TYPICAL PROBLEMS FACED BY SMALL SCALE INDUSTRIES

*S. Manopriya & ** K.Mayakkannan, Asst.Prof, Department of Management Science, S.A.Engineering College, Chennai-77

ABSTRACT

The SSI (SMALL SCALE INDUSTARY) today is immense for the growth of the

country. Small scale industries are the industries which are run with the help of their labours and

which also use some simple machine and power. The investment scale in this industry from 50

lakh to 1 crore for fixed assets. Irrespective number of worker engaged is small scale industry

unit. In India these type of industries are permuted to meet with the problem of excess population

and unemployment so the government of India prate entrepreneur to step up small scale

industries by aiding him by giving loans, land, guidance etc.

Small Scale Industries are at a distinct disadvantage as compared to large scale industries.

The scale of operations, availability of finance, ability to use modern technology, procurement of

raw materials are some of these areas. This gives rise to several problems. Most of these

problems can be attributed to the small size of their business, which prevents them from taking

advantages, which accrue to large business organizations. However, the problems faced are not

similar to all the categories of small businesses. The problems of traditional small scale units

include remote location with less developed infrastructural facilities, lack of managerial talent,

poor quality, traditional technology and inadequate availability of finance.

INTRODUCTION

      The definition for small-scale industrial undertakings has changed over time. Initially they

were classified into two categories- those using power with less than 50 employees and those not

using power with the employee strength being more than 50 but less than 100. However the

capital resources invested on plant and machinery buildings have been the primary criteria to

differentiate the small-scale industries from the large and medium scale industries. An industrial

unit can be categorized as a small- scale unit if it fulfils the capital investment limit fixed by the

Government of India for the small- scale sector.

     Any industrial unit to be regarded as Small Scale Industrial unit the following condition is to

be satisfied: - Investment in fixed assets like plants and equipments either held on ownership

terms on lease or on hire purchase should not be more than Rs 10 million. However the unit in no

way can be owned or controlled or ancillary of any other industrial unit.

      The traditional small-scale industries clearly differ from their modern counterparts in many

respects. The traditional units are highly labor consuming with their age-old machineries and

conventional techniques of production resulting in poor productivity rate whereas the modern

small-scale units are much more productive with less manpower and more sophisticated

equipments.

      Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some of

the traditional small-scale industries in India. The modern small industries offer a wide range of

products starting from simple items like hosiery products, garments, leather products, fishing

hook etc to more sophisticated items like television sets, electronics control system, various

engineering products especially as ancillaries to large industrial undertakings.

In India these type of industries are permuted to meet with the problem of excess population and

unemployment so the government of India prate entrepreneur to step up small scale industries by

aiding him by giving loans, land ,guidance etc .

Characteristics of a Small Scale Industries:

A few examples of small-scale businesses include a flea market or shopping mall booth, a

consultancy business, or even a computer repair shop that moves into retail space. Small-

scale businesses typically consist of one owner and his shop. The business owner sells

products and/or services supplied by a franchise company or created by the owner

himself. This type of business is flexible, which means that the owner can generally set

hours at any time to accommodate customers.

Startup

The initial start-up costs for a small-scale business are usually pretty low, depending on

the specific business model and what products/services are being sold. A small-scale

business selling retail goods at flea markets will only need require funds to purchase

initial inventory and pay for a spot at the flea market. Likewise, the owner of a small

business selling homemade goods only needs to worry about purchasing materials to

make the goods. Small-scale businesses that offer consultation services, such as tax

preparation or nutritional services, also have very low overhead costs.

Portability

A small-scale business is generally portable, making it easy to set up and tear down.

Holiday gift shops that sell candles and novelty items are a perfect example of portability;

all that's typically required is empty space at a shopping mall with a small table or booth

to display products. Small-scale businesses also need a way to accept payments. Small

credit card terminals and portable cash registers are perfect for these needs.

Employees

Usually very few employees, if any, work for a small-scale business. This type of

business may have one or two employees for busy times. Typically, however, such

businesses cannot afford to pay wages since a majority of the profits goes back into the

business or pays for the owner's personal expenses. As such, owners often staff small-

scale businesses themselves, allowing them to keep whatever profits they make.

HOW TO START A SMALL SCALE INDUSTRY

The steps involved in starting a small-scale industry are:-

Conduct Market Survey and Study the products as regards their demand in the market.

Check whether it is a seasonal product or it has demand through the year.

1. Study similar products available in the market that can be probable competitors. Analyze

them as regards their utility, quality and cost.

2. Find whether the product can be exported.

3. Explore the possibility whether some product can be manufactured in collaboration with

a foreign country. This provides readymade technical know how and save a lot of time

and money otherwise wasted in developing a suitable method of manufacture.

Decide the product that you are going to manufacture, on the basis of:-

o Market Survey

o Financial implication involved

o Technical know how available

o Experience in the line, etc.

