Internal Causes Of Industrial Sickness

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Internal Causes of Industrial Sickness

Such cases are those which are within the control of the concerned industrial unit. They generally arise due to some deficiencies in the internal functioning of the enterprise. These include:

(i)    Faulty Planning. Some faults can occur at the planning stage. The first fault could relate to the location of the unit. If the unit is located in such a place which lacks basic infrastructures facilities, it is likely to face problems. Secondly, the unit may not undertake proper market analysis. It may start production without finding out its market potential. Such a unit may face problems in the long run. Thirdly, the unit may make a wrong estimate of project cost and may indulge in wasteful expenditure in the initial stages.

(ii)    Inappropriate Technology. The technology adopted by the unit may turn out to be inappropriate or become obsolete. Such a unit is likely to suffer a cost and price disadvantage vis-à-vis units with the latest technology. not only this some units, especially the smaller units do not take professional guidance in choosing the right type of machinery. If the machinery acquired turns out to be inappropriate, the unit is likely to suffer.

(iii)    Financial Problems. Inadequate amount of capital, incompetent finical planning and control, poor management of working capital, cash flows, and capital expenditures, fatuity dividend policy, etc., may ultimately spell doom for an industrial unit.

(iv)    Incompetence. Many small entrepreneurs setting up business are incompetent in the sense that they do not have basic technical knowledge of the product which they want to bring out. They generally lack basic business acumen and the techniques of costing of their products, marketing their products and keeping accounts, etc.

(v)    Mis-management. Another important cause of sickness is mismanagement. Faulty managerial decisions relating to production, marketing, finance, personnel, etc., can destroy a business. For example, absence of quality control system, lack of inventory management, poor maintenance of plant and machinery and failure to renovate worn-out equipment are some examples of poor production management. Similarly, improper pricing policies, inadequate sales promotion tools, lack of attention ot packaging, etc., are some of the examples of poor marketing management. Lack of discipline on the cost front inefficient use of working capital, extravagant capital expenditure, faulty dividend policy, etc., are the examples of financial mismanagement.

(vi)    Labour Problems. Some small enterprises get sick due to constant labour problems. When labour and management do not see eye to eye on different issues such as wages, bonus, suspensions, retrenchment, wage-hike, etc., the labour may resort to strikes which may ultimately result in great losses of the firm.

(vii)    Feeble Marketing Skills. An entrepreneur may not be capable to make proper demand projections, to push the product in the market, to build up market image  and customer loyalty, to face the competition, to anticipate recessionary situations   and customer loyalty, to face the competition, to anticipate recessionary situations and to take advance remedial measures

(viii)    Fraudulent Practices. Many promoters of industrial unit siphon off funds and resources to personally enrich themselves. They rake loans from banks and other financial institutions with the intention of using them form personal expenditures. They take maximum advantage of all concessions and facilities offered by the government without any intention to make the enterprise strong. Such practices would make the unit sick.

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