Business Paper 2 AQA

GCSE 2025

Sole Trader

A business owned and run by one person. Simple to set up and control, but the owner has unlimited liability, meaning personal assets are at risk.

Partnership

A business owned by two or more individuals who share responsibilities and profits. There can be limited and general partnerships.

Private Limited Company (Ltd)

A company owned by shareholders, with limited liability. Shares are not available to the general public.

Public Limited Company (PLC)

A business whose shares are sold to the public on the stock exchange, with limited liability.

Franchising

A business model where one business (franchisor) sells the rights to others (franchisees) to use their brand and business model.

Joint Venture

A partnership between two or more businesses for a specific project or goal.

Interest Rates

High interest rates lead to higher borrowing costs for businesses, potentially reducing investment and expansion plans.

Exchange Rates

Strengthening currency makes exports more expensive for foreign consumers, which could reduce demand for a business's products abroad.

Inflation

High inflation results in rising costs for materials, wages, and goods, eroding purchasing power and reducing demand.

Unemployment

High unemployment increases the supply of labour, potentially reducing wages and making recruitment easier.

Taxation

Higher taxes reduce disposable income for consumers and increase the cost of doing business.

Health and Safety Legislation

Requires businesses to protect their employees from harm at work.

Advantages of Sole Trader

Full control, all profits go to the owner, easier to set up.

Disadvantages of Sole Trader

Unlimited liability, long working hours, limited financial resources.

Advantages of Partnership

Shared expertise and capital, easier to raise funds, workload shared.

Disadvantages of Partnership

Unlimited liability (for general partners), disagreements, profits shared.

Advantages of Private Limited Company (Ltd)

Limited liability, easier to raise capital, continuity of the business.

Disadvantages of Private Limited Company (Ltd)

Shareholders must agree on major decisions, accounts made public.

Advantages of Public Limited Company (PLC)

Ability to raise significant capital through stock, limited liability, business continuity.

Disadvantages of Public Limited Company (PLC)

Costly to set up, less control for owners, more regulation.

Advantages of Franchising

Established brand, easier market entry, ongoing support.

Disadvantages of Franchising

Less control for franchisees, fees and royalties, limited innovation.

Advantages of Joint Venture

Shared risk and expertise, access to new markets, cost savings.

Disadvantages of Joint Venture

Shared control, potential for conflict, limited duration.

Impact

Ensures workplace safety, reducing accidents, but may increase costs for implementing safety measures.

Employment Law

Equal pay, anti-discrimination, and minimum wage laws ensure fair treatment of employees.

Impact

Protects employees but increases costs for businesses that have to meet these requirements.

Consumer Protection Laws

Laws that protect consumers from unsafe goods and unfair trading practices.

Impact

Businesses must ensure quality and safety standards, which may increase costs but enhance customer trust.

Environmental Legislation

Laws requiring businesses to minimize pollution and reduce carbon emissions.

Impact

Businesses may need to invest in eco-friendly technologies, but it can lead to long-term savings and improved public image.

E-commerce

The buying and selling of goods and services over the internet.

Impact

Broader market reach, lower costs (no physical stores), but intense competition and security risks.

Digital Marketing

Use of digital channels such as social media, websites, and email marketing.

Impact

Lower cost than traditional marketing, ability to target specific demographics, but requires expertise and constant content creation.

Automation

The use of machines and technology to perform tasks that would otherwise be done manually.

Impact

Increased productivity, reduced costs, but high initial investment and potential job losses.

Hierarchical Structure

A pyramid-like structure with a clear chain of command. Often has multiple layers of management.

Advantages of Hierarchical Structure

Clear roles, clear promotion paths, well-defined responsibilities.

Disadvantages of Hierarchical Structure

Slow decision-making, communication barriers.

Flat Structure

Fewer layers of management, with employees having more responsibility.

Advantages of Flat Structure

Faster decision-making, better communication, more employee empowerment.

Disadvantages of Flat Structure

Can lead to confusion over responsibilities, less structure.

Matrix Structure

Employees have dual reporting relationships, both to a functional manager and a project manager.

