Page 215 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Entrepreneurship and Small Business Management

Notes simultaneously which may not be closely interrelated on even interdependent. The important
causes of industrial sickness can be classified as:
1. External causes, and

2. Internal causes
Figure 14.1: Various Causes of Industrial Sickness

Causes of
Sickness
External Internet
Causes Causes
Management Infrastructural
(Production, Bottlenecks Raw Material
Planning and Financial Problems
Implementation Marketing and
General
Management) Market Government
Constraints
Controls and
Policies
Labour and
Industrial Relations
Other Extraneous
Factors
Source: Lall Madhurima and Sahai Shikha (2008), Entrepreneurship, Excel Books Pvt. Ltd.
External Causes: The external causes are beyond the control of the industry, and usually effect
the industry group as a whole, e.g.,
Non-availability of raw material (or irregular supply, or availability at high prices).
A general recessionary trend in the economy which affects the overall performance of the
industrial units.
High cost of production facing a low realization of sales revenue.
Irregular supply of vital inputs such as power, water, transportation, etc.
Fiscal irregularities such as those possible in excise duties, import duties, etc.

Unfavourable change in government/institutional policies.
Industrial strikes, unrest, etc.
Natural calamities such as drought, earthquakes, flood, etc.
Internal Causes: Internal causes are within the control of the industry. It may be an outcome of
some internal deficiencies or shortcomings in its various functional areas such as marketing,
management production, finance, etc. Most of the causes of industrial sickness are, however, due
to internal factors such as:
Lack of control on key areas like management, finance, marketing, inventory, etc.
Shortage of working capital.

An improper demand forecast for the products to be sold.
Inappropriate choice of technology, non-flexibility of fixed assets, wrong location or
layout of industry.

A defective capital structure especially on account of delayed constructions and operations,
resulting in cost overruns and non-budgeted borrowings interest burden there from.

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