What is Small Scale Production?
When production is carried on with small quantities of factors of production, the scale of production is said to be small. In spite of growing tendency towards large-scale operations, small scale production has got its own place in the economic activities of nations.
Even in industrially advanced countries small-scale production has a role. Inspite of massive increase in large-scale production, the small scale could not be exterminated because of certain peculiarities of small-scale. These peculiarities have enabled the small-scale industries to survive at the face of competition by large scale.
When is Small Scale Production Preferred?
Certain occupations have to be necessarily carried on a small scale and they could not be conducted on a large scale. Given below are a few example where Small Scale production is preferred.
1. The occupation requiring personal attention and care such as tailoring, embroidery, jewellery, etc. can be conducted only on a small scale.
2. Products of artistic excellence are produced by handicrafts men on a small scale.
3. Some products do not command wide markets and must be produced only on a small scale.
4. Some occupations by their very nature cannot be conducted on a large scale; for example: Agriculture.
5. Even industries at the experimental stage have to be run on small scale.
6. Handicrafts men who want to remain independent work on a small-scale.
Advantages of small scale production
1. The master can exercise close watch on every one and the workers cannot shirk work;
2. There is much of savings in maintaining books of accounts, checks and counter-checks which would be very elaborate and expensive in large scale;
3. The relation between the master and laborers would be very cordial. There would be intimate bondage between them and the servants would owe allegiance to the master.
4. Small producers can easily adopt to the changing business conditions.
5. Self-interest motivates the producer to avoid wastes of raw material and working time.
6. Good understanding between workers and management.
7. Small-scale production can be carried on with simple techniques and machines at a lower cost.
8. A Small-scale concern requires less capital.
Disadvantages of Small Scale production
1. Economies available to large-scale operation, such as labour economies, marketing economies, technical economies, managerial economies and financial economies may not be available to small-scale production.
2. Articles of standard type cannot be produced as in the case of large scale. Of course, this difficulty can be minimized if machinery is used in a small-scale.
3. This method is unsuited to mass production to cater divider markets.
4. Small producer cannot use modern machinery and labor-saving devices.
5. Less scope for research, experimentation and specialisation, small firms are not in a position to use technical, financial and marketing economies.
6. A small scale producer cannot effectively utilize by-products.
7. Small scale production unsuited for mass production to cater wider markets.
The disadvantages can be reduced if government takes steps to improve the small-scale production. In many countries including India, small-scale industries have become complementary to large scale industries. Because of its special advantage in solving unemployment problem, the small-scale industries are encouraged by the governments.