Syllabus: Cambridge - IGCSE Business Studies
Module: 1.3 Enterprise Business Growth and Size
Lesson: 1.3.4 Why Some (New or Established) Businesses Fail

Introduction

Aligned to the Cambridge IGCSE Business Studies syllabus (0450), section 1.3.4 explores why some businesses — whether newly formed or long-established — ultimately fail. This topic is not only pivotal for exam preparation but offers rich potential for linking classroom theory to real-world business dynamics.

Understanding business failure is essential for developing commercial awareness, workplace confidence, and decision-making skills. It builds the foundation for more advanced topics in growth strategy, business planning, and financial literacy, while also offering a springboard into careers education through Gatsby Benchmark 4.

Key Concepts

The Cambridge syllabus outlines several reasons why businesses may fail, each of which forms part of a broader commercial literacy skill set. Key learning points include:

• Cash Flow Problems – Lack of working capital or poor cash management leading to insolvency.

• Poor Management – Inexperience, inadequate planning, or weak leadership affecting operations.

• Inappropriate Location – Being in the wrong place for the target market or supply chain efficiency.

• Failure to Plan for Change – Not adapting to market shifts, new technology, or customer needs.

• External Shocks – Including economic downturns, new competition, or regulatory changes.

• Lack of Finance – Inability to secure funding, especially in the early stages.

• Over-expansion – Scaling too quickly without sufficient resources or market research.

These ideas are closely linked to other syllabus areas such as business planning, marketing decisions, and sources of finance.

Real-World Relevance

High-profile business failures offer accessible and timely case studies:

• Wilko (UK retailer, 2023) collapsed due to poor financial management, loss of market relevance, and supply chain issues — illustrating a mix of internal and external fail factors.

• Thomas Cook (Travel Group) faced unsustainable debt and failed to adapt to digital competition, making it a cautionary tale in planning and innovation.

• Local Start-Up Closures – Many students will know of small businesses that opened and quickly closed. These examples help personalise the content, whether it’s a failed food delivery service or an online retail attempt that ran out of cash.

Encourage students to reflect on businesses in their area or industries they follow, fostering active learning through commercial curiosity.

How It’s Assessed

Assessment for this section typically appears in Paper 1 (short-answer and structured questions) or Paper 2 (case study with applied analysis).

Command words to focus on include:

• Identify – List one reason a business may fail.

• Explain – Give reasons and develop them with context.

• Analyse – Explore how or why a specific factor contributes to failure.

• Evaluate – Assess whether one cause is more significant than another in a given context.

Example question formats:

• “Explain two reasons why a new business might fail.” (4 marks)

• “Analyse the impact of poor cash flow on an established business.” (6 marks)

• “Evaluate whether poor location or lack of planning is the more significant cause of business failure.” (12 marks)

Encourage students to use applied examples and link back to the context provided.

Enterprise Skills Integration

This topic naturally supports several enterprise skills vital for workplace readiness:

• Decision-Making – Judging the relative impact of different failure factors.

• Problem-Solving – Identifying solutions to avoid failure (e.g. cash flow forecasting, contingency planning).

• Strategic Thinking – Understanding long-term sustainability versus short-term gain.

• Risk Awareness – Recognising early warning signs in a business context.

Simulation tools from the Skills Hub Futures platform help students practise these skills in realistic business scenarios. Students learn to test decisions in environments where poor planning can lead to simulated business failure — reinforcing key syllabus concepts and career-ready competencies.

Careers Links

This lesson is an excellent opportunity to embed Gatsby Benchmarks:

• Benchmark 4: Curriculum learning linked to careers
  Discuss how finance, marketing, and operations roles each contribute to preventing failure.

• Benchmark 5: Encounters with employers
  Use employer video clips or invite a local entrepreneur to share how they overcame challenges.

• Benchmark 6: Experiences of workplaces
  Simulations or project-based learning can replicate real business problem-solving.

Relevant careers include:

• Business Analyst

• Financial Manager

• Retail Operations Coordinator

• Entrepreneur / Start-up Founder

• Insolvency Practitioner

Understanding business failure supports not only academic success but the development of resilience and critical thinking — skills prized in every career path.

Teaching Notes

Teaching Tips:

• Use real-time business news to bring the topic alive — even student-run social media shops can be good discussion starters.

• Create group tasks where students diagnose a failed business scenario using a case study or role-play activity.

• Use Skills Hub Business simulations or decision-making tools to allow students to experience and reflect on potential failure points.

Common Pitfalls to Watch For:

• Students often confuse cash flow with profitability — ensure clarity here.

• Oversimplified answers (“bad marketing” or “no customers”) need development — encourage linking to broader causes like market research or target audience.

Extension Activities:

• Ask students to write a “turnaround strategy” for a failed business.

• Debate whether internal or external factors are more damaging — using case studies for evidence.

• Link this topic with business planning by creating a failure-avoidance checklist.