Small Business Test - 16

Finance plays a major role in the working of any enterprise or industry as it is known as the “Lifeblood” of a business organisation. There are various problems that are faced by a small business while arranging the sources of funds that help in the establishment and working of small business. The major problems that are a small business face with respect to the arrangement and procurement of funds are:-

1. Many banks don’t provide loans to small businesses without any collateral security and guarantee.

2. Small business suffers from lack of working capital which is required to meet the day-to-day expenses of the business this is because they get delayed payments or their stock is not sold in the market.

3. Many financial institutions don’t have trust in the people running a small business as they don’t have a credit worthiness that is required to generate funds for the business.

Thus all of the above options are correct. 

Small businesses usually don’t operate at their full capacity which is required to run the business efficiently because they lack marketing skills. 

They also don’t use the latest technology which is available in the market due to lack of affordability, and these businesses are generally operated by a single person and that may not possess all the managerial skills that are required to run a business smoothly. Therefore, the option A is true.

Productivity per employee is relatively high and employee turn over is generally low is not true in relation to labour as a problem for small businesses.

The basic motivation for an entrepreneur is to achieve something new or different. The idea he /she has created by involving his creative skills and knowledge and what can he/she achieve by investing in that idea.

Small business usually faces many problems with respect to finance, marketing, labour, managerial skills, quality, etc. When it comes to managerial skills small business is not able to fully utilise its managerial skills as it is generally promoted and operated by a single person and that person may not possess all the necessary skills required to run the business efficiently. Many of the small business entrepreneurs do have sound technical knowledge about the latest change in technology but they may not be successful in applying the trend in their business. They don’t have much to take care of all the activities of the business and due to lack of capital, they are also not able to afford the professional managers that could help them run their business effectively and efficiently. Therefore, all of the above options are correct.  

All of the above are the areas where small businesses feel threatened with the onslaught of global competition brought in by the LPG policy i.e.

Lack of skilled and trained labour is not an external cause of sickness of small businesses. Small Scale Industries (SSIs) play vital role in the economic development of a country. Some SSIs turn out to be sick due to various reasons. Some of the major causes for sickness in small scale industries are dealt in brief:

Small business has many problems related to the quality of the products, arrangement of funds, marketing of the product. Small business is not able to adhere to the quality of the products that it offers in the market, many of the small business entrepreneurs do have sound technical knowledge about the latest change in technology but they may not be successful in applying the trend in their business and due to lack of marketing skills also many business firms are not able to operate with the full capacity which is required to run the business. Therefore, only the option ‘B’ is not true.   

Marketing is an activity that is necessarily done for the promotion of the product which results in the sale of the product. Marketing plays a vital role in the development and growth of any business but this part is weak when the size of the organisation is small as direct marketing which involves the promotion of product with the help of social media, campaigns, newspapers, mails, etc. is expensive which is not feasible and affordable by the small scale organisations due to lack of capital investments. Also, these small organisations are mostly dependent upon the intermediaries and middleman for selling their products and services in the market due to which these intermediaries take undue advantage of the weakness of these organisations and exploit them by not paying them in time and due to lack of funds these organisations cannot invest much in marketing-related activities of the business. Thus, both ‘A’ and ‘B’ options are correct. 

NSIC stand for National Small Industries Corporation.National Small Industries Corporation Limited (NSIC) is a Mini Ratna PSU established by the Government of India in 1955 It falls under Ministry of Micro, Small & Medium Enterprises of India.