Typology of contractors for forestry services: Insights from Slovakia

The forestry services market in Slovakia has begun to form in the early 1990s under unstable and changing conditions due to the restitution of forest property rights and the restructuring of state-owned enterprises. The transition of State Enterprise Forests towards outsourcing of forestry activities was completed in a relatively short time period, which was insufficient for an adequate formation of this sector. Therefore, it is weakly developed, undercapitalised and has a low competitive ability. On the other hand, at present, there is a high dependence on contractor firms, which carry out the most part of logging, silviculture and transport activities within the forestry. Nowadays, the forest business community consists of more than 10,600 contractors, 88% are self-employed persons and 12% represent business companies. According to the structure of revenues and cost items, the aim of the study was to identify and characterize the firm types of contractors in the forest service sector in Slovakia, with an emphasis on Limited Liability Companies. Methodologically, it is based on the analysis of basic economic data from a representative sample of 152 contractors and a vertical analysis of their income statements. A detailed analysis of revenue and cost items showed that the most significant part of total income of the selected companies comes from the sale of own products and services (58%). On the other hand, the highest value within the total expenses were found for production consumption (57.2%) and cost of merchandise sold (31.8%). Subsequently, five types of business strategies were identified and characterised. Business strategies of contractors are influenced by the current situation within the sector. Low prices for provided services and a lack of qualified workers in the labour market cause mean that it is not possible to apply the classic business strategies. Contractors try to apply their own strategies such as orientation to business or management of subcontractors. They mostly prefer the so-called Classic strategy, which focuses on providing services as well as trading activities to complement their business activities. We therefore expect an increased number of contractors who provide forestry services through their own employees. Another possible way is to allow contractors to implement new business strategies and innovations through a higher degree of the standing timber sale.