Impact of Economic Factors on Charitable Organizations: A Case Study of NCLF

This report analyzes the impact of economic factors on charitable organizations, focusing on the National Lottery Community Fund (NCLF) in the UK. It discusses the influence of economic forces on business performance, the application of economic theory, and the micro and macro environmental factors affecting NCLF. The report also examines the use of SWOT and PESTLE analysis to understand the internal and external factors affecting NCLF's operations.

ANY CHARITY
ECONOMIC AND
FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Impact of economy on business organisation (NCLF) and application of economic theory.....................3
Micro and macro environmental factors affecting charitable organisation (NCLF).................................4
CONCLUSION...............................................................................................................................................6
REFERENCES................................................................................................................................................8

INTRODUCTION
It is very necessary for managers and leaders of the business to understand how certain economic
factors have both positive and negative impact over business performance and its operations.
Smart decision can only be made if such economic factors are properly and reasonably taken into
account which guides management in taking their business to a greater heights. Certain common
economic factors that can have an impact over business activities are taxation system in an
economy, prevailing and future rates of interests and exchange rates, recessionary and
inflationary status of the economy in the past, present and future and the last but not the least is
operation of demand and supply forces in an economy (Neumayr and Handy, 2019). In this
report, by choosing a public sector charity organisation based in UK, that is National Lottery
Community Fund (NLCF), the impact of various micro and macro-economic factors will be
discussed. Along with these economic factors, an environmental analysis will be performed with
the help of SWOT analysis tools meant for studying the internal environmental factors and
PESTLE analysis will be done to explain how both internal and external environmental factors
has affected the chosen organisation that is NCLF which leads to its failure (Li and et.al., 2018).
Also, various economic theories and concept will be simultaneously explained in the report to
highlight the impact of economic forces on the business organisation.
MAIN BODY
Impact of economy on business organisation (NCLF) and application of economic theory
Environmental analysis is generally undertaken to perform the effect of various external factors
on the business organisation. It is considered to be useful for business executives and analyst for
making time decisions in order to beat competitors, enhance business revenue and accordingly
ensure growth and development of the business concern (Cordery and Deguchi, 2018). Economic
factors forms a major part of every business environment affecting the operations of the business
like NCLF here, thus causing their performance either to be improved or worsened off than
before due to the changes occur in the economic forces. Such forces of economy are connected
somehow with money, goods and services and these factors may not sometimes directly affect
businesses but there impact can be judged from the financial state of the business (Hyndman and
McKillop, 2018). Certain factors that are identified which can affect business operations and its
financial performance are interest and exchange rates prevailing in the economy, recessionary or

inflationary condition of the economy, prevailing rates of taxes and state of demand and supply
forces. Like interest rates and changing in them many affect those companies who rely majorly
on obtaining loans for financing their business operations and in the same way changing
exchange rates affects businesses dealing in imports and exports of goods and services which
might have an impact on their ability to satisfy suppliers in international market, thus affecting
business’s profit margins and its resources level (Hassan and et.al., 2018). Also, recessionary
condition in an economy leads to change in the attitude of consumers towards making purchases,
and thus this results in force price cut by the businesses and producing less at lower demand.
NCLF, a public sector organisation can also be affected from such economic forces and
accordingly performance can be deteriorate due to changes taking place in economic
environment of UK. Charities are also great likely to be affected due to economic changes like
Great Recession has greatly hit charities due to the reason that when recession came, people
became more worried about their jobs and its security, this make them less likely to donate more
or less (Liu, Suh and Wagner, 2017). People think of their own survival rather than helping
others as their own survival goes in danger during such economic situations. As donations are
considered to be a major source of revenue for charities and acts as a force which derives the
success of the charities through the very fulfilment of their objectives of raising fund and
spending them for needy individuals and businesses. So, in the absence of this major source of
revenue these charitable organisation like NCLF failed which leads to draining of their resources
and loss of funding too (McDonnell and Rutherford, 2018).
But on the opposite side, when the economy is rising and there are boom situation, then
non-profit organisation like charities also get benefits as other organisation in terms of increase
in the budgets which allows for undertaking more activities than before. Also, the time when
people feels economically secure, they would be able to donate more for the cause they found to
be reasonable.
Micro and macro environmental factors affecting charitable organisation (NCLF)
Micro environment factors are those that exists within the company and thus affects business’s
ability to perform and serve its customers (Allen, Eilert and Peloza, 2018). The forces forming
part of companies both profit and non - profit organisation are employees, customers or donators,
competitors, investors and general public.

