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An organisation which provides some type of services or goods without any intention of earning profit from customers or stakeholders is known as Not For Profit organisation. These includes Private non profit corporations (such as hospitals, institutes, private colleges, and organized charities) as well as Public governmental units/agencies such as welfare departments, prisons and state universities. These organisations are not making profit by providing their services but they still have to make money to run their research or to grow and survive.
1. Types of Not-for-Profit Organizations:
The following diagram will shows the all the type of not for profit organisations.
In following discussion we will analyse the UK Cancer Research which is a not for profit organisation and we will see that how they make their strategy to provide their valuable services to customers.
2. Cancer Research UK
Cancer Research UK is a not for profit organisation, that claims that they are the leading charity to dedicated for beating cancer through their research. The organisation makes their strategy for every five years. The main purpose of this organisation is to reducing mortality from cancer and how the goal should be achieved.
Together we will beat the cancer.
The organisation is working with its partners to achieve the following goals by 2020:
People awareness about the reducing of risk of cancer
People should know that their are cancer treatment available with fewer side effects
Especially tackling cancer in low income societies
War against Cancer will continue upto 2020.
Popular Strategies in Not For Profit Organisation
It is important to know that what strategies are being used in NFP organisations.
2.3.1 Strategic Alliance and Mergers in UK Cancer Research
Cancer Research UK is founded with the alliance of two different charities. The charity made their strategies for every five years. As their main purpose is to beat the cancer by research they have broken down their work into three big areas and then further they have subdivided these areas into small piece of work.
The charity founded in February 2002 when The Cancer Research Campaign and Imperial Cancer Research Fund merged. The charity's aim is to minimise the deaths by cancer.
The charity carries out world's out class research for improvement and understanding of the cancer disease and to find out the better ways to diagnose and treatment in all kind of this disease. The research is also taken to prevent this deadly disease before it appears. The Cancer Research UK realises that in the last thirty years the survival rate is doubled of this deadly cancer. As we know that few decades ago there was no treatment of this disease but the research make it possible to provide treatment even with better technology. The research is continues to finding out more appropriate and reliable tools in which the disease can be caught before it appears. The Cancer Research UK is participating its huge and effective role in the field of research.
The charity has been at the heart of progress that has seen survival rates double in the last 30 years. This work, which has helped to save millions of lives, is funded entirely by the public.
2.3.2 Fund Raising Strategy
Cancer Research UK have an outstanding strategy to raising fund. The charity don't get any funds from the government but they rely on public funding and this funding done by its supporters.
The charity usually sends unaddressed mails by post to catch new supporters.
Letters with Pens:
Cancer Research tried recently to send a pen with the appeal letter to attract the people and make publicity. This strategy helped the charity with 40 percent more money in terms of funds.
Door to Door Fundraising:
The organisation has appointed some volunteers and these volunteers go door to door and street to street and communicate people.
Cancer Research UK is funded by the 250 charities in the UK in which some of them are the government bodies and some are pharmaceutical industries. There are not a clear information that how much a charity is spending on the research. But according to some research around £450m to £500m is invested every year in the research.
Organisations those called not for profit are dependant on dues, assessments or donations for their revenue sources. In these organizations there is likely to be a very different sort of relationship between the organisations providing and the person receiving the service. Because the recipient of the service typically does not pay the entire cost of the service, outside sponsors are required.
2.3.3 Communication Strategies
Communication strategy is a key in not for profit organisation. We will see under the following that UK Cancer Research which is playing a huge role to make aware people about the cancer. So to creating awareness in the people is defiantly depend how the organisation is communicate. We see in high streets the representatives of the UK Cancer Research are trying to stop peoples and passing information them about this deadly disease. This is all about the strategy that how we can use different styles to communicate with the people and how we can pass the valuable information and how we can make people to attract the information which is very useful to their lives.
The following are some styles and modes of behaviour and their impact.
