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Impact of Competition on The NPO’s Expenditure Patterns

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The Non-Profit organization (NPOs) is a tax exempted firm that aims to serve the well being of the common people. The objective of these types of organization is charity, render educational services, literary and religious knowledge sharing. The main aspect of the NPOs is utilizing the profit which is all the revenue after the normal operating expenses to service the interest of the public. Thus, the motive of the NPOs is not to make profits but to delivery services to the people. The NPOs like any other firm use the factors of production like labour and capital in order to produce goods and services. In this study a non-profit organization called CARE is used for the analysis. The NPOs are alarmingly facing competition. They are believed to compete with other non-profit firms, business organization and sometimes the government organizations also pose as a threat to the NPOs. The expenditure pattern of the NPOs includes the operating expenditures which is the general cost that the organization incurs like cost due to the land acquisition, construction of building and buying of equipments and other particulars. The focus of the study is to analyze the role of competition and its impact on the expenditure pattern of the NPO, CARE.


The purpose of the research is to evaluate the relationship between the competition in the market and the expenditure patterns of the NPOS. To achieve the aim of the project it is important to follow the objectives of the research:

  • To analyze the expenditure pattern of the CARE based on each factor.
  • To evaluate the profit trend of the CARE.
  • To establish the relationship between the competition and expenditure pattern of the CARE.



Null Hypothesis 1: Positive correlation between the measure of competition and the profits of the NPO for a period of five years.

Alternative Hypothesis 1: NO correlation between the competitiveness and the profits of the NPO within five years.

Null Hypothesis 2: Negative correlation between the profit elasticity and the expenditure pattern of the NPO for a period of five years.

Alternative Hypothesis 2: No correlation between the profit elasticity and the expenditure pattern of the NPO within the five year period.



Yurenka (2007) had commenced extensive research on the importance of the competition in the non-profit sector. He established the notion that increases in the competitiveness is good but the more the competition the less is the price that the consumers gives and the productivity of the organization increases. This ultimately helps the NPOs to achieve the overall efficiency and social welfare within an economy. One aspect that is important is that the NPOs are heavily dependent on the charitable donations for funding their expenditures. Assuming that the donations are fixed and the number of NPOs is increasing then the provision of funds in the form of services to clients are few and thus achieve an average status. Another research conducted by Glaeser (2003) revealed that the increased market competition for donations is treated like an instrument to acquire disciplined operations. Thus it can be seen that the donations influences the competition which again increases the efficiency of the NPOs but on the other hand the market competition also enables the price of the product or services of the NPO to decline assuming that the expenditures are fixed. This means that when the competition increases, the revenue falls and there is a stress on the operating expense of the NPOs.



The method of research of this study is empirical and secondary data analysis. A new method was established to measure the profit elasticity of the organizations in competition. This profit elasticity is used as measurement for the competition. The data on expenditure pattern and the profit trends are collected using the secondary data collection method which is gathered from the financial report of the NPO. The researcher then performs the linear correlation analysis between the variables. The first correlation analysis was done between the competition measure and the profit trends and then the second analysis was conducted between the profit elasticity and the expenditure pattern of the NPO. The correlation analysis was commenced through the statistical software Eviews. The second approach is commenced through the facts and findings obtained from the books, magazines, published papers and databanks. The research would highlight the correlation between the competitiveness in the NPO market and the expenditure pattern of the company that is considered for the research which is CARE.


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: [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.

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