1. Goran Vučur, University of Dubrovnik, Croatia

Today's business conditions, which are largely dictated by the global crisis, forced the companies to fully adapt to market conditions and find acceptable solutions that will result in business savings. Changing market conditions require a quick reaction to the changes from a company, which is not possible if the company is not flexible. Improvement in flexibility and competitive advantage is achieved by structural changes in the business activities of the company, where outsourcing is offered as one of the options. Outsourcing means leaving certain activities, functions or processes to external specialized companies that will perform allocated duties on behalf of the parent company. When it comes to small companies, outsourcing is most commonly applied to the activities related to logistics, IT technology, legal and accounting jobs, human resources, etc. The purpose of this paper is to explore the role of outsourcing in restructuring of small companies in crisis conditions. The aim is to show the possibilities of applying outsourcing in small companies to help reduce operating costs and establish a business network of associates, increase the flexibility and achieve competitiveness in the market. On a concrete practical example will be examined savings that are achieved by turning a part of fixed costs into variable, which depend solely on the business volume of the companies. The companies, in conditions of reduced demand for goods and services, do not have to pay expensive fixed costs, so-called “permanent costs”, but the company cost structure is largely dependent on the dynamics of performing certain activities. The most significant elements of cost structure of the companies which transform into variable costs are labor costs, which in unfavorable market situations for the company are a burden, and whose transition to variable cost increases business flexibility. Also, the impact of expansion of network of associates on access to new knowledge and skills will be analyzed. For a concrete example it was found that access to new markets can be achieved through a network of external business partners that a company can use to establish business cooperation with business associates of external partners, in a way that all participants in the business network benefit from it. Namely, companies that have small market shares are weaker than other market participants and through the business network they can gain access to new markets and further strengthen their positions. Achieving additional benefits provided by outsourcing, besides savings in overall operating costs, is expressed through easier access to information and funding sources, as well as new ways of procurement, distribution and sale of certain products or services.

Key words: outsourcing; small companies; costs; activities; business improvement

Conference: REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies

Date: 24.01.2014.