Strategy of Small defense oriented Enterprises in the Time of defense Budget Downsizing

Relatively large defense industry during the cold war time has been significantly reduced in many transitional states in the last decade due to heavy defense budget downsizing. These heavy budget cuts caused collapse of many large defense corporations in these countries. Furthermore, at the beginning of the 21&#8217 ; ; st century in the post cold war time many transitional states don&#8217 ; ; t need large defense industrial facilities and large defense enterprises for self-protection. But protection of their small and medium size defense oriented enterprises (SME&#8217 ; ; s) is important for protection of their economies, employment, social stability etc. In such situation, transformation and adaptation of these SME&#8217 ; ; s to the new business environment and conditions is imperative for their survival. Survival strategy of these small defense related companies requires: increase of their international competitiveness, acquiring of new dual use knowledge, expertise and technologies, stronger orientation to the civil markets, identification of new niche on civil and defense markets, education and shaping of future customers, acceptance of new management and organizational culture which support innovation and creativity, minimization of bureaucracy, modern type of personal management and diversification of their productions. Competitiveness of these SME&#8217 ; ; s on the globalize markets will depend, first of all on their efforts to increase their R&D activities and to put more R&D based innovations into their new products. Given Croatian case study is related to the business strategy formulation of one small R&D based Croatian defense oriented enterprise which is trying to survive in the time of heavy defense budget cuts through transformation of its old mainly defense oriented business strategy and products to the new one.