BUSINESS MODELS-KEY TO SUSTAINABLE

CONSUMER ORGANIZATIONS IN MALAYSIA

Indrani P.Thuraisingham; IIC University of Technology, Cambodia
Leow Chee Seng; IIC University of Technology, Cambodia

The consumer organization generally falls under the non-governmental organization (NGO) category, which, by definition,
consists of non-profit, voluntary citizens groups that are organized at local, national or international levels.3

ABSTRACT

The effective role played by consumer organizations worldwide is vital in ensuring consumer protection. Thus, emphasis on the
sustainability of consumer organizations becomes increasingly relevant. Without effective leadership and guidance in carrying out
proper systemized strategic planning of consumer organizations, including continuous
development of human resource and institutional capacities, the work and vision for advancing global consumer protection may not
be realized. Sustainability is important for
Consumer Organizations (COs), because it
addresses how they will continue to provide
their invaluable services to the beneficiaries
beyond the current round of programs or
fund raising grant proposals.1 Even though
most consumer organizations primarily exist
as a non-government and non-profit organizations, it is still very much important for
consumer organizations to operate in a way
that generates income in order to sustain
themselves. It is therefore appropriate to
say that if an organization has a viable way
to create, deliver, and capture value, then it
has a business model.2

Keywords: non -profit, consumer organizations, institutional capacity, human resource capacity, fund raising, sustainability, business model

Journal of the Consumers Research and Resource Centre

Ngeri Nwagha (1995) states that, NGOs have a comparative

advantage as effective agents of development because of their
relative administrative simplicity, their proximity to the grassroots, their ability to identify the felt needs of the people and
their efficient and costeffective mode of operation.
The importance of sustainability is rooted in the fact that the
objective of non-profit and non-governmental organizations,
of which consumer organizations are a subset of, is to change
human lives and that such changes need to be addressed sustainably by focusing on multiple dimensions simultaneously.
As such, sustainability should be seen as an ongoing process,
rather than an end in itself. It is a process that involves the interaction between different strategic, organizational, programmatic, social and financial elements.
Sustainable NGOs4 are thus defined as those organizations
that are able to respond strategically and effectively to external changes. The leadership within the NGOS are able to revise
their mission and objectives accordingly, access new sources
of income, and adapt their systems and processes to meet the
new challenges.
The effective role played by consumer organizations worldwide is vital in ensuring consumer protection. Thus, emphasis
on the sustainability of consumer organizations becomes increasingly relevant and important for consumer organizations
because it addresses how they will continue to provide their invaluable services to the beneficiaries beyond the current round
of programs or fund raising grant proposals. Even though consumer organizations (CO) primarily exist as non-government
and non-profit organizations, it is still very much important for
consumer organizations to operate similarly in a way that generates income in order to sustain themselves and meet future
challenges. Without effective leadership and guidance in carrying out proper systemized strategic planning of consumer
organizations, including continuous development of human
resource and institutional capacities, the work and vision for
advancing global consumer protection may not be realized.

As such, a sustainable consumer organization is one that can

continue its activities of serving consumers into the future,
which is to be determined based on various aspects of its operations and its business model. If an organization has a viable
way to create, deliver, and capture value, then it has a business
model irrespective of whether the organization is non-profit or
for profit. Any organization that wants to be relevant, to deliver
value at scale and to sustain itself must clearly articulate and
evolve its business model.
It is also important to note that non-profit does not mean that
consumer organizations are not allowed to make a surplus. It
generally means the organization is permitted to generate
surplus revenues and use the surplus revenues to achieve its
goals (including its self-preservation, expansion, or plans) rather than distributing them as profit or dividends. A consumer
organization may also have a tax-exempt status. Thus, for a
consumer organization, its non-profit business model is basically to support its mission and to deliver social impacts rather
than financial returns.
The consumer organization business models are in fact centred around the understanding that as non-profits, they have
dynamic relationships with stakeholders and that their business is not strictly about financial outcomes as they also need
volunteers, membership sign-ups, behavioural changes, etc. As
such, a consumer organization needs its own metrics for measuring impact.5
BACKGROUND
In the context of this paper, consumer organizations refer
primarily to non-governmental organizations working on
consumer-related issues. The International Organization for
Standardization (ISO) defines consumer organization6 as an
independent organization that is active in consumer affairs,
and which is:

advocating the interests of consumers before other organizations, corporations and governments
not-for-profit in character
not involved in the advancement of commercial interests, although it may engage in trading activities related
to the provision of consumer information and promotion of its own work
not affiliated with any political party.

