Study Guides

OxfordAQA A-Level Business: The nature and purpose of business and Types of business ownership (9625/9725)

Study guide to OxfordAQA International AS Business 3.1.1.1 and 3.1.1.2: entrepreneurs, objectives, plans, ownership, shareholders and stakeholders.

Subject: Business
Level: AS LEVEL
Topic: What is business?
Author: Marlbridge Academic Team
Updated: 25 October 2026
Reviewed by: Salman Ahmad (what this means)

Aligned to OxfordAQA A Level Business (9625, 9725), 9625: first teaching September 2018 (current cohorts). 9725: first teaching September 2026 (AS) / September 2027 (A2), the successor specification.. Official specification .

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

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This guide covers sections 3.1.1.1 The nature and purpose of business and 3.1.1.2 Types of business ownership of the OxfordAQA International AS and A-level Business specifications: 9625 (AS exams May/June 2019 onwards) and the successor 9725 (AS exams May/June 2027 onwards). Both are International AS content, assessed in Unit 1 (any content from section 3.1 Business and markets). The two specifications word these sections differently, so each point is tagged both, 9625 or 9725. Examples of motivations, challenges, why start-ups fail, and advantages and disadvantages are Marlbridge’s own wording, not lists from either specification.

Links: course hub · printable checklist · revision notes · practice questions · free 10-minute diagnostics. Earlier overview pages on the topic: What is business? study guide, revision notes and practice paper. All businesses here are invented.

What the sections list

Section	Content points	Spec
3.1.1.1	Key business terms, from inputs to customers and consumers	9625
3.1.1.1	Decision making: basic decision trees, expected value, net gain	9625
3.1.1.1	Entrepreneurs, objectives, business plans (SMART and plan elements 9725)	both
3.1.1.1	Start-ups, government support, why they fail, impact on society	9625
3.1.1.2	Types of business, choosing and changing form	both (partnerships 9725; co-operatives 9625)
3.1.1.2	Sectors, family businesses, business population	both
3.1.1.2	Small business (9725); SMEs against large businesses (9625)	each as tagged
3.1.1.2	Shareholders: equity, share price, dividends, yield, market capitalisation	both
3.1.1.2	Stakeholders and the impact of business activity	both (listed in detail in 9725)

Key business terms (9625)

Businesses turn inputs into outputs. The inputs are land, labour, capital and enterprise. The transformation process is whatever the business does to them. Outputs are goods (physical) and services (not physical). Adding value means the output is worth more to customers than the cost of the inputs used.

Strategy is the long-term plan to reach objectives. Tactics are the short-term actions that carry it out. Profit is revenue minus costs. Opportunity cost is the value of the best alternative forgone when you choose. Efficiency means producing more from unchanged inputs, or the same from less. Competitiveness is how well a business does against rivals, for example on price, quality or service. Risk is the chance that an outcome is worse than planned.

Owners put in capital and take the risk. Managers run the business day to day, so in a large firm the two groups are different people. Managers organise the business functions (for example marketing, operations, human resources and finance), set targets and monitor results using key performance indicators (KPIs), which are measures such as sales growth or customer complaints. Customers buy from the business. Consumers use the product and may be someone else, such as a child. Ethical influences are beliefs about right and wrong that shape a decision even when a cheaper option exists.

Selling price 50 splits into materials 20 and added value 30; the 30 then pays wages 12, rent 6, other costs 4 and leaves profit 8. Added value can rise by raising price or cutting material cost. — Added value is selling price minus bought-in materials, and profit is only what remains after other costs.

A budget of 60 buys only one of three items costing 60. The trainers are chosen, so the concert (second choice) is the opportunity cost. — Opportunity cost is the next best alternative given up, not everything given up.

Four narrowing cards from mission to objective to strategy to tactic with a fresh-food shop example: affordable fresh food; 10 percent more sales in 2 years; open shops in a new region; launch week two-for-one offer. — Mission states purpose, objectives set targets, strategy is the long-term plan and tactics are short-term actions.

Entrepreneurs (both)

An entrepreneur sets up and takes the risk of a new business.

Motivation (both). 9725 names financial and non-financial motivations; 9625 says only motivation to set up in business. Our examples: higher income or wealth; independence, using a talent, flexible hours, a passion, helping others.

Characteristics (both; 9725 names them). Risk taker, resilient, hard working, creative, passionate, innovative, adaptable.

Identifying an opportunity (9625). Look for an unmet need, a gap in the market, a problem that annoys customers, or a new way to do something.

