Impact of Competition on The NPO’s Expenditure Patterns

 1.     BACKGROUND OF THE STUDY:

NPO is the non-profit organization that is tax exempted and aims to serve for the welfare of common people. Doing charity for the development in the sector of education and literary, sharing religious knowledge and spreading peace and prosperity is the primary aim of such organizations. The revenue which remains after operating all the major or normal expenses is used by non-profit organizations to proceed with their aim. Thus, the motto of NPO is not to make profitability for the organization itself but to work for the interest of public. Like any other firm or organization, NPO also uses production factors such as labor and capital to produce goods and services.In this report, a case study of non-organization CARE is carried out for the analysis of competition among NPO’s for expenditure pattern. NPO’s also face a threatening competition due to the presence of other NPO’s, comparable business organizations and sometimes because of the government organizations also. NPO’s possess basic expenditure pattern like any other ‘family’ which includes purchasing of tools, equipment and necessary products, building construction expenditure, cost of land acquisition etc. Aim of this research is to study the effect of competition on NPO’s and their expenditure pattern.

2. AIMS AND OBJECTIVES OF THE STUDY:

To achieve aim, one has to follow certain objectives. Thus, objectives attainment acts as a ladder for the achievement of aim. And for this research, objectives follows as:

• To scrutinize the expenditure pattern of NPO by utilizing the case study of CARE.
• To study the profit trends of non-profit organization CARE.
• To analyze important relationship between the expenditure pattern and competition that a non-profit organization face.

3.     RESEARCH HYPOTHESIS:

Hypothesis 1. There exists positive correlation between the NPO’s profitability and competition for an overall period of five years.

Hypothesis 1.1 No positive correlation exists between the NPO’s profitability and competition for an overall period of five years.

Hypothesis2. There exist negative correlation between expenditure pattern of a non-profit organization and its profit elasticity for a period of five years.

Hypothesis2.1 No correlation exists between expenditure pattern of a non-profit organization and its profit elasticity for a period of five years.

4.     LITERATURE REVIEW:

Just like the effect that competition produces on the profitability of any normal or average ranged organization, the same is there for non-profit organizations. Having little competition within the industry is always good but when the level of competition increases, it decreases the price that consumers pay for the desirable productivity and profitability of any organization. This has made NPO’s to make themselves more efficient in terms of maintaining the economy as well as their aim – welfare of the society. On the other hand, expenditure pattern of NPO’s is highly dependent on the funds, donations or charity made by others. If we assume fixed donations along with increasing number of NPO’s then the NPO will attain an average status in the society if the funds provided to clients are few in the form of services. According to Glaeser (2003), increase in the trend of donation within the market is further treated as a tool to attain disciplined operations. Thus, it can be said that the factor which enhances the efficiency of NPO’s is donation provided to them and the presence of competition further declines the price of services of NPO’s. In other words, the increase in competition decreases the revenue of NPO which produces stress on the NPO regarding the operations of expenses.

5.     METHODOLOGY:

Empirical and secondary data analysis has been chosen for this research. The information or data regarding the profit trends and expenditure pattern of NPO’s is collected via secondary data collection method. The secondary data was collected from the financial reports of the non-profit organization. Linear correlation analysis between the different variables were undertaken by the researcher. The primary correlation analysis was done between the variables of profit trends and competition whereas the second correlation analysis was conducted between the variables like expenditure pattern and profit elasticity of NPO. The correlation analysis was conducted with the help of statistical software called Eviews. The secondary data was collected with the help of published databanks, reports, magazines, books, articles etc. The research has highlighted correlation between the expenditure pattern and competition faced by non-profit organization which is CARE- UK based international organization working for the welfare of society.

6. REFERENCES

Ahmed, S. (2013). Effective non-profit management. Boca Raton, FL: CRC Press.

Brekke, K., Siciliani, L. and Straume, O. (n.d.). Quality Competition with Profit Constraints: Do Non-Profit Firms Provide Higher Quality than For-Profit Firms?. SSRN Journal.

CARE, (2013). About. [online] Available at: http://care.org/about [Accessed 17 Jul. 2015].

Goering, G. (2008). Welfare impacts of a non-profit firm in mixed commercial markets. Economic Systems, 32(4), pp.326-334.

Hussey, R. and Ong, A. (2012). Strategic cost analysis. [New York, N.Y.]: Business Expert Press.

Kılınç, U. (2014). How to measure competition in an economy in transition.Econ Transit, 22(3), pp.397-432.

Omura, T. and Forster, J. (2014). Competition for donations and the sustainability of not-for-profit organisations. Humanomics, 30(3), pp.255-274.