On the other hand, macro environmental factors are those which are not under the control of the
management of the company and are thus generally studied from an economic and industry
viewpoint.
For studying micro and macro factors pertaining to the business environment, generally two
major and most common business analysis models are used that is SWOT and PESTLE analysis
(Breeze, 2017). So, here also these two analysis models will be applied to research upon how
NCLF, a charity organisation gets affected due to the existence of various micro and macro
environmental factors. In SWOT, strengths and weaknesses of a charity organisation depicts the
internal factors affecting the operations of such charitable organisation that is NCLF, while
opportunities and threats are meant for studying the impact of external factors affecting the non-
profit organisation like charities (Park, 2018). Also, PEST analysis is meant for searching
external factors to the business that can have both positive and negative impact on the
businesses.
SWOT analysis of NCLF
Strengths Weaknesses
 Good reputation in UK for
undertaking number of projects
through raising fund and distributing
the same for good causes.
 There are much high demand for their
services across UK based organisation
who undertakes projects and need
fund for the same (Wallace, Buil and
De Chernatony, 2017).
 NCLF is enjoying a good source of
donators of fund which helps them in
extending financial support to a great
extent.
 NCLF is facing financial problems
from past three years due to inability
to find goods investors and donators
for their charity function (Pratono and
Tjahjono, 2017).
 There is a problem with the awareness
among community regarding the
services of NCLF in the contemporary
economic environment of UK, making
it unsuitable for further financial
assistance to organisational projects.
 Another weakness of NCLF is it has
quite poor or under developed board
comprising of trustees.
Opportunities Threats
 They can now utilize advertisements  There are number of charity

through social platforms in order to
enhance awareness among investors
and donators regarding their services.
 They can tie up with major business
owners and billionaires in order to
encourage them towards donating and
investing their money in NCLF
(Pentaraki, 2019). Thus developing
links with business community is an
opportunity for NCLF to bring their
performance on track.
organisation existing in UK and this
count is continuously increasing,
making the survival of former
charities quite impossible as the
modern charities comes up with new
ideas and innovations, thus causing
higher attraction of the flow of
donations towards them (Hyndman,
2017).
 There are problems like limited
reserves available of the pool of funds
for extending financial assistance to
the public service projects.
 Restriction on international funding
from businesses across the globe into
the charities.
PESTLE analysis of NCLF
Factors Impact on NCLF
Political Political situations of a country could contribute towards the
development of the charity but at the same time pose certain obstacles
which leads to effect on the working of the Charities like NCLF. UK
government’s policies regarding Charitable activities has pose many
constraints on charity business especially those involve financial
transactions like NCLF (Glennon, Hannibal and Meehan, 2017).
Economic Finding rights investors to invest and donate money for projects which
can be best resolved through announcing their work through
advertisements and commercials on social platforms to the public for
enhancing their fundraising activities.
Social This includes British society and Britishers whose perception matter a lot
regarding donating to such charitable organisation. So, British society

plays a very important role in the success of NCLF as they are the core
investors and donators to such charities and NCLF finds it difficult to get
their enough cooperation in past many years (Becker, Boenigk and
Willems, 2020).
Technological NCLF finds themselves inefficient in terms of technology as they lack
resources such as appropriate means of communication for
communicating with large number of investors and donators.
Legal For performing charitable activities NCLF must abide by the laws and
regulations applicable on charities made by UK government and legal
bodies. And the same is quite stringent in UK especially when it comes
to dealing with money (Nageswarakurukkal, Gonçalves and Moshtari,
2020).
Environmental NCLF must ensure that there charitable activities should not any ways
compromise environmental norms and they should also make sure that
public services projects undertaken by organisation to whom they extend
financial assistance make sure for the same.
CONCLUSION
From the above report it has been concluded that economic factors which is a major part of
business environment should always be considered with great consciousness by the business
management as it affects the decision making of a business especially those concerned with the
finance. Here in this report business analysis tools like SWOT and PESTLE models are used for
analyzing the impact of environmental factors on UK based charitable organisation, NCLF in
order to determine the reasons behind their failure in past three years.

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