While the notion of competition is frequently regarded as more relevant in the sphere of profitable businesses, the nonprofit landscape is also interested in eliminating the risks fueled by competition for the target audience and potential donors. Thus, as far as the nonprofit segment is concerned, it is of paramount importance to note that over the past years, the overall perception of its strategy is currently highly driven by the expectations from the finance-providing entities and pressure from society (Laurett & Ferreira, 2018). For this reason, the investigation of the competition within the market is a must in order to remain relevant.
Porter’s Five Force Model
Primarily, it is necessary to define whether it is easy for a new nonprofit organization to enter the market. Thus, the overall premise of starting a nonprofit organization is not extremely challenging, but it is further funding and donorship that makes an organization challenging to stay afloat. Moreover, the overall process of running a nonprofit organization requires much time in terms of following many read-tape protocols, filing and approving project grants, and obtaining authority approval for operating. Moreover, the name and the reputation of an organization play an essential role in the nonprofit sector, as the notion of fraud in the context of the nonprofit segment has been gradually increasing over the past years (Seyam et al., 2018). For this reason, it may be concluded that the entry opportunities in the market, although easy at the start, are challenging enough to fuel the competition.
Another important aspect concerns the buyer and the supplier’s power. Nonprofit organizations are highly dependent on both these phenomena, as frequently, they serve as mediators in providing buyers with the suppliers’ resources. Hence, since there is a possibility that at one point, one of the stakeholders may decide to cooperate directly with the other or choose another, more cost-efficient mediator, the position of a nonprofit organization may be questioned.
The notion of substitution is also relevant to the nonprofit segment due to the fact that the services provided by an organization may be substituted with either public or business initiatives that promote similar services directly to the public. Finally, the existing competition in the nonprofit segment is considerably high when comparing the number of organizations with potential donors. One of the primary resources to check the competition and the conditions of the market entry is the National Council of Nonprofits, a public body that comprises both the reports from different organizations and the government operations required to establish an organization (“Government grants/contracting,” n.d.).
The notion of environmental scanning addresses such aspects as shifts, starts, substitutes, and signs. Shifts are extremely important to the nonprofit landscape due to the fact that nonprofit organizations are society-oriented, and any changes in the socio-cultural pattern should be accounted for during further activities. The same applies to the signs of social change that facilitate the guide the work of nonprofits. Finally, the notion of starts is also important, as it is necessary to pay close attention to the possible vectors in the sphere, such as governmental policies that may affect the workflow of a nonprofit organization dealing with a similar issue. One of the possible resources to stay ahead of the competition is to secure collaboration by joining or tracking the activity of such organizations as the Alliance for Nonprofit Management (“Membership plans,” 2021). Hence, it may be concluded that competition analysis is vital for the proper functioning of nonprofit organizations, as it helps them identify current trends in the market and be aware of the market entry rates and potential threats.
Government grants/contracting. (n.d.). National Council of Nonprofits.
Laurett, R., & Ferreira, J. J. (2018). Strategy in nonprofit organisations: A systematic literature review and agenda for future research. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 29(5), 881-897.
Membership plans. (2021). Alliance for Nonprofit Management.
Seyam, Y., Seyam, O., & Salama, N. (2018). An overview of fraud in nonprofit organizations and the appropriate approach to prevent it. International Journal of Accounting and Finance Studies, 1(2) 183-201.