Syllabus: Pearson Edexcel AS Business
Module: Managing Finance
Lesson: 2.3.3 Business Failure

Introduction

This article supports teaching and learning for Pearson Edexcel AS Business, specifically Theme 2: Managing Business Activities, Section 2.3.3 – Business Failure. It’s designed for teachers, SLT, careers leads, and headteachers looking to ground curriculum delivery in both real-world examples and assessment insights.

According to the Pearson Edexcel specification, this unit builds on earlier finance concepts by exploring why businesses fail. It connects well with classroom conversations around cash flow, strategy, and risk. Critically, it also offers rich opportunities to bring in enterprise thinking, especially around resilience, reflection, and decision-making.

Key Concepts

Section 2.3.3 of the Pearson Edexcel AS Business syllabus focuses on understanding the reasons for business failure. Students are expected to grasp:

• The difference between internal and external causes of failure

• Internal causes including poor cash flow management, lack of planning, inadequate market research, and overtrading

• External causes such as economic downturns, changes in consumer trends, and increased competition

• The importance of financial and non-financial factors in determining a business’s survival

• How business failure relates to risk and uncertainty

Students must be able to apply these ideas to different contexts, recognising that causes of failure are often interlinked and cumulative.

Real-World Relevance

High-profile failures help students ground theory in reality. A few current examples worth integrating:

• Wilko (2023): A classic case of overexpansion, weak online strategy, and squeezed margins. This links directly to poor strategic planning and failure to adapt to market changes.

• Made.com (2022): Offers a digital-era lens on business failure, showing how supply chain disruption, cash flow issues, and scaling too fast can topple even trendy firms.

• Local SMEs post-Covid: Many students will relate to the visible closures of restaurants, gyms, and shops – cases that highlight the role of external shocks and poor liquidity.

These case studies are useful for encouraging students to move beyond “blame culture” and explore the complex, multi-causal nature of failure.

How It’s Assessed

This topic is assessed across multiple question formats in the Edexcel AS exam:

• Short-answer questions requiring definitions and identification of causes

• Data response questions using financial statements, cash flow forecasts, or extracts from business articles

• Extended writing (10–12 marks) assessing evaluation skills: students might be asked to judge which cause was most significant or whether failure was inevitable

Command words to prepare students for include:

• Explain (e.g. “Explain one reason why a business might fail”)

• Analyse (e.g. “Analyse how poor cash flow might contribute to business failure”)

• Evaluate (e.g. “Evaluate whether overtrading or poor planning is a more significant cause of failure in a start-up business”)

Ensure students practise structuring answers using chains of reasoning and real business examples to back up their arguments.

Enterprise Skills Integration

Teaching business failure is a golden opportunity to develop wider enterprise capabilities:

• Resilience – Reflecting on how businesses can recover or pivot after failure

• Risk management – Recognising early warning signs and managing uncertainty

• Decision-making – Evaluating what could have been done differently

• Problem-solving – Exploring preventative actions and contingency plans

Enterprise Skills’ internal tools like MarketScope AI can help simulate decision-making environments where students must evaluate risk and choose between competing priorities -mirroring real-world business dilemmas.

Careers Links

This topic links well to the Gatsby Benchmarks, particularly:

• Benchmark 4: Linking curriculum learning to careers – Understanding failure is critical for entrepreneurs, finance officers, risk managers, and business analysts

• Benchmark 5: Encounters with employers and employees – Invite a local business owner to speak about lessons from failure or surviving financial shocks

Related career paths include:

• Entrepreneurship

• Business consultancy

• Commercial finance roles

• Strategic planning

Encourage students to explore job shadowing or case study interviews with start-up founders or SME owners, who often offer candid insights into failure and recovery.

Teaching Notes

Tips for delivery:

• Start with a thought experiment: “Think of a business you know that closed – why do you think it failed?”

• Use cash flow forecast templates or MarketScope AI simulations to visualise the impact of poor liquidity

• Build group tasks where students role-play as turnaround consultants analysing a failing business

Common pitfalls to address:

• Oversimplification (e.g. “They just ran out of money”)

• Confusing business failure with poor performance

• Ignoring external factors or economic context

Extension ideas:

• Task students with creating a mini case study of a failed business, including root cause analysis and suggested recovery actions

• Integrate cross-topic links with 2.1.4 (Cash flow), 2.2.1 (Sales forecasting), or 2.4.1 (Budgets) to reinforce finance fluency