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UPDATED TO 2022 SYLLABUS

CAIE A2 LEVEL
BUSINESS (9609)
SUMMARIZED NOTES ON THE DEFINITIONS SYLLABUS
CAIE A2 LEVEL BUSINESS (9609)

18. Computer-aided manufacturing (CAM) – the use of

computers and computer-controlled machinery to
1. Definitions speed up the production process and make it more
flexible
1. Globalisation – the increasing freedom of movement 19. Environmental audits – assess the impact of a
of goods, capital and people around the world business’s activities on the environment
2. Free trade – no restrictions or trade barriers exist that 20. Social audit – a report on the impact a business has
might prevent or limit trade between countries on society. This can cover pollution levels, health and
3. Tariffs – taxes imposed on imported goods to make safety record, sources of supplies, customer
them more expensive than they would otherwise be satisfaction and contribution to the community
4. Quotas – limits on the physical quantity or value of 21. Pressure groups – organisations created by people
certain goods that may be imported with a common interest or aim who put pressure on
5. Voluntary export limits – an exporting country agrees businesses and governments to change policies so
to limit the quantity of certain goods sold to one that an objective is reached
country (possibly to discourage the setting of 22. Economic growth – an increase in a country’s
tariffs/quotas) productive potential measured by an increase in its
6. Protectionism – using trade barriers to free trade to real GDP
protect a country’s own domestic industries 23. Gross domestic product (GDP) – the total value of
7. Multinational business – business organisation that goods and services produced in a country in one year
has its headquarters in one country, but with – real GDP has been adjusted for inflation.
operating branches, factories and assembly plants in 24. Business investment – expenditure by businesses on
other countries capital equipment, new technology and research and
8. Privatisation – selling state-owned and controlled development
business organisations to investors in the private 25. Business cycle – the regular swings in economic
sector activity, measured by real GDP, that occur in most
9. External growth – business expansion achieved by economies, varying from boom conditions (high
means of merging with or taking over another demand and rapid growth) to recession when total
business, from either the same or different industry national output declines
10. Merger – an agreement by shareholders and 26. Recession – a period of six months or more of
managers of two businesses to bring both firms declining real GDP
together under a common board of directors with 27. Inflation – an increase in the average price level of
shareholders in both businesses owning shares in the goods and services – it results in a fall in the value of
newly merged business money
11. Takeover – when a company buys more than 50% of 28. Deflation – a fall in the average price level of goods
the shares of another company and becomes the and services
controlling owner of it – often to as ‘acquisition’ 29. Working population – all those in the population of
12. Synergy – literally means that ‘the whole is greater working age who are willing and able to work
than the sum of parts’, so in integration it is often 30. Unemployment – this exists when members of the
assumed that the new, larger business will be more working population are willing and able to work, but
successful than the two formerly separate, businesses are unable to find a job
were 31. Cyclical unemployment – unemployment resulting
13. Monopoly – theoretically a situation in which there is from low demand for goods and services in the
only one supplier, but this is very rare: for economy during a period of slow economic growth or
government policy purposes this is usually redefined recession
as a business controlling at least 25% of the market 32. Structural unemployment – unemployment caused by
14. Social audit – a report on the impact a business has the decline in important industries, leading to
on society – this can cover pollution levels, health and significant job losses in one sector of industry
safety record, sources of supplies, customer 33. Frictional unemployment – unemployment resulting
satisfaction and contribution to the community from workers losing or leaving jobs and taking a
15. Information technology – the use of electronic substantial period of time to find alternative
technology to gather, store, process and employment
communicate information 34. Balance of payments (current account) – this account
16. Innovation – creating more effective processes, records the value of trade in goods and services
products or ways of doing things in a business between one country and the rest of the world. A
17. Computer-aided design (CAD) – using computers and deficit means that the value of goods and services
IT when designing products imported exceeds the value of goods and services
exported