Challenges (both). Raising capital, uncertain demand, cash-flow shortages, long hours, thin experience of every function, established rivals and personal financial risk. Why many start-ups fail (9625, our wording): poor cash-flow control, too little market research, too little capital, weak management skills, and underestimating costs.

Role changes as the business grows (9725). At first the entrepreneur does everything: selling, buying, banking. As the firm grows, the role moves toward leadership and delegation. Managers are hired for functions, and the entrepreneur spends more time on strategy.

Environment and government (9625). The business environment of a country influences how many entrepreneurs succeed: access to finance, taxes, regulation, infrastructure, skills, stability and demand. Governments may support start-ups because new firms create jobs, competition and tax revenue. Support includes grants, cheap loans, tax breaks, advice and training. Factors influencing the number and type of start-ups include the state of the economy, how easy it is to borrow, attitudes to risk, and the skills available.

At the start the entrepreneur does selling, buying and banking. As the firm grows managers run marketing, operations, HR and finance while the entrepreneur leads on strategy. — The entrepreneur moves from doing to leading.

Land, labour and capital feed into the entrepreneur, who organises them into business activity. Below, risks (failure, lost capital, long hours) are set against rewards (profit, control). — The entrepreneur organises the factors of production and bears risk in return for reward.

Example with invented numbers. A new business with $20m capital and an established one with $100m both lose $30m early. The new firm is $10m short and fails; the established one keeps $70m. New firms have less capital, market knowledge, customers and experience. — The same early loss can finish a new business but not an established one.

Business objectives and SMART (both)

Typical objectives are survival, profit, growth and cash flow (both specifications), social objectives (both), and personal and ethical objectives (9625).

Effective objectives are SMART. The 9725 text spells this out as Specific, Measurable, Accountable, Realistic, Time specific. “Raise sales by 8% by 31 December, owned by the sales manager” can be checked; “do better this year” cannot.

The value of setting objectives: direction, measurable success, motivation and a basis for choosing. Objectives can conflict: growth can drain cash.

Five tiles S, M, A, R, T matched to parts of the example objective, with a vague objective crossed out and the SMART one ticked. — An objective is SMART if it can be checked.

Mission informs corporate objectives (profit, growth, market share, survival, cash flow, social and ethical), which inform functional objectives in marketing, operations, finance and HR. Objectives can conflict, such as growth against cash flow. — Objectives flow from mission to corporate to functional level, and can conflict.

Business plans (both)

A business plan sets out what a business intends to do and how. The 9725 key elements are ownership, objectives, target market and market analysis, competitor analysis, unique selling point (USP) and financial analysis.

Benefits: it forces careful thinking, shows weaknesses early, helps win loans or investment. Limitations: it takes time, rests on forecasts that can be wrong, can become out of date, and a good plan does not guarantee success.

Competitiveness (both; 9725 adds meaning and significance) is how well a firm can win customers against rivals. A USP, lower costs or better service improve it.

An entrepreneur takes the financial risk of starting a business and writes a business plan. The plan sets out the idea and objectives, target market, financing and forecast costs, revenue and profit. It tests the idea, persuades lenders and gives a benchmark. Governments support start-ups with grants, training schemes, low-interest loans and advice. — An entrepreneur writes a business plan, and governments often support start-ups.

A business plan with five parts: the idea, target market, marketing, objectives and financial forecasts covering start-up costs, sales and cash flow. Arrows lead to its two readers. Lenders and investors judge viability and risk; the entrepreneur spots costly mistakes before spending money. — A plan helps secure finance and reduces the entrepreneur’s own risk of costly mistakes.

Why business matters (9625)

Business, including start-ups, creates jobs and incomes, produces goods and services people want, pays taxes, and can raise economic growth. It can also cause pollution, congestion or the closure of local shops. Effects on stakeholders are covered below.

Decision trees, expected value and net gain (9625)

A decision tree maps choices (a square) and uncertain outcomes (a circle, with probabilities adding to 1). Expected value = the sum of probability x outcome. Net gain = expected value minus the cost of that option. These are the standard forms.

Worked example. Hazelquay Boatyard can build a new workshop for £120,000 or refit the old one for £40,000. Demand is high with probability 0.7 and low with probability 0.3.

