1. 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.

2. 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 .

3. 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.

4. 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.

5. • 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

6. 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.

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.
• 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.