Introduction
Bay Area Video Coalition (BAVC) was founded in 1976 as a non-profit media service organization. Its’ mission was to serve the Bay Area by providing access to video equipment and offering technical assistance with video production for non-commercial purposes. BAVC currently employs a best-cost provider strategy in the niche Bay Area market. Its’ goal as an organization is to keep up with the rapid changes in technology and provide media services at reasonable prices. The difficulty with holding this market position is attaining the funding required to maintain it.
Strategic Issues
We have performed a thorough analysis of your company and have identified three issues that need to be dealt with immediately in order to ensure BAVC’s long-term success. The first issue is that your company is overly reliant on donors for funding. The second issue is that your company’s employee retention rate is low in comparison to for-profit organizations because you are unable to offer salaries of the same caliber. The final issue facing your company is the rapidly decreasing job placement rate of your MediaLink program graduates because of the recent swell of laid-off talent in the Bay Area Market. The following sections will provide detailed information about each of these critical issues.
Strategic Issue #1
BAVC is currently relying too heavily on funding from donors, which is dangerous due to the shrinking number of donors and the short life-span of donor relationships.
BAVC was established with seed money from the Rockefeller Foundation, which offered five years of full monetary support. This money was used up very quickly in an attempt to keep up with rapid technological advancements in the mid to late 1980s. By the early 1990s, BAVC needed to decide whether or not to position itself at the forefront of technological change; in essence, this meant choosing what market position to occupy. This choice would greatly affect the amount of capital requirements that would be necessary for the organization to continue running effectively. Sally Fifer, Executive Director of BAVC, decided that her company would pursue the high-end market by continuing to offer the newest technologies.
Since BAVC is a non-profit organization, there are no sales. BAVC’s revenue comes from earned income and contributed income. Earned income represents revenue generated by BAVC’s services. Support income is revenue given to BAVC by outside organizations, such as corporate sponsors, businesses, and the government. In the early 1990s, BAVC’s earned income was eighty percent, as compared to its contributed income of twenty percent. This was great because it meant that BAVC was supporting more than three quarters of its services by its own means. Between 1992 and 2000, BAVC’s earned income declined from eighty percent to forty percent, forcing the company to rely more heavily on outside support. As a result, BAVC increased support income from twenty percent to sixty percent of total revenue. This change represented a dangerous shift away from self-reliance.
BAVC’s strategy requires a tremendous amount of capital because the company must constantly have the newest technology available. BAVC cannot continue to rely as heavily as it does on support income because it is highly variable from year to year. BAVC has remained in the Bay Area of San Francisco since its foundation in 1976. Aside from a few potential donors moving into the Bay Area each year, the number of donors is limited because the majority of them have already contributed to your company. Donors typically invest in one particular program or technology that your company offers. For example, in 1997, the Mayor’s Office granted BAVC $200,000 to begin its MediaLink program; although the grant was helpful, it lasted only one year. This means that in order for donors to grant BAVC more money, existing programs would have to be expanded or new programs would have to be created.
In regard to the life-span of donor relationships, the average foundation grant to a non-profit organization lasts less than three years. Even worse, more than fifty percent of those grants last only one year. This means that BAVC loses at least fifty percent of its support income at the end of each year and must then search for new donors, which are becoming increasingly scarce. If your company continues to rely so heavily on support from donors, it will fail, because eventually there will be no donors left in the Bay Area.