As there are consumer organizations mushrooming every other day in Malaysia, the focus is how to make these existing
consumer organizations sustainable by evaluating their current
business models and recommending best practices to improve
the current model.
For purposes of discussion, the consumer organizations defined here are as per the ISO definition and the fact that they
have been in operation for a minimum of 5 years from the date
of their registration.
So what are business models?7 According to Michael Lewis (2001)8 when defining business models, all it really meant

was how you planned to make money. Peter Drucker defined

business model as assumptions about what a company gets
paid for. Then, in a 1994 article in the Harvard Business Review
(HBR)9 Drucker introduced the theory of business which in
addition to what a company gets paid for, describes a business
model as a set of assumptions about what a business would
and would not do at the market place that included identifying customers and competitors, their values and behaviour;
about technology and its dynamics and about the companys
strengths and weaknesses. Every organization, whether it is
for profit or not has a theory of business that must be clear,
consistent and focused and must evolve with time and with
changing market conditions.
The concept of non-profit business models addresses 4 basic
components:

Value proposition what it offers to beneficiaries, be

they consumers, individuals or society, the donors, or
the governments
Resources people, technology, facilities
Processes includes everything from budgeting and
planning to educating consumers, testing, research, policy making, lobbying, campaigning, advocating
Revenue generation mechanisms fundraising, i.e. the
money that the organization needs to bring in order to
support these input.

Consumer organizations therefore cannot exist in silos and

must ensure that they have a viable, workable and sustainable
business model to be able to serve their respective constituencies and beneficiaries.
PROBLEM STATEMENT
Like every non-profit organization, consumer organizations
have the same basic challenge: in order to do things, it needs
resources.
Consumers International (CI) is a global federation that is the
only independent global campaigning voice for consumers,
made up of over 250 member organizations from 120 countries. Founded in 1960, CI is working for a fair, safe and sustainable future for all consumers in a global marketplace in
which individual and collective consumer rights are secure and
respected.
As a CI Member, the consumer organization is fundamentally
a consumer body registered as a Member of CI under the Articles of Association of Consumers International Clause 3 (sub
clause 3.1) which carries similar terms as per the ISO definition.
In addition, CI Members are not to accept from external sources (paid or unpaid) any advertisements, announcements, messages or other forms of communication or publication, which
might compromise its independence.
This understanding is a key aspect in discussing a consumer organizations business models, and differentiating them
from other NGOs in terms of financial sustainability as consumer organizations have difficulty in mobilising funds from
Journal of the Consumers Research and Resource Centre

organizations/ corporations whose practices might impinge on

consumer rights and result in consumer detriment. Being dependent on a sole donor will create the perception of compromising the consumer organizations independence and affect
their reputation as well as credibility, whether aforementioned
donor happens to be the government or a corporate organization.
Furthermore, with philanthropic donors, the pie is getting
smaller with various NGOs clamouring and competing for the
same funding. There is also the danger of consumer organizations being donor driven where organizations only work on
issues where donors provide funds which may contradict the
NGOs mission.
NEEDS OF THE RESEARCH
Malaysia is currently inundated with more than 100 registered
consumer organizations throughout the country, yet the level
of awareness of consumer rights has not reached the desirable
level. Consumers in Malaysia are still falling victim to scams,
counterfeit products, unsafe and hazardous goods and unsatisfactory level of quality of services.
Out of these 100-odd organizations, around 50% have mushroomed for the purpose of obtaining financial grants or subsidies from the government. In light of this, their motives have
now become questionable. In other cases, some consumer organizations were set up by someone who felt he was wronged
or scammed by traders and did not receive adequate redress.
These leaders do not have the necessary organizational infrastructure, or the human resources required to run the organization and ends up being a one man show operating out of his
home or office. Very few consumer organizations are actually
working at the ground level to provide services to consumers.
Out of the total of locally registered consumer organizations,
only four are members of CI, i.e. the Federation of Malaysian
Consumers Associations (FOMCA), Education and Research
Association for Consumers (ERA), Selangor & Federal Territory
Consumer Association (SCA), and the Consumer Association of
Penang (CAP); it is safe to say that these are the COs that are
committed to adhere to the principles of ethics, accountability
and transparency espoused by CI.
The 2014 INTRAC (International NGO Training and Research
Center)10 paper explores the distinction between gift-based
International NGOs, aided-International NGOs and the more
enterprise-based International NGOs which gives a good foundation for assessing NGO sustainability from the financial perspective. However, consumer organizations have that limitation of raising funds from organizations that may affect their
credibility and reputation. This assessment, therefore, cannot
be applied as a whole to consumer organizations.
There are no systematic studies in Malaysia to account for assessing NGO sustainability except for research on assessing
how effective the Malaysian environmental NGOs were in influencing policy decisions.11 There are related studies done on international NGOs sustainability and NGO sustainability in gen-

