The Sector utilizes Porter’s 5 Forces framework to assess socially-minded organization’s market positions and to forecast future positions, within their stakeholder environment, when strategic planning….We adopt analytical tools typically for profit-driven businesses as a way to analyze competition and implement strategy for not-for-profit’s, social enterprise, hybrid’s, and corporate social strategies.
A prudently assessed and factual understanding of an organizations influence in it’s eco-system pursuant to the following 5 forces is key for sound strategy development….
Bargaining Power of Service Providers (Suppliers): How much influence do sub-contractors or partners providing services have on a charity? Providers gain power as their services become central to the mission and vision of the organization.
Bargaining Power of Grantmakers (Buyers): Grantmakers are essentially “purchasing” the social impact provided by the organization. If they can “get” a similar or superior product from another organization, they will “buy” their mission/vision instead.
Competitive Rivalry: There are an estimated 86,000 nonprofit organizations in Canada. It is important for public sector leadership to understand the gaps or competition in the market.
Threat of Substitution: How likely will a grantmaker or community or company switch to a competitor? If switching costs are low and similar organizations exist, there may be a serious threat of substitution.
Threat of New Entrants: With high donor loyalty or high fixed costs, the threat of new entrants can be limited. However, if the demand for a particular service is high and fixed costs are low, new organizations or programs may enter the market.