OxfordAQA IGCSE Business: Legislation and Competitive environment (9225) – Revision Notes

These notes condense sections 3.2.5 Legislation and 3.2.6 Competitive environment of the OxfordAQA International GCSE Business (9225) specification, version 3.1, for exams from May/June 2022 onwards. For full explanations and worked cost examples, read the study guide. Then try the practice questions.

Related pages: the Influences on business revision notes, the course hub, the printable checklist and the free diagnostics.

3.2.5 Legislation at a glance

Area of law	What it protects	Typical effect on a business
Employment law	Workers (pay, contracts, fair treatment)	Wage costs, record-keeping, hiring rules, training for managers
Health and safety law	Workers and others on the premises	Equipment, risk checks, safety training; fewer accidents
Consumer law	Buyers of goods and services	Quality control, clear descriptions, refunds, complaint handling; more trust

Legislation is a legal requirement. Ethics is a choice beyond the legal minimum.

The four effects to assess

Cost, training needs, recruitment and consequences of failure to follow the law. Pick the ones that fit the business in the question and explain the route from law to effect.

Chain to use in answers: law changes, so business must do X, which costs or changes Y, so profit, prices, staff or customers change.

Consequences of failing to comply

• Fines and legal costs.
• Compensation to staff or customers.
• Forced changes to how the business operates.
• Reputation damage and lost sales.
• Trouble recruiting and keeping staff.

National minimum wage

Benefits for a business	Drawbacks for a business
Better motivation and lower staff turnover	Higher wage bill
Workers have more to spend	Pay pressure on staff just above the minimum
Rivals face the same floor	Higher prices or lower profit
Easier planning of pay	May cut hours or recruit fewer staff

Labour-intensive businesses feel the rise most.

Laws requiring a safe working environment

• Benefits: fewer accidents, less absence, better morale, good reputation, a level playing field.
• Drawbacks: equipment and training cost, time on checks and records, disruption.
• Small firms spread fixed compliance costs over fewer sales.

Consumer protection laws

• Impacts: checks on quality, clear product information, refunds and repairs, staff trained in complaints.
• Benefits: customer trust, repeat sales, protection from rivals who mislead.
• Failure: refunds, compensation, fines, bad publicity.

Method in steps: assess the impact of a law

1. Name the law area (employment, health and safety, consumer).
2. State what the business must now do.
3. Choose the effects (cost, training, recruitment, consequences).
4. Use any figures in the stem.
5. Weigh benefits against drawbacks for this business.
6. Make a judgement if the command word asks for it.

3.2.6 Competitive environment at a glance

Term	Meaning (standard form)
Market	Where buyers and sellers trade a good or service
Competition	Two or more businesses trying to win the same customers
Risk	A chance of something harming the business
Uncertainty	The future cannot be known, so outcomes are unpredictable
Cost advantage	Producing or delivering at lower cost than rivals

Impacts of competition

• Prices or margins pushed down.
• Lost sales or market share.
• Higher spending on marketing and service.
• Pressure to improve quality and range.
• Wider choice for customers, which can grow the market.

How big the impact is depends on loyalty, how different the product is, and how much cost cushion there is.

Minimal or no competition: spot the situation

• Only seller in an area.
• Patent, licence or exclusive right.
• Very high start-up costs.
• Highly specialised product.
• Government-controlled supply.

Results: more pricing freedom and profit, but less pressure to improve and a risk that new entrants arrive.

Why all businesses face uncertainty

Tastes change; rivals act; costs, interest rates and exchange rates move; technology develops; the economy shifts.

Why entrepreneurs take risks

Profit, independence, turning an idea into a business, meeting a need, personal satisfaction.

Ways to minimise risk

Activity	How it reduces risk	Its limit
Market research	Tests demand before money is committed	Costs money; can be wrong
Business plan and forecasts	Shows cash needs early	Based on estimates
Insurance	Covers loss from fire, theft, injury	Premiums; excludes some events
Wider product or market range	Spreads the risk	Costs of developing new lines
Cash reserves	Absorbs shocks	Money tied up
Good supplier and customer relations	Stable supply and demand	Takes time

Developing countries competing

• Lower cost advantage (often lower labour costs).
• Local materials, skills or niche products.
• Limits: transport and delivery times, quality consistency, exchange rates, rivals’ brands and service.

Must-know distinctions

Pair	Difference
Legislation vs ethics	Required by law vs chosen beyond the law
Compliance cost vs non-compliance cost	Cost of following the law vs fines, claims, lost sales if you do not
Risk vs uncertainty	A possible harm vs not knowing what will happen
Minimal competition vs no risk	Little competition does not remove other risks
Low cost vs success	A cost advantage helps, but quality, delivery and brand also count

Small worked reminders

Wage rise. 10 workers, 35 hours a week, 52 weeks, rise of 0.50 an hour. Extra cost = 10 x 35 x 52 x 0.50 = 9,100. If sales revenue is 650,000, that is 1.4%.

