Final answer:
A business might fail due to poor management, unproductive workers, and strong competition. These internal issues, along with external influences like market shifts, can result in a business's inability to remain financially stable. While challenging for individuals, business exits are a part of the economic cycle that reallocates resources efficiently.
Step-by-step explanation:
Reasons a business might fail include poor management, unproductive workers, and tough competition. A business can suffer from these internal issues, which can lead to inefficiencies or an inability to compete effectively. For instance, poor management could result in inadequate decision-making or a failure to respond to market changes, while unproductive workers may reduce the overall efficiency of operations. On the other hand, competition, both domestic and foreign, can put a strain on a business's profit margins and market share, especially when competitors offer better or cheaper products and services.
External factors such as changing market conditions can also cause a business to fail. Shifts in demand and supply can unexpectedly alter product prices or the costs of inputs, affecting the financial stability of the company. According to the U.S. Small Business Administration, hundreds of thousands of firms enter and exit the market each year. While business failures impact the lives of workers and managers, from an economic perspective, they are part of the process that ensures resources are allocated to more efficient and innovative enterprises.