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Typical problems faced by ssi


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Typical problems faced by ssi

  1. 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 thecountry. Small scale industries are the industries which are run with the help of their labours andwhich also use some simple machine and power. The investment scale in this industry from 50lakh to 1 crore for fixed assets. Irrespective number of worker engaged is small scale industryunit. In India these type of industries are permuted to meet with the problem of excess populationand unemployment so the government of India prate entrepreneur to step up small scaleindustries 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 ofraw materials are some of these areas. This gives rise to several problems. Most of theseproblems can be attributed to the small size of their business, which prevents them from takingadvantages, which accrue to large business organizations. However, the problems faced are notsimilar to all the categories of small businesses. The problems of traditional small scale unitsinclude remote location with less developed infrastructural facilities, lack of managerial talent,poor quality, traditional technology and inadequate availability of finance.
  2. 2. INTRODUCTION The definition for small-scale industrial undertakings has changed over time. Initially theywere classified into two categories- those using power with less than 50 employees and those notusing power with the employee strength being more than 50 but less than 100. However thecapital resources invested on plant and machinery buildings have been the primary criteria todifferentiate the small-scale industries from the large and medium scale industries. An industrialunit can be categorized as a small- scale unit if it fulfils the capital investment limit fixed by theGovernment of India for the small- scale sector. Any industrial unit to be regarded as Small Scale Industrial unit the following condition is tobe satisfied: - Investment in fixed assets like plants and equipments either held on ownershipterms on lease or on hire purchase should not be more than Rs 10 million. However the unit in noway can be owned or controlled or ancillary of any other industrial unit. The traditional small-scale industries clearly differ from their modern counterparts in manyrespects. The traditional units are highly labor consuming with their age-old machineries andconventional techniques of production resulting in poor productivity rate whereas the modernsmall-scale units are much more productive with less manpower and more sophisticatedequipments. Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some ofthe traditional small-scale industries in India. The modern small industries offer a wide range ofproducts starting from simple items like hosiery products, garments, leather products, fishinghook etc to more sophisticated items like television sets, electronics control system, variousengineering products especially as ancillaries to large industrial undertakings.In India these type of industries are permuted to meet with the problem of excess population andunemployment so the government of India prate entrepreneur to step up small scale industries byaiding him by giving loans, land ,guidance etc .
  3. 3. Characteristics of a Small Scale Industries:A few examples of small-scale businesses include a flea market or shopping mall booth, aconsultancy 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 sellsproducts and/or services supplied by a franchise company or created by the ownerhimself. This type of business is flexible, which means that the owner can generally sethours at any time to accommodate customers.StartupThe initial start-up costs for a small-scale business are usually pretty low, depending onthe specific business model and what products/services are being sold. A small-scalebusiness selling retail goods at flea markets will only need require funds to purchaseinitial inventory and pay for a spot at the flea market. Likewise, the owner of a smallbusiness selling homemade goods only needs to worry about purchasing materials tomake the goods. Small-scale businesses that offer consultation services, such as taxpreparation or nutritional services, also have very low overhead costs.PortabilityA 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 thats typically required is empty space at a shopping mall with a small table or boothto display products. Small-scale businesses also need a way to accept payments. Smallcredit card terminals and portable cash registers are perfect for these needs.EmployeesUsually very few employees, if any, work for a small-scale business. This type ofbusiness may have one or two employees for busy times. Typically, however, suchbusinesses cannot afford to pay wages since a majority of the profits goes back into thebusiness or pays for the owners personal expenses. As such, owners often staff small-scale businesses themselves, allowing them to keep whatever profits they make.
  4. 4. HOW TO START A SMALL SCALE INDUSTRYThe 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. 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. 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. 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.