Tuesday, March 31, 2015

The Five Forces and the Non-Profit Culture Industry


The Five Forces that Shape Industry Competition is an interesting concept. While the article focused primarily in the for-profit arena, the five forces concept can be applied to defining a non-profit industry.  For example, many arts organizations operate in the non-profit culture arena; Broadway and traveling shows are for-profit entities and thus don’t apply to this though exercise. The culture industry is large and varied, so defining the industry may be a challenge, as understanding the competitors and the threat of new entrants can be difficult.

One of the biggest challenges with defining the non-profit culture sector is the definition of culture itself. According to Culture Track ’14, Americans have broadened the definition of cultural activities to include events focused on food and drink, visiting national parks, and watching television, along with traditional cultural events like live-theatre, opera and museums.[1] Since not all activities can be a direct competitor for the arts, the first step in defining the cohort’s niche. For example, Theatre A may see its obvious competitors as other theatres with similar production themes and qualities. Less obvious competitors could be restaurants and movie theatres. Knowing that socialization is a motivator for attending the arts[2], Theatre A can narrow its competitors down by identifying partnerships that can strength their market share. This could involve partnering with a restaurant for a pre/post show wine event, or jointly producing a show with another theatre company. By partnering with complementing groups, competitors will stand out more readily, in this case movie theatres, sporting events, and large symphonies, among others. Symphonies, Operas and Dance companies may be more “learning” competitors, as members of their audience may have similar inclinations to attend the art organization’s programming. The strategy would then be to identify those people and market to them so they learn about the organization.

When defining the industry, it is essential to look at barriers to entry. For nonprofit arts, barriers to entry can be quite low, depending on the area, as it is with the Washington, DC theatre scene. With a high percentage of non-equity actors in the area, there is a high demand from these artists to create their own work and contribute to the landscape. As the number of theatres increases, this increases the struggle for rehearsal/performance venues, financial resources and audience. Many small theatres will fade away, but new ones will emerge in a short time to take its place. For a theatre in the DC landscape, it would be important to have a continual understanding of what makes them different.

The traditional organizations that are associated with culture are generally not the most innovative. It is hard to be innovative, for example, when a Shakespeare play requires the same number of actors as when it was first written, but production costs have skyrocketed. No matter how challenging, non-profits must understand their industry and the nature of their local competitive landscape.


[1] Rinker, Campbell. “Culture Track ’14.” LaPlaca Cohen. Culture_Track_2014_Supporting_Data.pdf
[2] Rinker, Campbell. “Culture Track ’14.” LaPlaca Cohen. Culture_Track_2014_Supporting_Data.pdf

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