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Porters 'Sun model' or 'Five force analysis' would help you to take strategical decisions in a competitive atmosphere. The basic concept of this model is 'competition' which makes your business alive or die. 'Competitiveness' is equally important for both profit and non-profit organizations.
Ultimate intention of a private firm will be profit, a fat bottom line which will satisfy their stake holders. On the other hand, increase or improve the satisfaction of users, consumers or all the parties involved in the transactions of goods or services, by using least resources which is scarce for non-profit organizations. The incomes of non-profit organizations are Government grants, CSR allocations from private organizations, churches, membership fees or from auctions. So, the resources are limited, the aim is attaining maximum benefit. Stewardship of non-profit organization reflects their responsibility over best practices, better value and customer satisfaction as a whole.
Most of the organizations are structured in same way, but their differentiation mostly happening through their supply chain and product differentiation. How to differentiate? Then understanding the competitiveness is important. As Prof. Porter pointed, the main stream competitive forces in the markets are:
- Supplier power
- Customer power
- Threat of new entrants
- Threat of substitutes and
- Competitive revelry with in an industry
Self-awareness, understanding own SWOT, or own place in above five sections will help a non-profit organization to exploit the situations well. It is important to analyze each element, how it affects the business a whole and structures the strategy. A non-profit organization could support new entrants, SME or substitutes which increase the pressure on monopolists, oligopoly or in the perfect competition. As a non-profit organization, it would respect the supplier’s margin or markup for their existence. NPOs should leave something for their supplier and the remaining for their customer means sustainable profit for their supplier and maximum benefit for their customers. For this, a grass route analysis is important.
Now the question is why such an analysis is import for NPOs? Yes, it will help to them to execute their strategy to the best use of resources to achieve maximum benefits. On the contradictory, there is criticism over the competitive advantage which causes to exploitation. NPO objectives are maximum satisfaction of community to whom they serves, then why NPOs need ‘Sun model analysis? The answer still points to understanding the market, re-structuring strategy, objectives and goals. Example, one of the NPO need support to a war-torn country, the ultimate aim is to achieve maximum quantity of quality foods with minimum cost at an over-all supply chain activities. An understanding about the substitutes, aware on strength as a buyer/customer for bulk quantity discount from supplier or supply capability of a new entrants or revelry with in supply industry would help the NPO to negotiate and achieve their objectives.
Other difficulty of such an analysis is, the market situations are dynamic, it would vary time to time. The cost involved in this process should not exceed the benefit what is expected from the outcome.
The essence of strategy is competition, and Porter has indeed expounded this. Competition exists in all forms of business, whether it is for-profit or non- profit, they must all deal with the issues of competitive forces that shape their industry or environment.
For a non profit entity, it is most relevant, since the entity is in competition with other entities for resources, whether in their field or in other fields. For example, a charitable hospital. An analysis of the competitive forces will show who are the other charitable hospitals in the area, and what kind of services they offer. Are these services similar or different to mine. If they are similar, we will be competing for the same customers, and therefore our quality of service will be a source of competitive advantage. This sort of analysis will show who are the key contributors in the value chain and tell us how we need to iimprove and where we need to improve to attract customers. This is but an example. It could be a charity or an NGO or any like entity. An analysis will entail a careful examination of ALL the competitive forces as identified in Porter's Five Forces of Rivalry, Threat of new entrants, Suppliers power, Customers power, and threat of substitutes.
In the Public sector, the value chain is the process in producing a service. At the heart of the public service is people who deliver such services. Value is added by the competency as well as the financial resources that are provided in producing the service. Physical tools of a high quality will assist in creating value in the value chain. Certainly the remuneration of people also speaks to the creation of value. As well is the quality of management in the value chain that also adds value to the end service.
In this the digital age, Technology is a high value contributor to the service delivery and can reduce the cost as well as the delivery of services through cloud computing.