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35. Exchange rate – the price of one currency in terms of 54. Zero-hours contract – no minimum hours of work are
another offered and workers are only called in-and paid-when
36. Exchange rate depreciation – a fall in the external work is available
value of a currency as measured by its exchange rate 55. Labour productivity – the output per worker in a given
against other currencies. If $1 falls in value from €2 to time period
€1.5, the value of the dollar has depreciated in value Labour productivity = total output in time period/total
37. Imports – goods and services purchased from other workers employed
countries 56. Absenteeism – measures the rate of workforce
38. Exports – goods and services sold to consumers and absence as a proportion of the employee total
business in other countries Absenteeism = no. of employees absents/total no. of
39. Exchange rate appreciation – a rise in the external employees * 100
value of a currency as measured by its exchange rate 57. Workforce planning – analysing and forecasting the
against other currencies. If $1 rises from €1.5 to €1.8, numbers of workers and the skills of those workers
the value of the dollar has appreciated that will be required by the organisation to achieve its
40. Fiscal policy – concerned with decisions about objectives
government expenditure, tax rates and government 58. Workforce audit – a check on the skills and
borrowing – these operate largely through the qualifications of all existing workers/managers
government’s annual budget decisions 59. Trade union – an organisation of working people with
41. Government budget deficit – the value of government the objective of improving the pay and working
spending exceeds revenue from taxation conditions of their members and providing them with
42. Government budget surplus – taxation revenue support and legal services
exceeds the value of government spending 60. Trade union recognition – when an employer formally
43. Monetary policy – is concerned with decisions about agrees to conduct negotiations on pay and working
the rate of interest and the supply of money in the conditions with a trade union rather than bargain
economy individually with each worker
44. Market failure – when markets fail to achieve the most 61. Collective bargaining – the process of negotiating the
efficient allocation of resources and there is under- or terms of employment between an employer and a
overproduction of certain goods or services group of workers who are usually represented by a
45. External costs – costs of an economic activity that are trade union official
not paid for by the producer or consumer, but by the 62. Terms of employment – include working conditions,
rest of society pay, work hours, shift length, holidays, sick leave,
46. Income elasticity of demand – measures the retirement benefits and health care benefits
responsiveness of demand for a product after a 63. Single-union agreement – an employer recognises just
change in consumer incomes one union for purposes of collective bargaining
47. Hard HRM – an approach to managing staff that 64. No-strike agreement – unions agree to sign a no-strike
focuses on cutting costs, e.g., temporary and part- agreement with employers in exchange for greater
time employment contracts, offering maximum involvement in decisions that affect the workforce
flexibility but with minimum training costs 65. Industrial action – measures taken by the workforce
48. Soft HRM – an approach to managing staff that or trade union to put pressure on management to
focuses on developing staff so that they reach self- settle an industrial dispute in favour of employees
fulfilment and are motivated to work hard and stay 66. Organisational structure – the internal, formal
with the business framework of a business that shows the way in which
49. Part-time employment contract – employment management is organised and linked together and
contract that is for less than the normal full working how authority is passed through the organisation
week of, say, 40 hours, e.g., eight hours per week 67. Matrix structure – an organisational structure that
50. Temporary employment contract – employment creates project teams that cut across traditional
contract that lasts for a fixed time period, e.g., six functional departments
months 68. Level of hierarchy – a stage of the organisational
51. Flexi-time contract – employment contract that allows structure at which the personnel on it have equal
staff to be called in at times most convenient to status and authority
employers and employees, e.g., at busy times of day 69. Chain of command – this is the route through which
52. Outsourcing – not employing staff directly, but using authority is passed down an organisation – from the
an outside agency or organisation to carry out some chief executive and the board of directors
business functions 70. Span of control – the number of subordinates
53. Teleworking – staff working from home but keeping reporting directly to a manager
contact with the office by means of modern IT 71. Delegation – passing authority down the
communications organisational hierarchy