The strategy adopted  by the government is:-

Public enterprenship should remain confined only to those industries and sector where

private enterprise, individual or cooperate, is generally not attracted. Existing public

entrepreneurship be improved through better management and by putting relative greatly

emphasis on research and development. There is need to streamline the R&D wing of

public sector enterprise.

All possible efforts be made very seriously (not casualty) for the development of an

industrial culture. It should be realize that the central core of entrepreneurship is the

motive force since by its very nature, entrepreneurship implies positive action and

individual with the right kind of combination of ability can pursue their goal with

unlimited courage and enthusiasms.

There is need to development management education and industrial training.

The development of backward region / area constitutes a new challenge. Program for

their development be drawn up and should be effective implemented.

Adequate measure is a must for mobilizing & casting the entrepreneurs talent in the

country .In this context, it should be realized that entrepreneurs are not the grief of a

particular classes.

Economic administration by the state should be improved and made more effective so

that economic policy may be fully achieve their objective in the overall interest of

economy.

In general the small businesses are faced with the following problems:

Finance: One of the severe problems faced by SSIs is that of non availability of adequate

finance to carry out its operations. Generally a small business begins with a small capital

base. Many of the units in the small sector lack the credit worthiness required to raise as

capital from the capital markets. As a result, they heavily depend on local financial resources

and are frequently the victims of exploitation by the money lenders. These units frequently

suffer from lack of adequate working capital, either due to delayed payment of dues to them

or locking up of their capital in unsold stocks. Banks also do not lend money without

adequate collateral security or guarantees and margin money, which many of them are not in

a position to provide.

Raw materials: Another major problem of small business is the procurement of raw

materials. If the required materials are not available, they have to compromise on the quality

or have to pay a high price to get good quality materials. Their bargaining power is relatively

low due to the small quantity of purchases made by them. Also, they cannot afford to take the

risk of buying in bulk as they have no facilities to store the materials. Because of general

scarcity of metals, chemicals and extractive raw materials in the economy, the small scale

sector suffers the most. This also means a waste of production capacity for the economy and

loss of further units.

Managerial skills: Small business is generally promoted and operated by a single person,

who may not possess all the managerial skills required to run the business. Many of the small

business entrepreneurs possess sound technical knowledge but are less successful in

marketing the output. Moreover, they may not find enough time to take care of all functional

activities. At the same time they are not in a position to afford professional managers.

Labour: Small business firms cannot afford to pay higher salaries to the employees, which

affects employee willingness to work hard and produce more. Thus, productivity per

employee is relatively low and employee turn over is generally high. Because of lower

remuneration offered, attracting talented people is a major problem in small business

organisations. Unskilled workers join for low remuneration but training them is a time

consuming process. Also, unlike large organisations, division of labour cannot be practiced,

which results in lack of specialization and concentration.

Marketing: Marketing is one of the most important activities as it generates revenue.

Effective marketing of goods requires a thorough understanding of the customer’s needs and

requirements. In most cases, marketing is a weaker area of small organisations. These

organisations have, therefore, to depend excessively on middlemen, who at times exploit

them by paying low price and delayed payments. Further, direct marketing may not be

feasible for small business firms as they lack the necessary infrastructure.

Quality: Many small business organisations do not adhere to desired standards of quality.

Instead they concentrate on cutting the cost and keeping the prices low. They do not have

adequate resources to invest in quality research and maintain the standards of the industry,

nor do they have the expertise to upgrade technology. In fact maintaining quality is their

weakest point, when competing in global markets.

Capacity utilization: Due to lack of marketing skills or lack of demand, many small

business firms have to operate below full capacity due to which their operating costs tend to

increase. Gradually this leads to sickness and closure of the business.

Technology: Use of outdated technology is often stated as serious lacunae in the case of

small industries, resulting in low productivity and uneconomical production.

Sickness: Prevalence of sickness in small industries has become a point of worry to both the

policy makers and the entrepreneurs. The causes of sickness are both internal and external.

Internal problems include lack of skilled and trained labour and managerial and marketing

skills. Some of the external problems include delayed payment, shortage of working capital,

inadequate loans and lack of demand for their products.

Global competition: Apart from the problems stated above small businesses are not without

fears, especially in the present context of liberalization, privatization and globalization (LPG)

policies being followed by several countries across the world. Let us look into the areas

where small businesses feel threatened with the onslaught of global competition.

CONCLUSION

Competition is not only from medium and large industries, but also from multinational

companies which are giants in terms of their size and business volumes. Opening up of trade

results in cut throat competition for small scale units. It is difficult to withstand the quality

standards, technological skills, financial creditworthiness, managerial and marketing

capabilities of the large industries and multinationals. There is limited access to markets of

developed countries due to the stringent requirements of quality certification like ISO 9000.