Question

Attempt the following.

Explain the challenges before small business.

Answer 1

Small scale business is playing very important role in the development of developing countries. They faced the following challenges/difficulties:

1. Problems of Marketing: Small business organizations depend excessively on middlemen who many times exploit them by paying the low price and delayed payment. Further direct marketing may not be possible for them as they lack the necessary infrastructure. Major marketing problem is lack of advertising, nonbreeding of products, poor quality, transportation problem, local difficulties, competition, etc.
2. Infrastructural Problem: Problems of infrastructure faced by small business are power cuts, improper transport facility, a problem like traffic congestions, bottlenecks, strikes, rise in freight charges, inadequate space, bad repair of premises, unsuitable location, high rent, etc. These problems definitely affect the smooth working of small business.
3. Credit and Finance: Lack of finance is the major problem faced by small business. Artisans or Craftsmen running cottage industry take credits from Mahajan's or traders who charge a large amount of interest from them. For small scale industries, institutional source of finance (e.g. banks) is also available, but the funds allocated to this sector are inadequate.
4. Delayed Payment: They face the problem of delayed payment by large firms and Government departments.
5. Sickness Problem: According to RBI a sick unit is that which has incurred a cash loss for one year, is likely to continue it for current year as well as following years and the unit has an imbalance in the financial structure; Sickness is generally seen in small business industries like cotton, jute, sugar, textile, etc. Internal causes of sickness are lack of skilled labour, faulty planning, the problem of recovery, etc. External causes of sickness are a shortage of capital, inadequate loans, shortage of raw material, etc. However, rehabilitation of sick unit is a costly affair.
6. Personal Problems: Personal problems like spending long hours to work and less time with family and the rewards have not been favourable.
7. Shortage of Raw Material: Shortage of raw material often takes place due to reasons like natural calamities, transport problem, industrial strikes, poor quality of raw material, exploitation done by traders, etc. Traders or agents who supply raw material often exploit the owner by charging higher prices. They also insist on buying finished products at a lower rate. Thus, small business owners are subject to double exploitation.
8. Outdated Technology: Use of low-grade technical know-how and skills have resulted in low productivity in small business industries. Many units in small business make use of primitive methods of production, this leads to an increase in the cost of production, whereas productivity is low. Small units often do not care about the changing tastes and fashions of customers.
9. Underutilization of Capacity: Small business units cannot utilize optimum resources and capacity due to lack of marketing skills, lack of demand, they work below full capacity, etc. This lead to an increase in the cost and wastage of resources.
10. Labour Problem: It includes highly demanding employees, absenteeism, lack of skilled workers and transportation of workers, strikes, high wage rates, inefficiency, etc.