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72. Centralisation: keeping all of the important decision- 91. Sales forecasting – predicting future sales levels and
making powers within head office or the centre of the sales trends
organisation 92. Sales-force composite – a method of sales forecasting
73. Decentralisation: decision-making powers are passed that adds together all of the individual predictions of
down the organisation to empower subordinates and future sales of all the sales representatives working
regional/product managers for a business
74. Delayering – removal of one or more of the levels of 93. Delphi method – a long-range qualitative forecasting
hierarchy from an organisational structure technique that obtains forecasts from a panel of
75. Line managers – managers who have direct authority experts
over people, decisions and resources within the 94. Jury of experts – uses the specialists within a business
hierarchy of an organisation to make forecasts for the future
76. Staff managers – managers who, as specialists, 95. The trend – the underlying movement in a time series
provide support, information and assistance to line 96. Seasonal fluctuations – the regular and repeated
managers variations that occur in sales data within a period of
77. Informal organisation – the network of personal and 12 months
social relations that develop between people within 97. Cyclical fluctuations – these variations in sales occur
an organisation over periods of time of much more than a year and
78. Effective communication – the exchange of are due to the business cycle
information between people or groups, with feedback 98. Random fluctuations – these can occur at any time
79. Communication media – the methods used to and will cause unusual and unpredictable sales
communicate a message figures – examples include exceptionally poor weather
80. Information overload: so much information and so or negative public image following a high-profile
many messages are received that the most important product failure
ones cannot be easily identified and quickly acted on 99. Globalisation – the growing trend towards worldwide
– most likely to occur with electronic media. markets in products, capital and labour, unrestricted
81. Communication barriers – reasons why by barriers
communication fails 100. Multinational companies – businesses that have
82. Formal communication networks – the official operations in more than one country
communication channels and routes used within an 101. Free international trade – international trade that is
organisation allowed to take place without restrictions such as
83. Informal communication – unofficial channels of ‘protectionist’ tariff s and quotas
communication that exists between informal groups 102. Tariff – tax imposed on an imported product
within an organisation 103. Quota – a physical limit placed on the quantity of
84. Marketing plan – a detailed, fully researched written imports of certain products
report on marketing objectives and the marketing 104. International marketing – selling products in markets
strategy to be used to achieve them other than the original domestic market
85. Income elasticity of demand – measures the 105. BRICS – the acronym for five rapidly developing
responsiveness of demand for a product following a economies with great market opportunities – Brazil,
change in consumer incomes Russia, India, China and South Africa
Income elasticity of demand = % change in demand 106. Pan-global marketing – adopting a standardised
for the product/% change in consumer incomes product across the globe as if the entire world were a
86. Promotional elasticity of demand – measures the single market – selling the same goods in the same
responsiveness of demand for a product following a way everywhere
change in the amount spent on promoting it 107. Global localisation – adapting the marketing mix,
Promotional elasticity of demand = % change in including differentiated products, to meet national
demand for the product/% change in promotional and regional tastes and cultures
spending 108. Capacity utilisation – the proportion of maximum
87. Cross elasticity of demand – measures the output capacity currently being achieved
responsiveness of demand for a product following a 109. Excess capacity – exists when the current levels of
change in the price of another product demand are less than the full capacity output of a
88. New product development (NPD) – the design, business – also known as spare capacity
creation and marketing of new goods and services 110. Rationalisation – reducing capacity by cutting
89. Test marketing – the launch of the product on a small- overheads to increase efficiency of operations, such
scale market to test consumers’ reactions to it as closing a factory or off ice department, often
90. Research and development – the scientific research involving redundancies
and technical development of new products and 111. Full capacity – when a business produces at maximum
processes output Capacity shortage – when the demand for a
business’s products exceeds production capacity