How we get our message across
Effective communication face-to-face
Coping with the telephone
Strategies for effective listening
This strategy is totally different as compare to profit making organisation, because you are not asking people to buy any product but you are trying to make available attention of peoples to get information about the deadly disease (UK Cancer Research).
2.3.4 Marketing Strategy
Public funds make a non profit organisation alive. For raising funds these organisations have to market their services as well as to market the organisation. If you are not making aware yourself to the people they will not donate the organisation. You have to be very clear that how your organisation is playing its role to the particular problem and what have been done in this regard. If you don't have any marketing plan, then you will pretty soon don't have any clients or customers and if you are talking about those organisations which are not making profit but raising funds it means you don't have any person to be served or treated whatever your organizations doing.
The only marketing strategy can make alive a not for profit organisation, because these organisations are not selling their products but intangibly they are serving the people. People don't know what these organisations are doing until and unless you market yourself. That's why you must treat it as a priority and always be aware of how it's working or not.
Mostly non profit making organizations under-funded several times and the reason behind is only the lack of marketing, but the Information age is starting to change all of that. These organisations are getting full advantage of information technology to market their services. They publishing their broachers and pamphlets and distributing them door to door. The technology is already superb and has even greater potential. There are several platforms available to promote their services but there is still needs the wisdom of older minds that are trained and have built a lifetime of experience in making sure people get the information they need. We need to give the marketing function a priority within non profit organisation along our other organizational duties.
As we have discussed above that the charity uses different ways of marketing such as door to door, unaddressed mailing, pens with appeal letters.
2.4 Institutional Advantage
The concept of competitive advantage is less useful to the typical not-for-profit organizations than the related concept of Institutional advantage. A NFP organisation is said to have institutional advantage when it performs its tasks more effectively than other comparable organizations.
2.5 Portfolio Analysis
Portfolio analysis may be more difficult to apply to NFPs. Situation (SWOT) analysis; mission statements, stakeholder analysis, and corporate governance are all relevant to the strategic assessment of NFPs as they are to a profit making organizations
Strategic management is difficult to apply where the output of an NFP is difficult to measure. Thus it is very likely that most of the NFPs have not used strategic management because its concepts, techniques and prescription does not lend themselves to situations where sponsors, rather than the market place determine the value. However the situation is changing nowadays.
2.6 Impact of Constraints on strategic management
Several characteristics peculiar to the not for profit organisation constrain its behavior and affects it strategic management. The constraints are as follows:
Service is often intangible/hard to measure
Client influence may be weak
Strong employee commitments to professions
Resource contributors intrude on internal management
Restraints on use of rewards and punishments
2.7 Impact on Strategy Formulation
1. Goal conflicts with rational planning:
Because NFPs typically lacks a single clear cut performance criterion, divergent goals and objectives are likely, especially with multiple sponsors.
2. An integrated planning process tends to shift from results to resources:
Because NFPs tend to provide services that are hard to measure planning becomes more concerned with resource inputs, which can be easily measured than with service which cannot.
3. Ambiguous objectives create opportunities for internal politics and goal displacement:
The combination of vague objectives and heavy concerns with resources allows managers a considerable scope in their activities. Such attitude created opportunities for politics.
4. Professionalisation simplifies detailed planning but adds rigidity:
In NFPs professional values and traditions can prevent the organizations from changing its conventional behviour patterns to fit new service mission tuned to changing social needs. Â Goals of the professionals and their representative bodies may not align with organizational goals
2.8 Impact on Implementation of Strategy
1. Decentralization is complicated:
The difficulty of setting objectives for an intangible service complicates the decision making authority.
2. Increased requirement for an environmental buffer role:
Because of the heavy dependence on outside sponsors a special need arises for people in buffer roles to relate to both inside and outside organizations.
3. Job enlargement and executive development can be restrained by professionalism:
In organisations that employ large number of professionals, managers must design jobs that appeal to prevailing professional norms.
