Core competence based structuring in service industry and outsourcing as a downsizing strategy

Abstract

Service firms are forced to adapt to the changing conditions and restructure due to the global competition, technological and environmental change which cause more expectations from the service industry as a whole. Downsizing concept, a management strategy, which means act with less managers and employees while increasing effectiveness and flexibility is used as an important organizational change and development agent. Downsizing, which aims to reach a competitive advantage through reducing employee and layer numbers can be performed both by need or disability or a choice of management. Firms performing downsizing as a strategy practices another managerial strategy called outsourcing. This means the firm leaves some of its functions which are not included in its core competencies to other organizations. This method is appliable in service industry as in the manufacturing industry. Service firms can leave some functions such as data processing, security, clearing, repair, food, transportation to the suppliers our of the firm. Outsourcing as a downsizing tool help firms to focus on competencies and develop them and reduce costs, improve quality, save time, improve flexibility and reduce fixed costs. In this study, we examined outsourcing whether it is an effective tool for downsizing while the service firm structures around its core competencies.