Rationalisation In Business

Rationalisation is an important feature of large scale production. It implies the elimination of all kinds of wastes and diseconomies in the methods of production. It aims at the achievement of maximum economies in production. Professor Florence defined rationalisation in business as elimination of waste and inefficiency in the industry by the combined efforts of the industry.

Rationalisation in business industries can be introduced  by adopting scientific methods.

Objectives of Rationalisation In Business

1) Securing maximum labor efficiency with minimum efforts.

2) Elimination of waste in the utilization of raw-materials.

3) Elimination of unnecessary middlemen.

4) Simplification in distribution of goods.

5) Achievement of economic stability.

6) Promotion of standard of living.

7) Provision of commodities at cheaper rates.

8) Distribution of profits between workers and employers by increasing the productivity of the industry.

Advantages of Rationalisation In Business

 Rationalisation in business has the following advantages

1) It brings more profits and reduces costs of production.

2) It organizes productive activities with great efficiency.

3) It establishes co-ordination between consumption and production and achieves economic stability. This is due to the increase in the profits of the entrepreneurs and availability of goods at lower prices to the consumers.

4) It eliminates cut-throat competition by establishing co-operation between the producers.

5) It assigns importance to industrial research and experiments. It provides higher and attractive wages to the labourers by increasing their efficiency.

7) It helps in the provision of superior quality goods at lower prices to the consumers. As a result the standard of living of the consumers increases.

8) It increases the national income.

9) It reconciles the interests of the consumers and the producers.

10) It increases the competitive strength of the industry especially against foreign companies.

Disadvantages of Rationalisation In Business

Rationalisation has certain disadvantages. They are explained as follows-

1. Unemployment : Rationalisation in business leads to the introduction of machinery. So generally the labourers oppose the adoption of rationalisation as They consider that it leads to the unemployment of labourers. This is real in the short period only. But it is not real in the long period. As rationalisation reduces cost of production, prices fall, demand and output increase. In order to meet the growing demand, new machines and labourers are employed. This leads to increase in employment opportunities.

2. Growth of Monopoly : There is danger of the emergency of monopoly institutions. Growth of monopoly institutions destroy the growth of cottage and small scale industries.

3. Beneficial to Producers: Some economists argued that the advantages of rationalisation are enjoyed by the producers only. The consumers are deprived of its advantages.

4. Heavy investment: Rationalisation in business requires huge capital. Due to the invention of new technology and machinery, the existing machinery will become out-dated and useless. So the capital invested on machinery is considered waste after sometime. That is why the producers feel it uneconomical to invest on machinery. So, they oppose rationalisation in business.

In spite of its disadvantages, rationalisation is a necessary step, its evils can be eliminated witfi the co-operation of the government.

Difference Between Rationalisation and Scientific Management

Both Rationalisation and Scientific Management aim at the elimination of waste and reduction of in production expenses. But there are some differences in between two concepts. The are mentioned as follows:

1) Scientific Management is concerned to a firm. On the other hand, Rationalisation is applicable to the whole industry.

2) Rationalisation  in business provides scope for combinations. But scientific management has no such scope.

3) The benefit secured from scientific management are enjoyed by the the employees of the firm only. As against the benefits of Rationalisation  are enjoyed by the labourers and employers of the firm.

4) Rationalisation can be successfully implemented with the co=operation and interference of the government. Closure of sick and uneconomic units or provision of unemployment relief to the labourers and other schemes can be implemented only with the cooperation of the government. But as scientific management is concerned with a firm, the assistance of government is not required.

Hence, Scientific management and Rationalisation in business are not the same.