Skip to content
Marlbridge
Free trial

Revision Notes

A Level Business: External influences on business activity (Cambridge 9609) – Revision Notes

Condensed revision notes on 6.1 External influences on business activity for Cambridge A Level Business 9609, with a self-test and common slips.

Subject
Business
Level
A LEVEL
Topic
Business and its environment
Author
Marlbridge Academic Team
Updated
Reviewed by
Salman Ahmad (what this means)

Aligned to Cambridge A Level Business (9609), For examination in 2026, 2027 and 2028. Official specification .

Syllabus page (what it covers and how it is assessed): Cambridge A Level Business.

Syllabus points this page covers

9609 (A Level)

  • 6.1 External influences on business activity

Found an error? Report a correction.

Need help with this topic? Request a free trial class for A Level Business (9609).

These revision notes condense section 6.1 External influences on business activity (6.1.1 to 6.1.7) of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028. This is Topic 6 content, which is A Level. Read the study guide for full explanations, then test yourself with the practice questions. Course links: the Cambridge A Level Business hub, the checklist and the free diagnostics.

Core definitions

Term Meaning
Privatisation Transfer of a business or industry from government to private ownership
Nationalisation Transfer of a business or industry from private to government ownership
Market failure A free market gives a poor result, so government may step in
Macroeconomic objectives Low unemployment, low inflation, economic growth
Corporate social responsibility (CSR) Business duties to society beyond the minimum legal and profit duties
Social audit A review of the firm’s social impact and conduct
Demographic change Change in a population’s size, age structure and distribution
Multinational A business operating in more than one country
Tariff A tax on imports
Environmental audit A check of the firm’s environmental impact against targets
Sustainability Meeting present needs without harming future needs

Privatisation and nationalisation: always judge “in a given situation”.

Advantages Disadvantages
Privatisation Efficiency incentive; cash for government; investor capital Unprofitable services cut; private monopoly; job losses
Nationalisation Protects jobs and key services; rescue of strategic firms Taxpayer funds losses; weaker cost pressure; political aims

Law as control, seven areas to recall:

  1. Employment practices.
  2. Conditions of work, including health and safety.
  3. Wage levels.
  4. Marketing behaviour.
  5. Competition.
  6. Location decisions.
  7. Particular goods and services.

Method for any law question: name the area, say what the law requires, state the cost or change for this firm, then say whether the firm can adapt.

Seven rows, each pairing an area of law with its likely effect on a business: employment practices lead to more HR time and training; work conditions and health and safety to equipment and training costs; wage levels to higher labour costs; marketing behaviour to care over advertising claims; competition law to limits on growth by takeover; location decisions to higher site costs; and rules on particular goods and services to lost sales or a licence being needed.
Each of the seven areas where law controls business has a likely effect on the firm.

6.1.2 Economic

Government can help business and encourage enterprise (grants, subsidies, lower tax, training, advice), constrain it (taxes, regulation, licences) and deal with market failure (taxes, subsidies, regulation, direct provision, competition rules).

Effect of macroeconomic performance on a firm:

Condition Demand Costs Labour
Growth Rises, most for high income elasticity goods May rise Harder to hire
Recession Falls May ease Easier to hire
High inflation Uncertain Rise Pressure for pay rises
High unemployment Weak May ease Easier to hire, weaker pay claims

Policies:

Policy Tools Link to business
Monetary Interest rates, money supply Loan costs, consumer credit, investment
Fiscal Taxes, government spending Disposable income, profit tax, public contracts
Supply-side Training, deregulation, incentives Productivity, skills, costs
Exchange rate Actions affecting the currency’s value Export prices, import costs

Quick calculations (standard forms):

  • Change in demand ≈ income elasticity × percentage change in income.
  • Change in quantity ≈ price elasticity × percentage change in price.
  • Percentage change = change ÷ original × 100.
  • Foreign price in home currency = foreign price ÷ exchange rate (foreign units per £1).

Rule: a stronger home currency makes exports dearer abroad and imports cheaper. A weaker one does the reverse.

