Problems faced by Small Scale Industries

Problems faced by Small Scale Industries

Some of the major problems faced by small scale Industries are

  1. Production Problems,
  2. Technological Problems,
  3. Infrastructural Problems,
  4. Survival Problems,
  5. Managerial Problems,
  6. Marketing Problems,
  7. Financial Problems,
  8. Labour Problems.

Let us discuss about the major problems faced by SSI in detail below.

Problems faced by Small Scale Industries

Problems faced by Small Scale Industries

1. Production Problems faced by Small Scale Industries

The raw material required by the small scale industries may not be available in nearby places or may not be available in abundance.

SSI may not have adequate storing capacity. Hence, goods cannot be purchased in bulk and stored in large quantity.

Inadequate infrastructural facilities creates the problem of acute shortage of basic raw materials, if it has to be imported from distant places.

Small scale enterprises are unable to make full utilization of plant capacity as they face shortage of power supply. This affects their manufacturing progress. They could not afford to install their own power plant due to shortage of capital.

2. Technological Problems faced by Small Scale Industries

Small scale industries do not have adequate funds to spend on latest technologies or sophisticated technologies. Hence, they face technological problems due to traditional technology adopted by them. Due to old technology either production process may be slow or there may not be demand for the products produced by SSI.

3. Infrastructural Problems faced by Small Scale Industries

Small scale industries are set up in rural and backward areas as incentives are given by the government for setting up of industries in these areas; These areas may not have good roads, goods warehouses, proper transportation, proper established channels of telecommunication and adequate supply of power. Lack of any of these facility can cause potential damage to the firm’s value chain process.

4. Survival Problems faced by Small Scale Industries

Inadequate marketing facilities, lack of funds, etc., affect the long run profit earning capacity of SSI.

SSI generates less return on investment and affects the chances of survival of enterprises run by small scale entrepreneurs.

5. Managerial Problems faced by Small Scale Industries

The entrepreneur has to perform various managerial functions without having any exposure to professional education or formal training. SSI cannot recruit various people for carrying out managerial functions like large scale industries.

6. Marketing Problems faced by Small Scale Industries

Large scale industries can spend a lot of money on marketing. Whereas the small scale industries may lack it. Hence, they cannot establish their name in the market due to less money spent on advertising.

Similarly, small scale industries concentrate on one product. They cannot adopt cost oriented methods of pricing.

Small scale industries also face problems of branding their products, etc.

Small scale industries find it difficult to distribute their products to the markets which are located at far off places because of improper roads or highways.

Large scale industries pose cut throat competition to small scale industries due to less pricing and effective marketing. Small scale industries find very difficult to compete with large scale industries.

7. Financial Problems faced by Small Scale Industries

SSI units always face shortage of working capital as the goods sold by them may not be realized into cash quickly.

Loans are not granted to SSI by financial institutions quickly.

They also face investment risk as the project undertaken by them may not be feasible.

SSI do not have adequate assets to get secured loans from financial institutions,

They also find it difficult to meet day-to-day expenses due to shortage of working capital.

8. Labour Problems faced by Small Scale Industries

SSI find difficult to retain qualified staff as they cannot spend a good deal of money on labour cost or salaries.

SSIs are mostly located in backward regions which also pose a problem of recruiting qualified professionals.