Answer :

The problems faced by small scale industries are mentioned below:

a. The main problem faced by the small scale industries is the lack of Finance. Finance is required to establish business and carry out their day to day operations. They do not have the creditworthiness and the Collateral to raise the capital from the Financial Institutions. Banks are also hesitant to lend them loans. Eventually, they have to rely on the money lenders who chart exorbitant rates of interest and exploit them. They also fall short of the working capital because of the delayed payment.


b. A small business is established by a manager who does not have the required managerial skills to run the business. Some of the managers have good technical knowledge but are not successful in marketing their product. Some of them may have good advertising techniques but may not have adequate technical knowledge. Due to the shortage of funds, they cannot employ a professional manager.


c. They do not have easy access to raw material. They have to make a compromise either on the quality of the raw material for pe high price for its procurement. They usually purchase small quantities of raw material because of the lack of storage capacity and low bargaining power.


d. Due to the shortage of funds these industries are not able to employ workers at a high salary. This affects the willingness to work of the employee. This leads to lower productivity per employee and higher employee turnover. Division of labour can also not be practiced in this Industries.


e. These industries are not able to market their products in the right direction. They do not have the required infrastructure which is required for efficient marketing. They have to depend excessively on the middlemen which exploit by taking a very low price for the good.


f. Due to the various internal and external problems faced by these industries, most of these units are considered to be sick units. Internal problems include a lack of skilled labour and adequate marketing skills. External problems include delay payments and inadequate loans.


g. The technology used by these Industries is obsolete. They are unable to afford more advanced technology.


h. They always operate below their full capacity due to the law of demand. This leads to an increase in their operating cost which eventually leads to its sickness and closure.


i. They are not able to withstand the competition in the global market with the larger MNCs.


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