New workshop: high £260,000, low £90,000
  EV = 0.7 x 260,000 + 0.3 x 90,000 = 182,000 + 27,000 = £209,000
  Net gain = 209,000 - 120,000 = £89,000
Refit: high £110,000, low £60,000
  EV = 0.7 x 110,000 + 0.3 x 60,000 = 77,000 + 18,000 = £95,000
  Net gain = 95,000 - 40,000 = £55,000

The new workshop has the higher net gain. But in the low-demand case it returns £90,000 on £120,000, a loss of £30,000, while the refit still gains £20,000. If the yard cannot survive a loss, the refit is safer. Limitations of trees: guessed probabilities, no non-financial factors or ethics, and an average that may never happen.

A decision tree with new workshop (cost 120,000; EV 209,000; net gain 89,000) and refit (cost 40,000; EV 95,000; net gain 55,000). In low demand new makes -30,000 and refit +20,000. — Net gain is expected value minus cost, but the best average is not always the safest.

Decision tree with a decision square and two chance circles: A costs 45,000 (EV 91,500, net gain 46,500), B costs 70,000 (EV 121,500, net gain 51,500) and doing nothing is 0. B has the highest net gain. — Expected value is worked from right to left, then cost is subtracted to give net gain.

Types of business (3.1.1.2)

Type	Owner(s) and liability	Finance and profit	Spec
Sole trader	One owner, unlimited liability	Own savings, loans, retained profit; owner keeps all profit	both
Partnership	Two or more owners, usually unlimited liability	Partners’ capital; profit shared	9725
Private limited company (Ltd)	Shareholders with limited liability; shares not sold to the public	Can sell shares privately; dividends	both
Public limited company (plc)	Limited liability; shares can be bought by the public	Large sums from share issues; dividends	both
Social enterprise, charity or other non-profit	Social aim first; surplus reinvested	Grants, donations, trading income	both
Co-operative	Owned by members	Members’ capital; profit shared among members	9625

Unlimited liability means the owner’s own assets can be called on to settle business debts. Limited liability means shareholders risk no more than the money they put in.

Compare forms using: objectives, finance, distribution of profits and liability (both), and control (9725).

Reasons for choosing or changing form: wanting full control, protecting personal assets, needing more capital, planning growth, or seeking social impact. A fast-growing sole trader may become a Ltd to limit liability and attract investors. A Ltd may become a plc to raise large sums, but accepts more regulation, public accounts and takeover risk.

Advantages and disadvantages. Sole trader: easy to start, full control and profit, but unlimited liability and limited funds. Partnership: more capital and skills, but disagreements and unlimited liability. Ltd: limited liability, but less control and shared profit. plc: large funds, but loss of control, scrutiny and short-term pressure. Social enterprise: purpose and goodwill, but lower profit and harder fund-raising.

Private sector organisations belong to individuals or shareholders. Public sector organisations are government-owned and government-run. Objectives differ: profit versus public service. A public limited company is private sector.

Sectors. Primary extracts natural resources (farming, mining). Secondary makes or builds (manufacturing, construction). Tertiary provides services (retail, banking, teaching).

Influences on the business population (9625, our wording): the economy, ease of raising finance, regulation, attitudes to risk and skills.

Family business (both): advantages are loyalty, shared values, long-term thinking and quick decisions. Disadvantages are conflict, limited finance and skills, and difficult succession. Small business: flexible, personal service and close customer contact, but limited finance, little buying power and weaker brand. In 9625 you also compare small and medium-sized enterprises (SMEs) with large businesses, which gain economies of scale, finance and market power but can be slower and less personal.

A sole trader keeps all profit; a 12-member co-operative shares it among members (illustrative £5,000 each). — In a co-operative the members share the profit.

Four columns compare sole trader, partnership, private Ltd and public plc: number of owners, liability (unlimited for the first two, limited for the last two) and a rising staircase of reporting duties. Reporting grows from minimal to the most extensive disclosure and audit for a plc. — As a business becomes more formal, liability becomes limited and reporting duties grow.

Six forms of ownership with liability: sole trader unlimited, partnership usually unlimited, Ltd and plc limited, non-profit and social enterprise varies. Limited liability caps the loss at the amount invested. — Liability is the key difference between forms of ownership.

Business debts of 50 with 10 invested. A sole trader can lose 50 including their house; a limited company owner loses only the 10 invested and the house is protected. — Unlimited liability puts personal assets at risk; limited liability caps the loss at the amount invested.

A loaf of bread followed through primary (farm grows wheat), secondary (mill and bakery) and tertiary (shop) sectors with the lesson examples. — Primary extracts, secondary makes, tertiary provides services.

