Small scale industry is an industry that is independently owned and operated and is not dominant in its field of operation. Such units are generally under single ownership. So it is a sole proprietorship or sometimes a partnership.
The rationale behind the development of small scale industries in developing countries –
Lack of finance – This including weak equity base, poor utilization of assets, inefficient working capital management, an absence of costing & pricing, an absence of planning and budgeting and inappropriate utilization or diversion of funds.
Bad production Policies – The another important reason for sickness is a wrong selection of site, which is related to production, inappropriate plant and machinery, bad maintenance of plant, lack of quality control and so on.
Marketing and sickness – This is another part which always affects the health of any sector as well as SSI. This including wrong ‘demand forecasting, selection of appropriate product mix, the absence of product planning, wrong market research method and bad sales promotions.
Inappropriate Personnel Management – Another internal reason for the sickness of SSI is Inappropriate Personnel Management politics which includes bad wages and salary administration, bad, labour relation etc.
Ineffective Corporate Management – Another reason is Ineffective Corporate which includes improper corporate planning, lack of integrity in for management, Lack of coordination and control etc.
Small scale units are more change vulnerable and highly imprudent and accessible to socio-economic conditions. They are more flexible to adopt changes like the introduction of new products, a new method of production, new materials, new markets and the new form of organization etc