how the market is defined

The syllabus does not list the measures in 1.3.1. These are the standard ones. It asks how appropriate each is, so tie your choice to what the question wants to know.

1.3.2 Small businesses and family businesses

• Small, advantages: personal service, flexibility, quick decisions, low overheads.
• Small, disadvantages: limited finance, few economies of scale, vulnerable to large rivals, owner overload.
• Family, strengths: commitment, trust, long-term view.
• Family, weaknesses: limited management talent, disputes, succession.
• Economy: jobs, new ideas, suppliers to large firms, local service.
• Industrial structure: small firms are common where demand is local, personal or specialised, and large-scale production brings little advantage.

1.3.3 Growth

Organic: growth from the business’s own resources, such as new products, new markets and extra outlets. Slower, but keeps control. Reasons: economies of scale, market share, profit and security.

External:

Term	Meaning
Merger	Two firms agree to combine
Takeover	One firm buys control of another
Friendly merger	Both boards agree
Hostile takeover	Target’s board opposes; bidder appeals to shareholders
Horizontal	Same industry, same stage
Vertical backward	Towards a supplier
Vertical forward	Towards customers
Conglomerate diversification	Unrelated industry

• Stakeholder effects: employees (jobs, conditions), target shareholders (price), customers (choice), suppliers (new or lost buyer), managers (roles), community (local jobs).
• Success factors: cost savings, bigger market share, new skills, good fit.
• Failure factors: overpaying, culture clash, loss of key staff, diseconomies of scale.
• Joint venture: a shared project or business. Strategic alliance: cooperation while staying separate. Both are cheaper and less committing than merging, but risk disputes and sharing know-how.

Method: judging a deal

1. Identify the type of deal.
2. State the objective, such as growth, cost saving or entry to a new market.
3. Give one reason it could achieve the objective.
4. Give one reason it might not.
5. Judge, and state what the outcome depends on.

Must-know distinctions

• Merger and takeover: a merger is agreed by both sides; a takeover is one firm buying control, and may be friendly or hostile.
• Horizontal and vertical: horizontal joins firms at the same stage of production; vertical joins different stages of one chain.
• Joint venture and strategic alliance: a joint venture creates a shared project or business; an alliance is cooperation without a new shared entity.
• Organic and external growth: organic uses the firm’s own resources; external joins with, or buys, another firm.
• Private and public limited company: both give limited liability, but only a public limited company can sell shares to the general public on a stock exchange.
• Revenue and capital employed: revenue measures sales in a period; capital employed measures funds invested in the business.
• Franchise and co-operative: a franchise runs on a brand owner’s system and fees; a co-operative is run for its members.

Worked reminders

Sector shift. In an invented economy the tertiary share of employment rises from 38% to 58%. The change is 58 - 38 = 20 percentage points, not 20%. Say “percentage points” when comparing two shares.

Liability. A sole trader’s business owes £50,000 and its assets sell for £35,000. The shortfall is £15,000. Unlimited liability means that sum can be taken from personal assets. A limited company owner’s loss would stop at the money invested.

Choosing a size measure. A question about the number of jobs a firm provides points to employees. A question about financial strength points to revenue or capital employed. A question about competitive power points to market share. Always say why the chosen measure fits.

Spotting the growth type. Ask three questions. Is the target in the same industry? If yes, is it at the same stage of the chain (horizontal) or a different stage (vertical)? If it is in an unrelated industry, the move is conglomerate diversification. For vertical moves, ask whether the target supplies the buyer (backward) or is nearer the final customer (forward).

Quick self-test

1. Which sector does a company selling weather-data analysis belong to?
2. State the effect of limited liability on an owner’s personal assets.
3. A firm has revenue of £6m in a market worth £40m. What is its market share?
4. Revenue rises from £5.0m to £5.6m. What is the percentage growth?
5. A firm has issued shares of £4m, reserves of £2.5m and non-current liabilities of £3m. What is its capital employed, using the syllabus finance formula?
6. A baker buys a farm that grows its wheat. Name the type of growth.
7. Firm A has 15% of a market and merges with firm B with 9%. What is the combined share if sales hold?
8. A takeover costs £2.4m and saves £0.6m a year. How many years of savings cover the price?
9. Give one reason why a business might choose a strategic alliance rather than a merger.
10. State one weakness of using employee numbers to measure size.

Answers

1. Quaternary (knowledge and information).
2. They can lose only what they invested; personal assets are protected.
3. 6 ÷ 40 × 100 = 15%.
4. (5.6 - 5.0) ÷ 5.0 × 100 = 12%.
5. 4 + 2.5 + 3 = £9.5m.
6. Vertical backward (towards the supplier).
7. 15% + 9% = 24%.
8. 2.4 ÷ 0.6 = 4 years.
9. It gives access to skills or markets with less cost and commitment, and the firms stay separate.
10. It understates the size of capital-intensive firms that need few workers.

Where marks are usually lost

• Describing an ownership form instead of applying it to the business in the question.
• Confusing unlimited liability with the business being unable to fail.
• Mixing up backward and forward integration. Backward is towards the supplier.
• Giving reasons for a sector shift when consequences were asked for, or the reverse.
• Choosing one size measure without saying why it suits the question.
• Answering an evaluate question with one side only and no judgement.
• Listing stakeholders affected by a takeover without saying how each is affected.
• Saying a merger always saves money. It depends on fit, price and integration.

Frequently asked questions

What is the quaternary sector? The quaternary sector is knowledge and information activity, such as research, data analysis and software. Cambridge AS and A Level Business 9609 uses four sectors: primary, secondary, tertiary and quaternary.

What is the difference between a joint venture and a strategic alliance? In a joint venture, firms create a shared project or business, often sharing its ownership. A strategic alliance is cooperation between firms without forming a new shared business.

How can you measure the size of a business? Common measures are number of employees, revenue, capital employed and market share. Each has a weakness, so choose the measure that suits the question, for example employees for a question about jobs.

Why do some mergers and takeovers fail? Common reasons are overpaying for the target, culture clashes, loss of key staff and diseconomies of scale. Success depends on fit, price and how well the businesses are integrated.

Official syllabus

Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International Education).