Method in steps for a policy question:

  1. State the policy change and the tool used.
  2. Say whether it changes the firm’s costs, the customers’ spending, or both.
  3. Put a figure on it if the data allows.
  4. Judge the size using the firm’s debt, exports, customers and product type.
Sales tax rises from 15 to 20 percent, so the shelf price goes from 57.50 to 60 pounds (+4.35 percent). With elasticity of -1.4, units sold fall 6.09 percent to about 9,391. Revenue before tax falls from 500,000 to 469,565 pounds.
Elastic demand means a tax rise hits the seller hard.
Monetary (interest rates, money supply), fiscal (tax and spending), supply-side (training, deregulation) and exchange rate policy, each with its typical business effect.
The four policy types and how each reaches businesses.
A price index rising from 106.0 to 110.24 is 4 percent inflation (divide by the earlier index). Quenby raising prices 3 percent against 4 percent generally is about 1 percent lower in real terms. 100.0 to 98.5 is 1.5 percent deflation.
Inflation is the change in the index divided by the earlier index.
Rates rise from 4% to 6%. Direct effect: interest on a 100,000 pound loan rises from 4,000 to 6,000 pounds a year. Indirect effect: customers' loans cost more, they have less to spend and demand may fall. Together this is double pressure on profit.
A rate rise hits a business directly through its loan and indirectly through its customers' spending.
The pound rises from 1.15 to 1.25 euro. Keeping the 12 pound price lifts the euro price from 13.80 to 15.00 (8.7 percent); holding the euro price cuts income to 11.04 pounds a jar (8 percent less).
A stronger pound makes exports dearer or less profitable.
The pound weakens from 1.50 to 1.25 dollars. A 100 pound export costs the US buyer 150 then 125 dollars (cheaper, helps the exporter). A 100 dollar import costs the UK buyer 66.67 then 80.00 pounds (dearer, hurts the importer). If the pound strengthens, the effects reverse.
A weaker home currency helps exporters and hurts importers; a stronger one reverses this.
The pound falls from 200 to 180 yen, so a 36,000 yen motor rises from 180 to 200 pounds (11.1 percent), and an order of 4,000 motors costs 80,000 pounds more.
A weaker pound makes imported inputs dearer.
Two cause-and-effect chains. A rise in interest rates leaves households with less to spend, so clothing demand falls, and raises the retailer’s interest costs, squeezing profit and delaying stores: two costs. A fall in the exchange rate makes imported stock dearer, a cost, but makes exports cheaper abroad, a benefit.
External factors usually bring a cost and often a partly offsetting benefit.

6.1.3 Social and demographic

  • CSR examples named in the syllabus: accounting practices, paying incentives for the award of contracts, social auditing.
  • Possible gains: reputation, loyalty, recruitment. Possible costs: money, higher prices, accusations of empty claims.
  • The community supplies labour and customers and grants goodwill. Pressure groups can use publicity and boycotts to change attitudes and influence law.
  • Demography at three levels: local, national, global. Think age structure, birth and death rates, migration.
  • Effects: demand for age-linked goods, labour supply, pension and training costs, choice of location.
A town grows from 50,000 to 54,000 people (+8 percent) while the over-65 share rises from 16 to 24 percent, so over-65s grow from 8,000 to 12,960 (+62 percent).
An ageing population grows some markets and shrinks others.
Three bands: ethics (a choice: charitable giving, fair prices to suppliers, religious observance) above a line marking the legal minimum; law (a requirement: safe workplace, national minimum wage, consumer protection); and breaking the law, which brings consequences of non-compliance.
Law is what a business must do; ethics is what it chooses to do beyond that.
The six PESTLE factors, then one social change (an ageing population) shown as an opportunity for Ivybrook Care and a threat for Rushbank Couriers.
One external change can be an opportunity for one firm and a threat for another.

6.1.4 Technological

Technology changes products, methods and sales channels. Gains: lower unit costs, new markets, better quality. Costs: investment, retraining, job losses, obsolete stock. Judgement: timing, cost, and what customers and rivals are doing.

6.1.5 Competitors and suppliers

Group Influences Possible response
Competitors Price, features, promotion, entry decisions Differentiate, match price, innovate
Suppliers Cost, quality, reliability, delivery Use several suppliers, longer contracts, backward integration
Three columns: no rivals (one shop, little pressure to improve), a few rivals (three shops, some pressure on price) and many rivals (six shops, strong pressure on price and quality), shown with one, two and three filled bars.
The more rivals a business has, the more pressure it faces to compete.

