Small scale production firms have the actual survival value side by side with large scale production. The facts that small scale firms have a firm footing along with the large scale firms. The reasons are that small scale firms concerns enjoy certain advantages which are peculiar to their own. They are following:
Reasons of the Survival of Small Scale Firms or (Advantages):
Small scale production is most suitable and economical than large scale production:
(i) Close supervision. When production is being carried on a small scale, the producer can easily supervise each part of the work. The raw material is fully utilized by avoiding the waste. As the workers are closely supervised efficiently. The machines are carefully handled. All this results in lowering the of cost production.
(ii) Economic independence. In a small scale firm, the producer is generally the sole proprietor himself. When he clearly knows that the whole profit will go to him and not to anybody else, he works untiringly.
(iii) Economy in management. A large firm has to spend a sizeable portion of the income on maintaining administrative machinery but that is not the case with the small firm. In a small firm, the proprietor himself is the manager. He does not need superfluous account keeping. He just writes the income and expenditure of his business on a small notebook and keeps that with himself.
(iv) Close contact with customers. As the workers employed in a small firm are few in numbers, the employer can have a close contact with them. He can listen to their grievances personally and can redress them if he thinks them justified. Due to better understanding between the owner and the employees, the chances of industrial disputes are reduced.
(v) Greater adaptability to changes. Another advantage claimed by a small firm is that it can easily adjust its supply to the changed conditions in demand. As the small firm has not to consult the various share-holders of the business, so it can easily arrive at quick decisions and these decisions can be promptly executed.
(vi) When the demand for a commodity is small and is expected to remain as such for many years to come, then the production will not be carried out on a large scale. Similarly, if the demand is of a fluctuating nature, the goods are produced on small scale and not on large scale.
(vii) Production is also carried on small scale where the scope of division of labor is limited. For example, in tailoring, repairing agricultural concerns, the division of labor cannot be introduced on a large scale. In tailoring, the clothes are prepared according to the individual tastes of the customers. So, is also the case in repairing. In agricultural work cannot be divided into processes and sub-processes. So, it is generally organized on a small scale.
(viii) Small scale production is also able to hold its own in that field where production is carried on according to the individual tastes. For instance, in jewellery, embroidery works, etc., the demand is met locally and the work is done strictly according to the wishes of the customers customers.
(ix) The goods are also produced on small scale where it is not possible to standardize them.