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Managerial Problems of Small and Medium Industries

Updated on February 4, 2014

Labor Problem

Perhaps of all the factors of production in industries, labor occupies the most important place. Since the small and medium industries are mostly labor-intensive and employing about 87 per cent of the total industrial labor force, the significance of labor is more in their case than in other sectors of economy. This sector demands rapid development and expansion for creating more employment opportunities for the vast number of unemployed persons in the country. The problems of low productivity of workers in these industries and also their poor wage level were cited. Development of uneconomic units or sector of industry ca not be justified. Therefore, along with the increasing importance given to the promotion and development of small and medium industries, skill of workers needs to be improved, so that they can increase their productivity and thereby justly claim higher wages and raise their stander of living. While discussing the labor problems in Bangladesh, the low literacy rate of in Bangladesh should be borne in mind. This may act as a retarding element in any skill development effort.

Character of Workers

Employment in Bangladesh is seasonal, especially in small and medium industries. The more rural nature the industry the more is the presence of family workers and temporary employment. As the majority of family workers come from the landless class and agriculture sector, many of these workers usually go back to farming employment, especially at the time of sowing and harvesting. This seasonal character of workers also stems from the very nature of agriculture. For example, the agricultural labors are of two types:

i) Surplus Labor, even during the peak periods due to the agricultural structure. This portion of the labor force could be transferred to other occupation without affecting agricultural output. But here the question lies with their quality. Unless they can be developed into industrial workers, they will create new problems instead of solving them. Since, the rural and cottage industries require minimum of training and mostly in known occupations, they can easily accommodated these workers.

ii) Seasonal unemployment, especially during the off-seasons. During this period of the year, most of the surplus agricultural workers migrate to urban areas to work as cooks, domestic servants, office peons taxi driver, bus conductors, brick layers, painters, police constables, porters, cart pullers, bamboo and sugarcane cutters, crew in river crafts, seamen in ocean going vessels and so on. Though majority of them return to agricultural work during peak period, many remain in those activities in urban areas.

Even though agriculture is greatly responsible for producing a large number of temporary workers, it is found that only about 18.5 per cent of the workers are engaged part time. It is normally assumed that under a capitalistic system of production, the presence of hired workers is essential, indicating whether the enterprise is earning any profit or not. The hired labor need to be paid a minimum wage and in the presence of alternative employment opportunities, the wage rate tends to move up to the best alternative employment. Therefore, the necessity to hire labor is determined by marginal productivity of labor. The low marginal productivity of workers forces the owner to employ family labor. Besides, the social system influenced by religion induces the small and medium industries to employ more family workers and especially female workers. From the study of BIDS it is found that about 71 per cent of the workers in small industries are family workers, of whom 27 per cent are proprietors and 44 per cent are family workers. In urban small industries it is found that the presence of family workers is only 17.58 per cent. Among the unpaid family workers, about 65 per cent are female workers. As regards the hired workers, their share is 29 per cent, of which 71 per cent is male and 29 per cent is female. Thus, it is found that family female workers are pre-dominant in rural small industries. Among the industries where the percentage of hired workers is high are:

Jute bailing


Saw milling


Metal Furniture


Hand Saw Timber




Grain Milling


Motor Vehicles Repairing


Bidi ( indigenous tobacco ) making


Brick and Tiles


Job printing


Soap and Tooth Powder


Agar and Atar ( cent)


Metal tools and cutlery




The wage rate of the workers varies between taka 5 to taka 20 per hour and the average wage rate per day is about taka 94.7. It is found that those industries employing more of hired workers are also paying higher wages. From this it is assumes that the value-added per worker is also high in case of those industries where the hired workers constitute the largest share. Wage rates are low in those industries where the family female workers usually work. This may be because of social and religious influences and the lack of alternative job opportunities for the women. In general the wage rate is comparatively high in the case of urban-based small and medium industries.

Education and Training

As could be expected from the low literacy rate in the country, the majority of the workers are illiterate. Nearly 53% per cent of workers are illiterate and of the workers with some formal education, 27 per cent are up to primary, 15 per cent up to secondary and 5 per cent have education above secondary level. The percentage of literate workers is mire in case of men than women. Workers with some sort of training do not exceed 2 per cent (only up to six months) and workers with more than six months training are only 1 per cent.

Some breakthroughs in this regard are expected from the recent new educational policy of the country. The policy has emphasized compulsory primary education directed towards raising the literacy percentage. Adequate provision is to be made for skill development and training in every Thana (smallest administrative unit in Bangladesh). Drop-outs are to be diverted to some skill development or vocational training centers or institutions, keeping in mind the requirements of training and needs of the region.

Problems of Entrepreneurial Development

The main problems with respect to entrepreneurial development in Bangladesh are the institutional and other related factors. The policies relating to small and medium industries are confusing and even the confusing ones could not be put into practice due to not have sufficient funds or trained personnel to carry out and implement their objectives and mission. Financial institutions for small and medium industries are yet to be established. Training facilities are far inadequate and inappropriate and the consultative services are not worth mentioning. In other words, in spite of existence of vigorous entrepreneurs, the feeder services, policies and plans, and institutions for the promotion and development of small and medium industries have stood against the sound development of these industries. Unless these situations is corrected and steps are taken to assist and help the entrepreneurs to develop, the promotion of small and medium industries will remain impossible task. 

Besides, the promotion of industries in Bangladesh is affected by complicated formalities. Since most of the owners of small and medium industries are either illiterate or have very poor educational back ground, it is very difficult for them to fulfill these formalities. The resultant effect is that they become an easy target of the middlemen and bureaucratic red-tape. Complicated tax procedures, controls and licensing systems and the influence of political and bureaucratic factors virtually led to a loss of interest among the real entrepreneurs.  Some Often, dishonest and corrupt people successes in starting new business, which go into liquidation due to their lack of interest and business ability. It is encouraging to note that the new industry policy of the government has offered to solve these problems but the future can tell the consequences

Marketing Problems

The marketing problems of small and medium industries in Bangladesh are many. These includes , the very small size of firms, unthinkably poor financial conditions, poor ability to procure raw materials, competition from foreign products and indigenous products from large industries, poor linkage of with effective channels of distribution, exploitation by the wholesalers, poor knowledge of market, poor market information, practically no advertisement of products to expand or retain market and above all the poor communication system. All these result in poor bargaining power, local oriented market and easy target of exploitation of middlemen. With this picture before us, let us discuss the main features of the marketing of small and medium industries. The following factors usually influence the nature of the marketing, whether local or outside the locality:

· Nature of products

· Location and concentration of activity

· Demand for the product

· Knowledge about the market.

More over, Technology development is lacking in small and medium industries in Bangladesh. More than 50 per cent industries work without machineries; about 25 per cent of machineries used by the rural based industries are secondhand or used machineries. The cause of using secondhand machinery is partly financial.

How to Become a Manager


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