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Long answer type questions.

Explain problems faced by small business.


Solution

Following are the major problems faced by small-scale industries (SSIs) in India:
i. Inadequate finance and credit: The SSIs have always faced the problem of inadequate finance and credit. This is partly because of the scarcity of capital available with the entrepreneurs in this sector and partly due to the lack of assets that can be offered as collateral/mortgage to secure bank loans.

ii. Problem of procuring raw materials: Due to inadequate finance and credit, SSIs face shortage of funds for procuring raw materials and for carrying out their day-to-day business activities.

iii. Lack of skilled labour: As SSIs cannot afford to pay high salaries to their employees, they employ semi-skilled or unskilled labourers.

iv. Marketing: Efficient techniques for marketing and promoting products have remained an unfulfilled dream for small-scale industries. Because of this lack of efficient marketing techniques, small units are forced to sell their products in the market through middlemen, which further leads to the exploitation of the small-scale entrepreneurs.

v. Obsolete/outdated technology: Many small-scale industries use production techniques which are outdated and obsolete. This lowers their productivity and makes their operations unfeasible.

vi. Poor quality: SSIs are characterised by outdated technology and inefficient labour force. Furthermore, the owners of these industries lack managerial skills and creditworthiness required to run a business successfully. Thus, they have to compromise on quality in order to reduce the costs. This poor quality poses a serious threat to them, particularly while competing with the global corporations.

Business Studies
Org of Comm & Mgmt (2014)
Standard XI

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