6.1.6 International

  • Trading links: bigger markets, cheaper inputs, economies of scale. Risks: exchange rate changes, foreign rivals, cultural and rule differences.
  • Trade agreements: can lower barriers and widen market access, but also bring stronger rivals and leave out non-members.
  • Technology in trade: online selling, digital payment, tracking, spread of design and production.
  • Multinational and host country: jobs, investment, skills, tax, exports against profit leaving, pressure on local firms, environmental harm, loss of control.
  • Multinational and government: incentives and bargaining on one side, regulation and tax on the other.

6.1.7 Environmental

  • Physical issues: pollution, climate change, resource scarcity, waste, habitat damage.
  • Influence on behaviour: law, customer opinion, input costs, risk of disruption.
  • Environmental audit: used by the business to find waste and support claims; used by stakeholders to check those claims.
  • Sustainability: affects product design, supply chains and reporting. Gains: lower long-term cost, brand strength. Costs: investment now.
Waste per unit falls from 0.60 kg (54,000 kg over 90,000 units) to 0.36 kg (39,600 kg over 110,000 units), a fall of 40 percent.
An environmental audit can show waste per unit falling even as output rises.
Environmental impacts shown as a car, recycling arrows, a bin and a smoking factory; sustainability shown as a thermometer and a tree stump. A banner says each is a trade-off with profit.
Environmental impacts and sustainability both involve weighing costs now against benefits later.

Worked reminders

Importer and exchange rate: a firm buys stock priced at €60,000. At €1.25 per £1 it costs £48,000. At €1.20 per £1 it costs £50,000. The pound has weakened, so the cost rises by £2,000, or 4.2%.

Subsidy: a grant covering 15% of a £200,000 project cost is worth £30,000, leaving the firm to find £170,000. A subsidy lowers cost, but it may end, so a firm should not build a plan that only works with it.

Demographic shift: if the share of a town aged over 65 rises while total population is flat, the number of older customers rises. Calculate the group’s size (share × population) before and after, then compare.

Evaluating an external influence

Ask these in order:

  1. How large is the change compared with the firm’s size, debt, exports or customers?
  2. Is the effect short-term or lasting?
  3. Does it hit all competitors equally, or this firm in particular?
  4. Can the firm respond, and at what cost?
  5. Which stakeholders gain and lose?

Then state a judgement and the condition that would change it.

Must-know distinctions

  • Privatisation versus nationalisation: the direction of ownership change.
  • Fiscal versus monetary: taxes and spending versus interest rates and money.
  • Supply-side versus demand-side: supply-side aims at productive capacity, not spending.
  • Social audit versus environmental audit: social conduct versus environmental impact.
  • Stronger currency versus weaker currency: effect on exporters and importers is opposite.

Quick self-test

  1. Define nationalisation.
  2. Name the three key macroeconomic objectives in the syllabus.
  3. A firm has a £150,000 variable loan. The rate rises from 4% to 6%. Find the extra annual interest and the percentage rise in interest.
  4. An exporter sells at €300. Find the sterling price at €1.25 per £1 and at €1.20 per £1. Which rate favours the exporter?
  5. Income elasticity of demand is +0.8 and incomes rise 2.5%. Estimate the change in demand.
  6. Find the landed cost of goods worth £200 with a 15% tariff.
  7. Wages rise 2% while prices rise 4%. Estimate the real change in wages.
  8. A product costs £40 before sales tax. Find the price with 20% tax.
  9. Name the four types of government policy used to achieve macroeconomic objectives.
  10. A multinational makes £8 million profit and pays 30% local tax. How much does the host government receive? Give one reason this may not make the host better off.

