Discuss the problems faced by small scale industries. 

1. Finance : Generally small business begin with a small capital base. Many of the units in small sector lack the credit worthiness required to raise required amounts as capital from 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 payments of dues to them or due to locking up of their capital in unsold stocks.

2. Raw Materials : Another major problem of small business is the procurement of raw materials. As the required materials, are not available, they have to compromise on the quality or have to pay 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 cannot afford to store the materials.

3. Managerial skills : Small business is generally promoted and operated by single persons, 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 to professional managers.

4. Labour : Small business firms cannot afford to pay higher salaries to the employees, with affects employees willingness to work hard and produce more. Thus, productivity per employee is relatively low and employee turnover is generally high. Because of lower remuneration offered attracting talented people is a major problem in small business organisations.

5. Marketing : Effective marketing of goods requires a through understanding of customer’s needs and requirements. In most cases, marketing is a weaker area of small organisation. These organizations have therefore, to depend excessively on middlemen, which at items exploit them by payment low price and delayed payments.

6. Quality : Many small business organizations don’t adhere to desired standards of quality. In stead of concentrate on cutting the cost and keeping the prices low. They do not have adequate resources to invest in quality research and maintain the industry standards, nor do they have the expertise to upgrade technologically.

7. 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.

8. Technology : Use of outdated technology is often stated as serious lacunae in the case of small industries, resulting in low productivity and uneconomical production.

9. 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, lack of managerial skills, lack of marketing skills. Some of the external problems include delayed payments, shortage of working capital, inadequate loans and lack of demand for their products.

10. Global Competition : Small business has a serious threat to its survival from :

a. Competition from not only medium and large industries but also from MNCs.

b. Difficulty to withstand the quality standards, technological skills and financial credit worthiness of MNCs.