2.9 Impact on Evaluation & Control
1. Rewards & penalties have little or no relation to performance:
When results are vague and the judgement of success is subjective, predictable and impersonal feedback cannot be established.
2. Inputs rather than outputs are heavily controlled:
Because its inputs can be measured much more easily than outputs, the not for profit organisation tends to focus more on the resources going into performance than on the performance itself.
Profit Making Organisations
There are two kind of organisations one is non profit making organisation and other is profit making organisation. These organisations can be differ with two important thoughts.
As the name shows the first and important difference is profit between non for profit and profit making organisations. In fact both kinds of organisations have to generate money to pay their bills and pay their employees and to survive and grow.
In both sectors some of the profits are re-invested in the organization to replace old assets and machinery and to acquire new building or new machinery to expand the organisation.
In a for profit organization the profits that are not re-invested in the organization are distributed to the shareholders and stakeholders in terms of bonuses as cash or as some other kind of benefits.
Secondly, a profit making organisation is created or formed when investors get together and transfer their skills, talents and assets such as money, while in non profit making organisation developed when some individuals transfer their skills, talent and assets.
3.0 Role of Strategic Planning and Management in Profit Making Organisations:
Strategic planning has an important role in any kind of organisation but for profit organisations it is different as compare to non profit organisations. They have to analyse their competitors, price, situation and PESTEL and SWOT. In following discussion we will take an example of Sainsbury in which we will explore that how the profit making organisation make their strategy to generate profit. They don't take donations, but generate their own profits.
3.1 Sainsbury's Plc
In 1869 the J Sainsbury plc was founded and it operates a total of 872 stores comprising 537 supermarkets and 335 convenience stores today. The motive behind the Sainsbury's brand is to provide customers with healthy, safe, fresh and tasty food at their convenience. Quality and fair prices go hand-in-hand with a responsible approach to business. The Sainsbury's stores have a particular emphasis on fresh food and to innovate continuously and improve products in line with their customer needs.
3.1.1 Goal of Sainsbury's
At Sainsbury's they are strict to deliver an ever-improving quality shopping experience for their customers at fair prices with great products. Their aim of business is to exceed customer expectations for healthy, fresh, tasty and safe food, to making their lives easier everyday.
3.1.2 Company's values
The values of the Sainsbury's brand - passion for healthy, safe, fresh and tasty food, their focus on delivering great products at competitive prices, a history of innovation and leadership and a strong regard for the social, ethical and environmental effects of our operation.
They have five principles:
The best for food and health
Sourcing with integrity
Respect for our environment
Making a positive difference to our community
A great place to work.
3.2 Company's Strategy
The Company's strategy centres around five areas of focus. These areas are underpinned by Sainsbury's strong heritage and brand which consistently sets it apart from major competitors.
Great food at fair prices, accelerating the growth of complementary non-food ranges and services, reaching more customers through additional channels, growing supermarket space Active property management
By seeing the last 5 years report of Sainsbury, it is evident that three years ago company was in a bad share, and now its in the stage of recovery. In the beginning of 2004, there has been a major change in the management as well as the strategy. Since then the company has taken several big approaches. They have invested money to renovating and expanding the spaces in the stores and reengineering of supply chain, also by improvement in IT provide a difference in company's profit. Also there has been focus on brand repositioning through quality improvement, cost reduction through increasing volume, etc. This has resulted into good numbers for its sales and profit margin. The new Chief Executive Officer Justin King reduce prices by 5% in many of the items, by doing this they have regain the confidence of customers.
From a year's perspective, company is highly squeezed in terms of cash flow, very less net profit margin compared to industry. They have a high pressure on improving their margins. Comparing them with their peers Tesco, Morrison, and ASDA, they found that Tesco is obviously market leader, so have a very high profit margin. The company's closest competitor is Morrison, even though they relatively smaller in size of business, but they have much better profit margin and revenue, with less number of stores.
