Advantages and Disadvantages of Small Scale Industries

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Advantages and Disadvantages of Small Scale Industries

Small scale industries are small businesses that do not have a large output. They may be contrasted to large corporations that use huge factories to create thousands of products a day.

An example of a small scale industry is a family run workshop creating hand made products like clothing or carved toys. With few employees and a small production space, this is definitely a small scale industry.

Small scale industries are sometimes called cottage industries, referring to the traditional locations in which they were housed. The advantages and disadvantages of small scale industries are detailed below.

Advantages of small scale industries

1. Niche charm: Something made by a small scale producer feels much more special and unique than something that has been churned out along with thousands of identical items in a large factory.

2. Local flavor: Products made by small scale industries often have a recognizable – and often quirky – local feel to them that is characteristic of the area in which they were produced.

3. A humanizing element: small scale industries often have a very human face as customers can get to know the producers personally.

4. Traditional skill: Rather than using heavy duty machinery, items produced by small scale industries are often produced using traditional skills such as weaving, carving or hand painting. These skills are valuable and make the products more precious.

5. An alternative economy: For people who do not like to hand over their money to large corporations (perhaps because they disagree with that corporation’s values or their way of acting in the world), small scale industries provide an alternative source of goods and services.

Disadvantages of small scale industries

1. Difficulty with meeting demand: When products are in high demand, small scale industries can often struggle to increase their output sufficiently to meet that demand.

2. Geographically restricted: Small scale industries may be concentrated in a particular town or even in one single building. This can limit their ability to become household names across the globe.

3. Less financial power: Small scale industries usually deal with less money (both in terms of ingoings and outgoings) than larger factories and so have less financial weight.

4. Access to machinery: Small scale industries usually do not have the space or the money to use large scale machinery. However, they may have access to expensive, specialized equipment.

5. A niche business: What makes the products of small scale industries attractive to some – i.e. their nicheness and uniqueness – may make them less attractive to others. Small scale industries often do not have the capacity to please all tastes.


Unique and charming, small scale industries may lack global reach and financial power but they make up for that by being innovative and authentic. It is worth bearing in mind, moreover, that many brands that are now global names started life as very small scale industries. So, every small scale industry has the potential to become a large corporation. But, not all small scale industries want to do so, perhaps because they feel they would lose some of their selling points in that case.

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