Explain why the formulation of strategy in a non-profit organization may be different from a profit making organization.

Principles and Practice of Management notes and Revision questions and answers

• Managing activities internal to the firm are only part of the modern executives responsibilities. The executive must also respond to changes posed by the external environment as well. To deal effectively with everything that affects the growth of a firm, executives employ management processes that will position the firm optimally in its competitive environment. They strive to maximize the anticipation of environmental changes and of unexpected internal and competitive demands. They place emphasis on external forecasting and external considerations in the formulation and implementation of plans.

This all encompassing approach is known as strategic management which may be defined as “The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives” or “The development, implementation and control of agreed strategies.”

Strategic management comprises the following activities:

• Strategic Analysis
(i) Formulate the company’s mission, including its purpose and philosophy. The goals and objectives of the company must also be developed.
(ii) Assess the external environment to identify opportunities and threats. This assessment covers both the competitive environment and the general environmental factors.
(iii) Development of a company profile that reflects its internal capabilities, resources and weaknesses. This is internal analysis.
(iv) Analysis of the company’s options by matching its internal resources with the threats and opportunities in the external environment. This corporate appraisal should bear in mind the objectives to be achieved by the company as defined in step (i).

• Strategic formulation and choice
Development of a range of alternative options/alternatives that the company can undertake.

(v) Identify the most desirable option by evaluating the various options in light of the mission statement.

• Strategic implementation
(vi) Implement the selected strategy by means of budgeted resource allocations, operational plans paying attention to the organization culture, structure and developing appropriate functional strategies.

• Strategic control
(vii) Review and control the strategy implementation process by assessing actual performance against plans.

• Strategy formulation in a profit making and a non-profit making organization follow the same procedures as above. The only difference that arises is that a non-profit making organization does not have competitors in the strict sense of the word. Thus assessment of the external environment will not be done in the same way as in a profit making organization. A non-profit making organization will be concerned with attracting funds and utilizing these funds well. The mission will also be different since a non profit organisation aims at providing a public good.

Principles and Practice of Management notes and Revision

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