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112. Outsourcing – using another business (a ‘third party’) 131. Network diagram – the diagram used in critical path
to undertake a part of the production process rather analysis that shows the logical sequence of activities
than doing it within the business using the firm’s own and the logical dependencies between them – so the
employees critical path can be identified
113. Business-process outsourcing (BPO) – a form of 132. Cost centre – a section of a business, such as a
outsourcing that uses a third party to take department, to which costs can be allocated or
responsibility for certain business functions, such as charged
HR and finance 133. Profit centre – a section of a business to which both
114. Lean production – producing goods and services with costs and revenues can be allocated – so profit can be
the minimum of wasted resources while maintaining calculated
high quality 134. Full costing – a method of costing in which all fixed
115. Simultaneous engineering – product development is and variable costs are allocated to products, services
organised so that different stages are done at the or divisions of a business
same time instead of in sequence 135. Contribution or marginal costing – costing method
116. Cell production – splitting flow production into self- that allocates only direct costs to cost/profit centres,
contained groups that are responsible for whole work not overhead costs
units 136. Budget – a detailed financial plan for the future
117. Kaizen – Japanese term meaning continuous 137. Budget holder – individual responsible for the initial
improvement setting and achievement of a budget
118. Quality product – a good or service that meets 138. Variance analysis – calculating differences between
customers’ expectations and is therefore ‘fit for budgets and actual performance, and analysing
purpose’ reasons for such differences
119. Quality standards – the expectations of customers 139. Delegated budgets – giving some delegated authority
expressed in terms of the minimum acceptable over the setting and achievement of budgets to junior
production or service standards managers
120. Quality control – this is based on inspection of the 140. Incremental budgeting – uses least year’s budget as a
product or a sample of products basis and an adjustment is made for the coming year
121. Quality assurance – a system of agreeing and meeting 141. Zero budgeting – setting budgets to zero each year
quality standards at each stage of production to and budget holders have to argue their case to
ensure consumer satisfaction receive any finance
122. ISO 9000 – this is an internationally recognised 142. Flexible budgeting – cost budgets for each expense
certificate that acknowledges the existence of a are allowed to vary if sales or production vary from
quality procedure that meets certain conditions budgeted levels
123. Total quality management – an approach to quality 143. Adverse variance – exists when the difference
that aims to involve all employees in quality- between the budgeted and actual figure leads to a
improvement lower-than-expected profit
124. Internal customers – people within the organisation 144. Favourable variance – exists when the difference
who depend upon the quality of work being done by between the budgeted and actual figure leads to a
others higher-than-expected profit
125. Zero defects – achieving perfect products every time 145. Intellectual property – the amount by which the
126. Benchmarking – involves management identifying the market value of a firm exceeds its tangible assets less
best firms in the industry and then comparing the liabilities – an intangible asset
performance standards – including quality – of these 146. Market value – the estimated total value of a company
businesses with those of their own business if it were taken over
127. Project – a specific and temporary activity with a start 147. Capital expenditure – any item bought by a business
and end date, clear goals, defined responsibilities and and retained for more than one year, that is the
a budget purchase of fixed or non-current assets
128. Project management – using modern management 148. Revenue expenditure – any expenditure on costs
techniques to carry out and complete a project from other than non-current asset expenditure
start to finish in order to achieve pre-set targets of 149. Depreciation – the decline in the estimated value of a
quality, time and cost noncurrent asset over time
129. Critical path analysis – a planning technique that Assets decline in value for two main reasons: normal
identifies all tasks in a project, puts them in the wear and tear through usage & technological change,
correct sequence and allows for the identification of making either the asset, or the product it is used to
the critical path make, obsolete
130. Critical path – the sequence of activities that must be 150. Net book value – the current Statement of financial
completed on time for the whole project to be position value of a non-current asset = original cost –
completed by the agreed date accumulated depreciation

