OPERATIONS AND SURVIVAL OF SMALL UNITS
Large scale units avail of different types of economies which reduce their average cost of production and thus increase the profitability and competitive strength. In spite of such superiority over smaller units, they have not outcast the smaller units from the economy. Even in a highly developed capitalist economy like the USA the number of small scale firms is substantial. The following reasons can be traced for the co-existence of small scale units:
State Patronage: Government encourages small scale units through certain assistance and incentives. Such state patronage is provided to small scale units because it creates more employment opportunities, decentralizes industrial activities, minimizes concentration of wealth in few hands and preserves the skill of the artisans.
Retainer system: Large units can afford to spend heavily on costly machines and fulltime professional experts. Under the present business world, small firms can also use such facilities with limited resources. They can hire such machines and can have management consultancy services at moderate fees.
Individual tastes: Small units are more suitable for such activities where satisfaction of diverse individual taste is involved. For example tailoring, making of precious ornaments, photography, etc.
Change in fashions: Large scale production is not suitable for the fashion-oriented products. Small units can quickly adjust to the changing character of the demand.
Flexibility: Small units enjoy high flexibility in their business operations. Due to small investment they change the production facilities easily. It is also easy to change the line of production.
Ancillary industries: Large units needing varied standard components can conveniently rely on small units for their requirements of such small pats. Thus small units survive as the ancillary units to large units.
New source of power: When power was generated through boilers, it was not economical to run small machines. Due to invention of electric power small motors can be employed conveniently. Similarly diesel engines of small horse powers can be used as per the requirements of the small units.
Scattered raw materials and market: There are certain industries whose raw materials as well as demand for the products both are scattered. Small units are more suitable to such production e.g. bricks, stones, tiles, and such other building materials.
Specialized production: Certain production is of a specialized nature which is not manufactured on mass level. Small scale units are more suitable to such specific production e.g. handicrafts, paintings, etc.
Simple and efficient management: Due to the limited span of activities, it is simple to manage it by one or few persons. The personal interest of proprietor contributes directly to the benefits out of the business. Moreover, personal contact with employees and customers, increase the efficiency of the unit.
Personal motives: Sometimes, the possibilities of expansion and development of small unit are denied by proprietors on the ground that they will not get the benefits of small scale unit. Moreover they are not ready to part with the management and control which they enjoy in small unit.
Less investment: Due to negligible investments, it is convenient to promote a small scale unit. Due to this technicians and job-seekers prefer to establish their own unit rather than to go for employment
The small scale units all over the world are now resorting to high technology products. They have even upgraded their ability to supply to aircraft and large automobile manufacturers. In some cases the smaller units are supplying hi tech parts even for satellites and rocket engines. Some of the large industries are entrusting the small units to make the entire product like low tension switchgear, pack them as per marketing instructions of the large industry and even send hem to the destination. Small scale units will continue to be there very much and so are the technical and management skills of the owners.