Explain why businesses succeed or fail
Use management, finance, product suitability, demand, competition and economic change to explain outcomes conditionally.
Cambridge IGCSE Business 0264, 2027–2029 syllabus, Topic 1. Apply concepts to the stated business and weigh benefits against costs and stakeholder effects. Written practice is self-checked and does not certify exam readiness
Before you begin
- No previous business study is assumed. Read each scenario for the decision-maker, objective, available evidence and constraints.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which is a possible factor affecting whether a business succeeds?
What you will learn
- Recognise syllabus factors affecting success and failure
- Build a causal explanation
- Avoid single-cause certainty
Connect a factor to the outcome
Business outcomes may depend on management skills, availability of finance, product suitability, demand, economic changes and competition.
A developed explanation links the factor to a business mechanism. For example, weak cash-flow management may prevent a firm from paying suppliers on time, limiting production even if customers want the product.
Consider interacting causes
A business may face several causes at once. A fall in demand can be manageable with adequate finance and adaptation, but more damaging when costs are high and management reacts slowly.
Avoid claiming one factor proves why every business succeeds or fails. Use the case evidence and identify what further information would strengthen the judgement.
Pause and explain
Why can limited finance contribute to failure?
Worked example
A popular café closes after rent rises and its owner cannot obtain additional finance. Explain how these factors may contribute to failure.
Show the worked solution
- Higher rent raises operating costs.
- The finance constraint limits the response to that cost pressure.
- Connect the pressure to cash or viability, while recognising other evidence may matter.
Answer Higher rent may reduce cash available to cover other costs. Without additional finance, the café may be unable to adapt or meet payments, contributing to closure despite customer popularity.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A firm has rising demand but repeated production delays because its manager has not trained new staff. Explain the likely link to performance.
Give me a hint
Connect demand, capacity and management decisions.
Compare my reasoning
- Demand creates potential orders.
- Untrained staff may reduce output or quality.
- The business can lose sales or reputation if delays persist.
Strong demand creates an opportunity, but poor training may prevent the firm from meeting orders consistently. Delays can cause lost sales or damage customer relationships.
Look for these in your work
- Demand opportunity identified
- Management link made
- Business consequence explained
A business loses sales after a competitor launches a cheaper substitute. Explain one possible response and one risk of it.
Give me a hint
Choose a response that fits customers and costs.
Compare my reasoning
- The firm could differentiate its offer or review its pricing.
- The response must fit customer preferences and financial capacity.
- A price cut may reduce margins if costs remain high.
It could differentiate through service or review its price. A price cut might recover demand but could reduce contribution if customers are not sufficiently responsive or costs stay high.
Look for these in your work
- Response plausible
- Context/finance considered
- Trade-off stated
Two businesses in the same economic downturn have different outcomes. Give two reasons one may survive while the other fails without assuming that the economy has no effect.
Give me a hint
Consider resources and decisions as well as the shared external change.
Compare my reasoning
- Their finances, costs or cash buffers may differ.
- Management skills and products may differ.
- Their customers and ability to adapt may differ.
One may have stronger finance or lower fixed costs, more suitable products, better management or customers whose demand holds up. The downturn can affect both while producing different outcomes.
Look for these in your work
- Shared shock acknowledged
- At least two differentiating factors
- Conditional explanation
Common mistakes
- Claiming popularity alone guarantees success
- Treating a correlation as proof of a single cause
- Ignoring management response and available resources
What can you explain now?
Which is a possible factor affecting whether a business succeeds?
Compare with the explanation
Product suitability and customer demand
A product must fit a market to generate sales.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
How do you turn a named success factor into a business explanation rather than a list?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.