Answers

  1. Transfer of a business or industry from private to government ownership.
  2. Low unemployment, low inflation, economic growth.
  3. Interest £6,000 becomes £9,000, so the extra is £3,000, a rise of 50%.
  4. 300 ÷ 1.25 = £240 and 300 ÷ 1.20 = £250. The lower rate (€1.20) favours the exporter, because the pound is weaker.
  5. 0.8 × 2.5 = 2.0%, so demand rises by about 2%.
  6. 200 × 1.15 = £230.
  7. About −1.9% (exactly 1.02 ÷ 1.04 − 1).
  8. 40 × 1.20 = £48.
  9. Monetary, fiscal, supply-side, exchange rate policies.
  10. £2.4 million. Possible reasons: profit leaves the country, local firms lose out, jobs may be few.
A multinational makes 12 million pounds profit and pays 25 percent local tax: 3 million stays with the host country and 9 million may leave.
Whether a multinational is a good deal depends on the jobs created and the alternative.
Two bars to the same scale. At the supplier the goods cost 80 pounds. After crossing the border a 12 percent tariff, 12 percent of 80 which is 9.60, is added, so the landed cost is 89.60 pounds before any other import charges.
A 12% tariff on 80 pounds of goods raises the landed cost to 89.60 pounds.
Two bars of annual interest on a 240,000 pound variable-rate loan. At a rate of 5 percent the interest is 12,000 pounds. At 7 percent it is 16,800, a rise of 4,800 pounds, which is 40 percent more. The extra cost cuts profit unless prices rise.
A rise in the interest rate from 5% to 7% raises the annual interest on a 240,000 pound loan by 40%.
Two stacked bars of the sterling price of a bicycle priced at 540 euros with a cost of 360 pounds. At 1.20 euros per pound the price is 450 pounds and the margin 90, so 2,000 bikes give 180,000 pounds profit. After the pound strengthens to 1.35 the price is 400, the margin 40 and profit 80,000. Revenue per bike falls 11.1 percent and profit 55.6 percent.
A stronger pound cuts the sterling price and margin per bike, so profit falls much faster than price.
A 1,500,000 pound loan repaying 300,000 a year plus interest on the opening balance. At 5 percent the payment is 375,000; at 6.5 percent it is 397,500, an extra 22,500 or 6 percent.
A higher interest rate raises the cost of a variable-rate loan.

Where marks are usually lost

  • Describing the policy or factor without linking it to the business in the case.
  • Giving only advantages for privatisation or nationalisation when the question asks for both.
  • Getting the direction of an exchange rate effect wrong.
  • Using percentage points where a percentage change is needed.
  • Treating one change as certain to cut sales, ignoring elasticity and customer type.
  • Writing about CSR as always positive without cost or credibility issues.
  • Not separating the immediate effect from the longer-term one.
  • Ending an evaluation without a judgement.
Two switches of ownership. Privatisation moves a business from government to private owners: advantages are tighter cost control and cash for the government; disadvantages are that loss-making services may be cut and a private monopoly may lift prices. Nationalisation moves it from private owners to government: advantages are protecting jobs and key services and rescuing a failing key firm; disadvantages are that taxpayers meet losses and there is less pressure to cut costs. The case decides which points matter.
Privatisation and nationalisation each bring gains and risks that depend on the case.

Frequently asked questions

What are the key macroeconomic objectives in Cambridge 9609 Business? The syllabus names low unemployment, low inflation and economic growth. Answers should link each one to a specific firm’s demand, costs or labour.

What is the difference between fiscal and monetary policy? Fiscal policy uses taxation and government spending. Monetary policy uses interest rates and the money supply.

How does a stronger currency affect exporters and importers? A stronger home currency makes exports dearer abroad and imports cheaper. A weaker currency has the opposite effect, helping exporters and raising import costs.

What is the difference between a social audit and an environmental audit? A social audit reviews a firm’s social impact and conduct, such as working conditions. An environmental audit checks its environmental impact, such as waste and energy use, against targets.

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), section 6.1.

Get free revision emails (optional)

Occasional emails with practice questions, worked explanations and links to free resources for the qualification and subjects you choose. No spam, and you can unsubscribe from any email. The free tools on this site never need an email.

Subjects (optional, up to 6)

Choose a qualification to see its subjects.

Related resources

Related articles

Studying this with a teacher

Working through Business A LEVEL?

This page is free and stays free. If you would rather be taught it, Marlbridge runs Business classes one-to-one and in small groups of up to 15, online in your own time zone. The first trial class is free. WhatsApp replies within an hour (8am–11pm Pakistan time, every day); email the same day.

Cambridge Business teachers at Marlbridge

Request a free trial Meet the teachers