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151. Straight-line depreciation – a constant amount of for investment appraisal results for a project to be
depreciation is subtracted from the value of the asset accepted
each year. 170. Corporate strategy – a long-term plan of action for the
Straight line depreciation = original cost of asset- whole organisation, designed to achieve a particular
expected residual value/expected useful life of asset goal
(years) 171. Tactic – short-term policy or decision aimed at
152. Net realisable value – the amount for which an asset resolving a particular problem or meeting a specific
(usually an inventory) can be sold minus the cost of part of the overall strategy
selling it – it is only used on Statements of financial 172. Strategic management – the role of management
position when NRV is estimated to be below historical when setting long-term goals and implementing
cost cross-functional decisions that should enable a
153. Return on capital employed (%) – operating business to reach these goals
profit/capital employed × 100 173. Competitive advantage – a superiority gained by a
154. Capital employed – the total value of all long-term business when it can provide the same value
finance invested in the business: it is equal to (non- product/service as competitors but at a lower price, or
current assets + current assets) − current liabilities or can charge higher prices by providing greater value
non-current liabilities + shareholders’ equity through differentiation
155. Inventory turnover ratio – cost of goods sold/value of 174. Strategic analysis – the process of conducting
inventories research into the business environment within which
156. Day’s sales in receivables ratio – trade accounts an organisation operates, and into the organisation
receivable * 365/revenue itself, to help form future strategies
157. Share price – the quoted price of one share on the 175. SWOT analysis – a form of strategic analysis that
stock exchange Dividend – the share of the company identifies and analyses the main internal strengths
profits paid to shareholders and weaknesses and external opportunities and
158. Dividend yield ratio – dividend per share * threats that will influence the future direction and
100/current share price success of a business
159. Dividend per share – total annual dividends/total 176. PEST analysis – the strategic analysis of a firm’s
number of issued shares macroenvironment, including political, economic,
160. Dividend cover ratio – profit for the year/annual social and technological factors
dividends 177. Mission statement – a statement of the business’s
161. Price/earnings ratio – current share price/earnings per core purpose and focus, phrased in a way to motivate
share employees and to stimulate interest by outside
162. Earnings per share – profit for the year/annual groups
dividends This is the amount of profit (after tax and 178. Vision statement – a statement of what the
interest) earned per share organisation would like to achieve or accomplish in
163. Investment appraisal – evaluating the profitability or the long term
desirability of an investment project 179. Boston Matrix – a method of analysing the product
164. Annual forecasted net cash flow – forecast cash portfolio of a business in terms of market share and
inflows minus forecast cash outflows market growth
165. Payback period – length of time it takes for the net 180. Core competence – an important business capability
cash inflows to pay back the original capital cost of that gives a firm competitive advantage
the investment 181. Core product – product based on a business’s core
166. Accounting rate of return – measures the annual competences, but not necessarily for final consumer
profitability of an investment as a percentage of the or end user
initial investment 182. Ansoff ’s matrix – a model used to show the degree of
ARR (%) = annual profit (net cash flow)/initial capital risk associated with the four growth strategies of
cost × 100 An alternative formula is: market penetration, market development, product
ARR (%) = annual profit (net cash flow)/average capital development and diversification
cost × 100 where the average capital cost = initial 183. Market penetration – achieving higher market shares
capital cost – residual capital value/2 in existing markets with existing products
167. Net present value (NPV) – today’s value of the 184. Product development – the development and sale of
estimated cash flows resulting from an investment new products or new developments of existing
168. Internal rate of return (IRR) – the rate of discount that products in existing markets
yields a net present value of zero – the higher the IRR, 185. Market development – the strategy of selling existing
the more profitable the investment project is products in new markets
169. Criterion rate or levels – the minimum levels 186. Diversification – the process of selling different,
(maximum for payback period) set by management unrelated goods or services in new markets

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187. Force-field analysis – technique for identifying and 196. Entrepreneurial culture – this encourages
analysing the positive factors that support a decision management and workers to take risks, to come up
(‘driving forces’) and negative factors that constrain it with new ideas and test out new business ventures
(‘restraining forces’) 197. Power culture – concentrating power among just a
188. Decision tree – a diagram that sets out the options few people
connected with a decision and the outcomes and 198. Role culture – each member of staff has a clearly
economic returns that may result defined job title and role
189. Expected value – the likely financial result of an 199. Change management – planning, implementing,
outcome obtained by multiplying the probability of an controlling and reviewing the movement of an
event occurring by the forecast economic return if it organisation from its current state to a new one
does occur 200. Business process re-engineering – fundamentally
190. Strategic implementation – the process of planning, rethinking and redesigning the processes of a
allocating and controlling resources to support the business to achieve a dramatic improvement in
chosen strategies performance
191. Business plan – a written document that describes a 201. Project champion – a person assigned to support and
business, its objectives and its strategies, the market drive a project forward, who explains the benefits of
it is in and its financial forecasts change and assists and supports the team putting
192. Corporate plan – this is a methodical plan containing change into practice
details of the organisation’s central objectives and the 202. Project groups – these are created by an organisation
strategies to be followed to achieve them to address a problem that requires input from
193. Corporate culture – the values, attitudes and beliefs of different specialists
the people working in an organisation that control the 203. Contingency plan – preparing an organisation’s
way they interact with each other and with external resources for unlikely events
stakeholder groups
194. Task culture – based on cooperation and teamwork
195. Person culture – when individuals are given the
freedom to express themselves fully and make
decisions for themselves

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Business (9609)

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