Price match. Unit cost 12, price 20, 5,000 sold: profit 40,000. Matching a rival at 18 gives margin 6. Same profit needs 40,000 / 6 = 6,667 units (rounded up from 6,666.7).

Cost advantage. Developing-country unit cost 8.40, rival 13.00. Advantage 4.60, or 35.4% of the rival’s cost.

Quick self-test

1. Name the three areas of law in section 3.2.5.
2. State two items that may increase a firm’s costs after a rise in the national minimum wage.
3. Give one benefit to a business of laws requiring a safe working environment.
4. Explain one way a consumer protection law could benefit a business.
5. Define a market.
6. Identify two situations in which a business faces minimal or no competition.
7. Give two reasons why every business faces uncertainty.
8. State two reasons why an entrepreneur might start a business.
9. Name two activities that reduce a business’s risks.
10. Explain one reason a developing-country firm might undercut a developed-country rival.

Answers

1. Employment law, health and safety law, consumer law.
2. Any two: higher wages for staff on the minimum, pay increases for staff just above it to keep differences, higher prices to customers if costs are passed on, more spent on recruitment if staff leave.
3. Any one: fewer accidents, less absence, better morale, good reputation, rivals cannot gain by cutting safety.
4. For example: clear and fair rules build customer trust, which can lead to repeat purchases; or rivals cannot win sales through misleading claims.
5. A place or system where buyers and sellers trade a good or service.
6. Any two: only seller in the area, patent or licence, very high start-up costs, specialised product, government-controlled supply.
7. Any two: customer tastes change, rivals act, costs or exchange rates move, the economy changes, technology develops.
8. Any two: profit, independence (being their own boss), turning an idea into a business, meeting a need they have spotted.
9. Any two: market research, business plan, insurance, wider product range, cash reserves.
10. Lower labour costs lower its cost per unit, so it can charge a lower price or keep a higher margin.

Command words for this topic

Command word	Your task here
State, identify	Give the point in a few words, such as one area of law or one risk
Define	Give a short, accurate meaning, such as of a market or of competition
Calculate	Show the working and the unit; check that the figure answers the question asked
Explain	Make a point, then say how or why it happens
Analyse	Build a chain of cause and effect using details from the stem
Evaluate, justify, recommend	Weigh both sides, compare their size for this business, then reach a reasoned judgement

Judgement frames that work

• Size. Is the cost large or small compared with sales revenue or profit? A 1% rise in wage costs is easier to absorb than a 10% fall in sales.
• Time. Training costs are often one-off, while a wage rise recurs every year. Lost trust can last for years.
• Flexibility. Can the business pass the cost on, find savings or change supplier? A firm with loyal customers can usually raise prices more easily.
• Alternatives. Compare the cost of following a law with the cost of failing to follow it, including fines, claims and lost reputation.
• Context. Say whether the business is small or large, local or exporting, in a crowded market or a protected one.

Where marks are usually lost

• Writing that a law “affects” a business without saying how.
• Counting only costs and ignoring benefits such as lower staff turnover or customer trust.
• Mixing up ethics and legislation.
• Listing risks without tying any of them to the kind of firm described.
• Treating a business with no competitors as risk-free.
• Writing that developing-country firms always win on price, with no mention of limits such as delivery or quality.
• Not using the figures in a case study.
• Ending an evaluation with no judgement that refers to the firm in the case.

Frequently asked questions

What are the three areas of law in OxfordAQA IGCSE Business section 3.2.5? The three areas are employment law, health and safety law and consumer law. The specification does not name particular Acts, so answers should describe the effect of the law in general terms.

What is the difference between legislation and ethics? Legislation is a legal requirement that a business must follow. Ethics covers choices a business makes beyond the legal minimum.

What is the difference between compliance and non-compliance costs? Compliance costs are the costs of following the law, such as equipment and training. Non-compliance costs are the fines, claims and lost sales a business faces if it does not follow the law, and they can be much larger.

How do you judge how serious an external change is for a business? Consider the size of the cost compared with revenue or profit, whether it is one-off or recurring, how flexible the business is in passing it on, the alternatives, and the context of the business, such as its size and market.

Official syllabus

OxfordAQA International GCSE Business (9225) specification, version 3.1, OxfordAQA, for International GCSE exams May/June 2022 onwards. Sections 3.2.5 Legislation and 3.2.6 Competitive environment.