The company provided 9.75p dividend compared to last years 8p. The company have also ensured to keep the dividend cover to 1.5.
3.2.1 Competitive Strategy
In profit making organisations the companies normally have to look into the competitors strategies. If a company doesn't make a competitive strategy it will not take stand in the market and looses its sales and profit.
Sainsbury realises in few years ago that Tesco and Morrison are its biggest competitors and Tesco is leading the market by providing high quality food with low prices, but they have to beat first Morrison and then Tesco.
Sainsbury has a good reputation among its competitors such as Tesco, ASDA and Morrison. But to maintain the standard they always look and make changes into their strategy in terms to provide the best quality food and possibilities to make more money.
3.2.2 Marketing Strategy
To make valuable profit every profit making organisation should be very keen in marketing strategy. Companies usually establish their marketing strategy to attract customers. I can say that this is a tool to make more profit in the business.
Sainsbury uses 4ps and 7ps strategy to attract customers and sell their products. The company is also using promotion mix to catch the attention of customers. Here we will see the promotion of Sainsbury that how they are doing their promotions in the stores to make more profit:
Sainsbury's current promotion, 'Active Kids', promises to donate sporting equipment and coaching to primary and secondary schools in exchange for vouchers collected by customers. This promotion is trying to take advantage of the current consciousness surrounding childhood obesity and positioning Sainsbury's as a socially responsible retailer. Sainsbury's also uses celebrity Jamie Oliver's endorsement in its current television advertisement. Of Jamie Oliver, a Sainsbury's representative stated, "He takes the mystery out of cooking, fires people up with enthusiasm and confidence in the kitchen and appeals to everyone regardless of age or ability. He really is the ideal partner for Sainsbury's" (Guardian Unlimited).
3.2.3 Role of PESTEL
Profit making organisations such as Sainsbury when make their business strategy they analyse the political, economical, social, technological, environmental and legal issues to make effective and more appropriate in terms to increase their sale and profit.
3.2.4 Role of SWOT in profit making organisations
All those organisations which are subject to make profit in business need to analyse their strengths, weaknesses, opportunities and threats. In case of Sainsbury, they make their strategy according to their strengths and weaknesses. They look into their own organisation that what strength they have. For example Sainsbury emphasis on the quality of products as compare to other super stores available in the market. People who visits the Sainsbury are keen in quality therefore they like to buy food from Sainsbury. If the store will compromise their quality, people will not come to buy from Sainsbury. So they have strength of quality. In other hand they have to improve their weaknesses to make attraction for those customers which usually buy from other stores. Opportunities and threats are also have important role in strategy of profit making organisations.
3.2.5 Communication Strategy
Sainsbury's Plc has been forced to make simplify the communication messages into its television advertising, after their Value to Shout About advertising campaign, fronted by comedian John Cleese, proved to be a flop with customers who, along with Sainsbury's staff, decoded the message contained in the commercial as being confusing and patronising to staff. (BBC News, 1999).
In store communication is very effective in its stores, there are two meetings held every day one is in morning and other one in evening which explains the all staffs about the daily and weekly strategy so motivate the employees to get desired results.
From the above discussion and facts it is clear that the strategic planning and strategy management play a key role in the success of the business, either it is a profit making organisation or a not for profit organisation. Both sectors have to generate money in terms to survive in the market. Both have to pay their bills and salaries to their employees to fulfil their basic needs. A bad strategy management can sink the whole organisation. There is a little difference in both sectors strategies. Not for profit organisations are funded by the peoples who donate them to provide better services and profit making organisations make profit by selling their products, services and goods to customers. In non profit making organisations marketing strategy play a wide role because they don't have to worry about the competitors to beat them but they have to provide awareness to people who donate them for specific reasons. Marketing is also important in profit making organisations but there are some other issues in which they have to look for making and managing their strategies such as political, environmental, social etc and competitive advantages. A best strategy will lead an organisation to upward either it is profit making organisation or not for profit making organisation.