Enterprise, Business Growth And Size: Why Some (New Or Established) Businesses Fail (Copy)
Cheat Sheet: 3.4 Why Businesses Fail
| Cause | Explanation | Example | Quick Note |
|---|---|---|---|
| Lack of management skills | Poor planning, weak leadership, no experience | Startup founder without financial knowledge | Leads to bad decisions |
| Liquidity problems | Business cannot meet short-term debts | Profitable company runs out of cash to pay suppliers | “Cash is king” — liquidity matters |
| Over-expansion | Growing too fast without resources | Small retailer opening 10 branches in 1 year | Strains finance & control |
| Poor location | Low customer access, wrong area | Café in a deserted street | Impacts sales badly |
| Competition | Larger rivals dominate market | Local bookstore vs. Amazon | Can force closures |
| Changes in environment | New laws, consumer tastes, economic downturn | Plastic bans affecting packaging firms | External risks |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Why New Businesses Face Greater Risk
| Reason | Explanation | Example |
|---|---|---|
| Lack of finance | Difficult to raise loans/investment | Banks reluctant to lend to start-ups |
| No brand loyalty | Customers unfamiliar with new brand | New soft drink struggles against Coca-Cola |
| High competition | Entrants face established players | Small phone company vs. Apple |
| Limited resources | Few staff, small capital base | Local shop with one worker |
| Inexperience | Owners may lack business knowledge | First-time entrepreneur mismanages stock |
Additional Factors
- Poor marketing – failure to attract customers
- Economic downturns – recessions cut demand
- Technological change – failure to adapt (e.g. Kodak)
- Legal issues – non-compliance → fines/closure
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Quick Revision Bullets
- Failure reasons = weak management, cash shortages, poor location, competition, external change
- New businesses riskier → no brand, no finance, less experience
- Survival improves with planning, finance control, market research
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course