Business Success & Failure (Cambridge International IGCSE Business)

Exam board Cambridge International · IGCSEUpdated 2025-08-27

Why businesses succeed

Spec point — "reasons why businesses succeed or fail, e.g. management skills, availability of finance, suitability of product, demand for products, changes in the economy, level of competition"

Why businesses succeed

Successful businesses often share similar strengths, such as good management, strong products and enough finance
These factors help them grow, stay competitive, and meet customer needs in changing markets

Flowchart titled "Reasons for Business Success" with factors: favourable economic condition, strong management skills, suitable product, high demand, low competition, finance.

Key reasons for business success include strong management skills, the availability of finance and favourable economic conditions

Strong management skills

Good managers make effective decisions, organise resources well and motivate employees
They plan ahead, solve problems quickly, and lead the business towards its goals
- For example, Steve Jobs helped Apple succeed by making bold decisions and focusing on design and innovation

Availability of finance

Having enough money (capital) allows a business to invest in equipment, marketing, staff and product development
- For example, Amazon used early investment to grow its operations and dominate online shopping

Suitable product

A successful business offers a product that solves a problem, meets customer needs or has unique features
Products must be high quality and appealing to the target market
- For example, Dyson vacuum cleaners became popular by fixing problems like loss of suction

High demand for the product

When many people want the product, sales rise and the business earns more profit
Demand can increase due to trends, changes in lifestyle or special events
- For example, Zoom became a global success during the COVID-19 pandemic as remote working increased

Favourable economic conditions

In a strong economy, people have more money to spend, which increases sales
Low interest rates and low inflation can also help businesses grow
- For example, during economic growth periods, car manufacturers often see rising sales

Low competition or competitive advantage

Businesses succeed when they offer something better than their rivals
- For example, lower prices, better quality or a strong brand
Having few competitors also gives more control over pricing and customers
- For example, Nike stays successful by constantly innovating and using powerful branding

Why businesses fail

Business failure is a risk to both new and established businesses
- In 2021, an average of 8% of businesses in EU countries failed
  - In Estonia, almost one in four businesses failed
  - However, in Greece, just over 2% of businesses failed
New businesses are often more at risk of failure than well-established businesses
- This is often due to lack of management skills, limited experience or cashflow problems during the initial start-up phase
- The volume and variety of tasks required of new business owners can be overwhelming
- Market research is unlikely to be detailed, as small business owners may lack the skills to understand findings and make effective decisions

The main reasons why some businesses fail

Financial factors	Poor management
- A business may be unable to generate enough revenue to sustain its operations - Costs may rise sharply and eliminate profit margins - Cash shortages mean that creditors cannot be paid what they are owed - Limited access to finance, such as loans or trade credit can be particularly problematic for start-ups	- Lack of experience can lead to poor decisions related to product range, pricing or promotional activity - Making decisions based on hunches rather than market research - Ineffective coordination and planning of business operations, such as stock purchasing or staffing, can increase costs
External factors	Overtrading
- Ineffective or delayed response to new technology, powerful new competitors and major economic change - Changes in laws or taxation *can increase pressure on businesses to make difficult choices	- This occurs when a business expands too quickly - Poor coordination and planning of growth can lead to diseconomies of scale, which increases costs

Exam Hint Don’t give vague answers like “the business failed because it was bad” – use specific factors such as poor management, lack of finance, or falling demand, and always link them to the impact on the business

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Exam Questions Flashcards

Financial factors

Poor management

- A business may be unable to generate enough revenue to sustain its operations
- Costs may rise sharply and eliminate profit margins
- Cash shortages mean that creditors cannot be paid what they are owed
- Limited access to finance, such as loans or trade credit can be particularly problematic for start-ups

- Lack of experience can lead to poor decisions related to product range, pricing or promotional activity
- Making decisions based on hunches rather than market research
- Ineffective coordination and **planning **of business operations, such as stock purchasing or staffing, can increase costs

External factors

Overtrading

- Ineffective or delayed response to new technology, powerful new competitors and major economic change
- Changes in laws or taxation *can increase pressure on businesses to make difficult choices

- This occurs when a** business expands too quickly**
- Poor coordination and planning of growth can lead to diseconomies of scale, which increases costs