Advantages of Matrix Structure

Flexible, encourages teamwork.

Disadvantages of Matrix Structure

Confusion in authority, potential conflict.

Internal Recruitment

Promoting existing employees to new roles.

Advantages of Internal Recruitment

Employees are already familiar with the company culture.

Disadvantages of Internal Recruitment

Limits fresh ideas, creates vacancy in the previous role.

External Recruitment

Hiring from outside the company.

Advantages of External Recruitment

Brings in new skills and ideas.

Disadvantages of External Recruitment

Longer recruitment process, higher costs.

Selection Process

Job descriptions, person specifications, CVs, interviews, testing, and inductions.

On-the-job Training

Employees learn while doing the job.

Advantages of On-the-job Training

Cost-effective, directly relevant to the job.

Disadvantages of On-the-job Training

May be less structured, depends on the expertise of the trainer.

Off-the-job Training

Employees attend external courses or workshops.

Advantages of Off-the-job Training

Professional development, more structured.

Disadvantages of Off-the-job Training

Expensive, time away from work.

Maslow's Hierarchy of Needs

People are motivated by fulfilling needs in a specific order: physiological, safety, social, esteem, and self-actualization.

Herzberg's Two-Factor Theory

Hygiene factors: Pay, working conditions (basic needs to avoid dissatisfaction). Motivators: Recognition, responsibility, achievement (these lead to satisfaction).

Taylor's Scientific Management

Believed employees are primarily motivated by money; therefore, paying based on output can increase productivity.

Product life cycle

Introduction, growth, maturity, decline.

Product differentiation

Unique selling proposition (USP) that makes a product stand out.

Product branding

Building a brand identity that evokes loyalty.

Cost-plus pricing

Adding a percentage markup to the cost of producing a product.

Penetration pricing

Setting a low price initially to attract customers.

Skimming pricing

Setting a high price initially and lowering it later.

Competitive pricing

Setting a price based on competitors' prices.

Advertising

Using TV, radio, social media to reach a wide audience.

Sales Promotions

Discounts, buy-one-get-one-free offers.

Public Relations

Managing the business's image and reputation.

Direct selling

Retail, online sales channels, and distribution logistics.

Primary Research

Surveys, interviews, focus groups, observations.

Advantages of Primary Research

Tailored to specific needs, up-to-date.

Disadvantages of Primary Research

Expensive, time-consuming.

Secondary Research

Using existing data from reports, websites, and government publications.

Advantages of Secondary Research

Quick, cost-effective.

Disadvantages of Secondary Research

May not be specific to the business, outdated.

Demographic Segmentation

Age, gender, income, education level.

Geographic Segmentation

Location, region.

Behavioral Segmentation

Consumer purchasing habits, loyalty.

Psychographic Segmentation

Lifestyle, values, personality.

Gross Profit

Gross Profit = Revenue − Cost of Sales.

Net Profit

Net Profit = Gross Profit − Expenses.

Profit Margin

Profit Margin = (Profit / Revenue) × 100.

Revenue (Sales)

Revenue = Price × Quantity Sold.

Total Costs

Total Costs = Fixed Costs + Variable Costs.

Average Cost

Average Cost = Total Costs / Output.

Break-even Output

Break-even Output = Fixed Costs / Contribution per Unit.

Contribution per Unit

Contribution per Unit = Selling Price per Unit − Variable Cost per Unit.

Margin of Safety

Margin of Safety = Actual Output − Break-even Output.

Current Ratio

Current Ratio = Current Assets / Current Liabilities.

Acid Test Ratio

Acid Test Ratio = (Current Assets − Inventory) / Current Liabilities.

Average rate of return (ARR)

ARR = (average annual profit / Cost of Investment) × 100.

Market Share

Market Share = (Business Sales / Total Market Sales) × 100.

Labour Productivity

Labour Productivity = Output / Number of Employees.

Working Capital

Working Capital = Current Assets − Current Liabilities.

Cost of Sales

Cost of Sales = Opening Stock + Purchases − Closing Stock

Contribution

Total Contribution = Selling Price − Variable Costs per Unit