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Five Forces Analysis

Five Forces Analysis

Entry Barriers:

  • For smaller NGOs, providing a limited number of services with limited integration, entry barriers are rather low. Financial capital is minimal, and usually NGOs are tax exempted. The human capital required is also small with concentrated capabilities limited in their respective service sector.
     However, for operational efficiency, larger NGOs providing more horizontal, and vertical integration, across their value chain, are required. This makes the entry barriers for larger NGOs higher. My vision for Al Beit Al Iraqi, as an NGO, is to start small, to benefit from the low barriers, and grow organically to increase efficiency and reduce risks of competition. The NGO should be strategically positioned for growth.  
    A third barrier can be considered in its location, in an old house, in a historical part of Baghdad. Only limited places can offer an impactful experience to visitors and partners. This will add further entry barriers, positioning Al Beit Al Iraqi in a unique position.

Power of Substitutes:

  • Substitutes fall into several categories here, the first is smaller, less diverse NGOs with limited capabilities specialized in one or two services such as training or empowering women. They tend to miss the opportunities created through synergies across vertical, or horizontal integration across multiple domains.
    The second substitute is the small home business around 1 product line, woodwork or hand made kilims or textiles for example. They lack capabilities of proper training methodologies, archiving, marketing, quality control and business development. They also lack opportunities brought through coordination to integrate the different product lines.
    The third is the public sector, with a couple of training institutes that suffer from chronic bureaucracy and a clear vision for growth.

Power of partners and end consumers:

  • Partners are small businesses that supply specialized product lines, depending on method production and raw material used. These small businesses also contribute services by providing specialized technical trainers. In those regards they can be seen as suppliers.
    On the other hand, they will benefit from marketing, quality, small business management and trainer training sessions, as well as research facilities provided by Al Beit Al Iraqi to grow their own businesses and make them more competitive independently. They also use Al Beit Al Iraqi digital and physical marketplaces, and other marketing channels to sell their own products for a service fee paid to Al Beit Al Iraqi. From this perspective, they are considered consumers.
    Regardless, partners are the most determinant factor for NGOs in this industry. They set the prices of the goods they produce. They also determine the price of services provided by the NGO. They could pose a risk by moving their supply line elsewhere. To control these risks, a constant supply of future partnerships will be required.
    Another subset of consumers are the end consumers who are interested in the end products and services provided by the NGO. They are not contributing to the supply of products and services. These consumers are local (from the community) and international (the digital marketing, as well as through marketing partnership channels. They play a moderately determining factor for NGO competitiveness, as they play a role in setting the selling price of products depending on how they perceive the value of these products and services.
    Another set of buyers are the NGO donors. This are external organizations and agencies, international or local. They can also be government agencies. They can also be private business or individuals paying for the NGO services, as part of their social commitment to change. In the non-governmental sector, donors can be considered as buyers, as they are paying for the service of the NGO. These are highly influential, depending on their brand loyalty, and number of donors available, they can exert extreme pressure on the NGO sector.

Power of Competitors:

  • The concept of NGOs in Iraq is rather new. Before 2003 there was hardly any local NGO operating in Iraq. Competitors for Al Beit Al Iraqi are organizations of similar scale. Currently, there is no NGO in Iraq focusing on the aspect of cultural heritage. Since entry barriers to the NGO market of that scale is high, it is hard to see any serious competition that can cause a threat in this sector.
    As a closing remark, an NGO focusing on culture and heritage through crafts can be considered moderately lucrative in the short to medium future. However, to have a complete picture of the future investment in this sector, a complete PESTELE analysis and a SWOTT analysis (including emerging trends) is required.

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