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Special Topics: Strategies for Not-For-Profits 8 8

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Special Topics: Strategies for Not-For-Profits. 8. Learning Objectives. After studying this chapter, you should be able to: Define not-for-profit and public sector organizations. Describe the various types of not-for-profit organizations. - PowerPoint PPT Presentation

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Special Topics:Strategies for

Not-For-Profits

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Learning Objectives

After studying this chapter, you should be able to:

1. Define not-for-profit and public sector organizations.

2. Describe the various types of not-for-profit organizations.

3. Describe how the strategic management process is used in these organizations.

4. Discuss the special strategic issues facing these organizations.

5. Describe the unique strategies developed by not-for-profit organizations.

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Not-for-Profit (NFP) organization is an organization whose purpose is to provide some service or good with no intention of earning a profit in order to meet the requirements of U.S. tax code section 501 c (3) as a tax exempt organization.

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Not-for-Profit means no profit, not no revenue.

Sources of revenue include:• Taxes.• Dues.• Donations.• Product sales.• Permit fees.• Grants.

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Figure 8.2 Revenue Source for Not-For-Profit Organizations

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Figure 8.3 Types of Not-For-Profit Organizations

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Public sector organization is an NFP created, funded, and regulated by the public sector or government, and includes:

• Government units, offices, agencies and divisions at all levels of government.

• Provide public services to society.• Police protection• Transportation needs• Care for the elderly and disabled

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Figure 8.4Economic Contribution of NFPs and Public Sector Organizations(2006)

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Other types of NFP organizations include• Schools.• Charities.• Religious organizations.• Health care-related organization.• Cultural and recreational facilities.

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Importance of NFP organizations to society:

• Provide essential needs not provided by private sector for-profit organizations.

• Maintain or enhance quality of life.• Maintain economic, social, and political

system that encourages, facilitates, and protects the development and continued existence of for-profit organizations.

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Not-For-Profit and Public Sector Organizations

What are Not-for-Profit Organizations?

Importance of NFP organizations to society:

• Contributes a significant portion of the GNP.

• Large employers.• Employees pay taxes and spend income

on goods and services.

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

NFP organizations compete for resources and customers.

• Need to develop competitive advantage.

• Positive link between strategic management and performance in NFP organizations.

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

NFP organizations face dynamic environments:

• Need external and internal analyses.

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1. What is a not-for-profit organization (NFP)?2. Do NFPs need revenue? How about profits?

Explain.3. Describe the typical sources of revenues for NFPs.4. What are the main types of NFPs?5. What is a public sector organization, and what do

they provide?6. Why are NFPs important?7. Explain how NFPs “compete.” 8. How would strategic managers in an NFP do an

external analysis? An internal analysis?

Section Review Questions

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Choices

NFP organizations face similar constraints as

for-profit organizations:• Limited resources.• Competition for customers and

resources.• Performance measurement.

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Choices

Functional strategy choices differ between NFP organizations and for-profit organizations.

• Limited variety of strategic choices due to limited resources and external constraints.

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Choices

Competitive strategy choices are similar to for- profit organizations

• Competition with other NFPs and for-profit organizations for:

• Customers• Resources

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Choices

Corporate strategy choices are similar to for- profit organizations:

• Growth• Stability• Renewal

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Choices

Corporate strategy choices are different than for-profit organizations.

• Limited range of strategic choices:• Cost cutting• Restructuring• Re-establishing relationships

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Not-For-Profit and Public Sector Organizations

The Strategic Management Process in Not-for-Profit Organizations

Strategy Evaluation

Most difficult part of the strategic management process for NFPs:

• No single performance measure• Profit

• Clearly stated performance goals are difficult to develop in NFPs.

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

• Misconception about the usefulness of strategic management

• Managing multiple stakeholders• Unique Strategies Used by NFP

organizations

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Misconceptions about the usefulness of strategic management:

• No profit=No strategic management?• Still need competitive advantage• Competition for resources and

customers• Environmental changes

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Multiple stakeholders• Close relationship between politics and

political process.• Public sector organizations are owned

by the public.• Close monitoring of NFP decision

making.• Second guessing

• Different agenda of stakeholders.

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Unique strategies used by NFP organizations:

• Cause-related marketing• Marketing alliances• Strategic piggybacking

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Cause-related marketing is a strategic process in which NFP organizations link up with a social cause that fits well with its products.

• Avon Breast Cancer Crusade

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Profit marketing alliances are strategic partnerships between an NFP and one or more corporate partners in which the corporate partner(s) agree to do marketing actions that will benefit both the NFP and the corporate partner(s).

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Profit marketing alliances are an extension of cause-related marketing, with the main difference being that the NFP organization is the one that proposes and initiates the alliance.

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Marketing alliances include:• Transaction-based promotion• Joint-issue promotion• Licensing

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Figure 8.5 Types of NFP Marketing Alliances

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Transaction-based promotion is an alliance in which the corporate partner donates a specific amount of cash, food, or equipment in direct proportion to sale revenues, typically to a limit.

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Joint-issue promotion is an alliance in which the partners agree to tackle a social problem through actions such as advertising products and promotional materials.

• Glamour magazine and Hanes hosiery with the National Cancer Institute, American College of Obstetricians and Gynecologists, and the American Health Foundation - distribution of health materials and magazines about breast cancer in young women

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Licensing names and logos of NFPs in return for a fee or percentage of revenue

• Arthritis Foundation and McNeil Consumer Products to market a line of pain relievers called :”Arthritis Foundation Pain Relievers.”

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Not-For-Profit and Public Sector Organizations

Specific Strategic Management Issues Facing Not-for-Profit Organizations

Strategic Piggybacking is when an NFP develops a new activity to generate revenue.

• Special Olympics sells clothing and other related merchandise.

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1. What kinds of strategic choices do decision makers at not-for-profit and public sector organizations face?

2. Describe how functional, competitive, and corporate strategies might be used in NFPs and public sector organizations.

3. What types of strategy evaluation and control issues do strategic decision makers at NFPs face?

4. How would you address the misconceptions that strategic management isn’t useful for or isn’t needed in NFP and public organizations?

Section Review Questions

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5. What types of challenges do NFPs face in dealing with multiple stakeholders, and how can these challenges be addressed?

6. Describe cause-related marketing.7. How are marketing alliances different from

cause-related marketing efforts?8. What are the three different types of NFP

marketing alliances?9. What is strategic piggybacking, and what are its

benefits and drawbacks?

Section Review Questions

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PowerPoint created by:

Ronald Heimler

• Dowling College-MBA• Georgetown University-BS

Business Administration• Adjunct Professor-LIM College,

NY• Adjunct Professor-Long Island

University, NY• Lecturer-California Polytechnic

State University, Pomona, CA• President-Walter Heimler, Inc