A grid shows which of seven named sources each ownership type can use: owner's capital for sole traders, partners' capital for partnerships, shares and debentures for limited companies (mainly large-scale for plcs), and overdraft, loan and mortgage for all. A Cambridge-only box names instalments, leasing, trade credit and secured/unsecured loans. — Match each source of finance to the ownership types that can realistically use it.

Shareholders (both)

Shareholders invest to receive dividends (a share of profit paid out), to gain if the share price rises, and sometimes for a say in decisions or because they back the business’s aims. Share capital (equity) is the money raised by selling shares. Ordinary shares usually carry votes and a dividend that varies with profit (standard definition).

Influences on share price: company profit and forecasts, dividends, the economy, interest rates, rival performance, news and rumours, and supply and demand for the shares. Rises help shareholders and the firm’s ability to raise capital; falls can bring takeover risk.

Standard forms (9725 asks for all three calculations; 9625 names yield calculation and market capitalisation):

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

Worked example. Oakreach Foods plc has 8,000,000 ordinary shares, pays a total dividend of £1,200,000, and its share price is £3.00.

Dividend per share = 1,200,000 / 8,000,000 = £0.15 (15p)
Dividend yield = 0.15 / 3.00 x 100 = 5%
Market capitalisation = 3.00 x 8,000,000 = £24,000,000

If the price rises to £3.60 and the dividend stays at 15p, the yield falls to 0.15 / 3.60 x 100 = 4.2% (1 d.p.) and market capitalisation rises to £28,800,000.

Six influences on share price, then Oakreach at £3.00 and £3.60: yield 5.0% falls to 4.2% while market capitalisation rises from £24.0m to £28.8m. — A higher share price lowers the yield and raises market capitalisation.

Market capitalisation 48 million x 3.25 = 156 million pounds; dividend per share 7.2m / 48m = 15p; yield 15p / 3.25 x 100 = 4.62 percent. If the price falls to 3.00 the yield is 5.00 percent and market capitalisation 144 million pounds. — A falling share price raises dividend yield but lowers market capitalisation, so a higher yield can signal lost confidence.

Stakeholders (both)

Internal: owners and shareholders, employees. External: customers, suppliers, the community, the government and, in 9725, creditors (those owed money by the firm). Stakeholders have different interests: shareholders want returns, employees want pay and security, suppliers want prompt payment, the community wants jobs without disruption, the government wants tax and legal compliance. To show the impact of business activity, name the stakeholder, the change and the effect.

A power-interest grid. Planning authority is high power, high interest (manage closely); shareholders high power and moderate interest; residents low power, high interest (keep informed), with an arrow showing their power rising if they campaign. — Stakeholders are placed by power and interest to decide how much attention each needs.

Six stakeholder groups around a business (owners and employees internal; customers, suppliers, government, local community external). Two conflicts: owners cutting costs vs employees wanting higher wages; customers wanting low prices vs owners wanting higher margins. — Stakeholders have differing objectives that often conflict.

Common errors

Writing “limited liability means limited debts”. The firm owes the whole debt, but the shareholder’s loss is limited.
Confusing a public limited company with the public sector.
Stopping a decision-tree answer at expected value, without taking off the cost.
Using partnerships in a 9625 answer, or co-operatives in a 9725 answer, without checking your specification.

Frequently asked questions

What does SMART stand for in OxfordAQA 9725? The 9725 text spells SMART out as Specific, Measurable, Accountable, Realistic and Time specific. An objective such as raising sales by a set percentage by a set date, owned by a named manager, can be checked.

What are the key elements of a business plan in 9725? The 9725 key elements are ownership, objectives, target market and market analysis, competitor analysis, unique selling point (USP) and financial analysis.

What are the primary, secondary and tertiary sectors? The primary sector extracts natural resources, such as farming and mining. The secondary sector makes or builds things, such as manufacturing and construction, and the tertiary sector provides services, such as retail, banking and teaching.

What are the advantages and disadvantages of a family business? A family business can benefit from loyalty, shared values, long-term thinking and quick decisions. Its disadvantages include conflict, limited finance and skills, and difficult succession.

Why do people buy shares? Shareholders invest to receive dividends, which are a share of profit paid out, to gain if the share price rises, and sometimes for a say in decisions or because they back the business’s aims.

Official syllabus

OxfordAQA International AS and A-level Business (9625), Version 3.1, first AS exams May/June 2019 and first A-level exams May/June 2020; and OxfordAQA International AS and A-level Business (9725), Version 1.1, first AS exams May/June 2027 and first A-level exams May/June 2028. Publisher: OxfordAQA. Sections 3.1.1.1 and 3.1.1.2.

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