Journal of the Consumers Research and Resource Centre

eral but not specifically for consumer organizations. In light of

the current globalization agenda, it is timely for an assessment
of the Malaysian consumer movement to be done to identify
their strength and opportunities and address their weakness
and threats by looking at not only financial sustainability but
institutional and programmatic sustainability as well.
APPROACH
Sustainable consumer organizations are assessed through a
set of definitions and dimensions. The following 3 Key Dimensions are the aspects used to gauge a Consumer Organizations: Institutional Sustainability, Financial Sustainability and
Programmatic Sustainability.
The dimensions of non-profit business models are then merged
with the dimensions of NGO Sustainability in order to define
sustainable consumer organization. In addition, elements of
transparency and accountability are included. Thus, maintaining professionalism within the Consumer Organization to build
adequate trust with the potential sponsor or donor is equally
important.
Study Dimensions of CO Business Models
(based on viable current models)
Value propositions

Study Dimensions of NGO Sustainability

(based on literature)
Resources, Processes, Revenue generations

Key Dimensions of
Consumer Organizations Business Models
(value propositions, resources, processes, revenue
generations)

Institutional, Financial and Programmatic sustainability

CO Sustainability Survey
Questionnaire

Analysis

Sustainable Consumer
Organizations Business Models
(Best practices & features)

Sustainable Consumer Organization

Diagram 1: Approach towards building

Sustainable Consumer Organizations in Malaysia

Dimensions of consumer organizations models

One of the assessment methods used to map the selected key
consumer organizations in Malaysia is based on their value
creations aspect. This will be primarily based on the types of
stakeholder engagement for development and role as consumer organizations (the value proposition).
Value proposition essentially refers to customer problem or
needs, the products or services that address the problem or
needs, and the value of the product or services from the customers perspective.12 For a consumer organization, the customer can mean consumers, donors or governments, or other
entities that have interests in their products or services, such as
another NGO or corporate sector. The ultimate beneficiary of
a consumer organizations value proposition, however, is the
consumer the role of a consumer organization is to solve
consumer problems and satisfy consumer needs. As such, the
method of delivery for these products or services is an important part in a consumer organization value proposition, as this
captures its vital functions as a consumer organization.
Using the value proposition component of a business model,
the selected consumer organizations are to be assessed and
clustered into four types of CO models based on these 2 aspects:
1)

Influencing stakeholders that drives CO development

(Strategic Engagement Orientation for value propo
tions): CO-NGO, CO-non-NGO, or CO-direct to Con-
sumer
It should be noted that this primarily refers to the
target groups that have the driving or strategic im-
portance to their operational structure. The benefi-
ciaries of these COs, however, are still the public con
sumers, regardless of their Strategic Engagement Ori
entation (SEO).
2)
Functions of the COs approach to Solving Consumer

Problems or ensuring customer satisfaction.

As a Consumer organization, it must carry out at

least one or all of these four CO vital functions:13

i)
Research, testing and publishing product/
service evaluations

ii)
Consumer education, information, and legal
advice

iii)
Policy formulation
iv) Representation.

CO Model 1: Network by association (federation)

A CO may emulate an umbrella organization formed through
an association of civic organizations that democratically adopt
special standards for governance, disclosure or fundraising.
Strategic Engagement Orientation is targeted at Consumer
Organizations or NGOs. The CO may have state branches and
assist local NGOs. The development of the CO may involve the
establishment of separate or individual centres or units based
on product/services differentiations or functions, which become affiliated to the network. The individual sub-establishment or smaller associations in the country has its specific CO

function that complements the functions of the other sub-establishment.

CO Model 2: Public-Private Partnership

CO involves forging formal and mutual cooperation or collaboration with another party, either a private corporation, or
government, whereby the partnership creates value for both
the CO and the partner. The partnership is said to be facilitated as it would bring about mutual benefits that are specifically
agreed upon. This facilitated partnership may take place for a
stipulated time frame, from short-term to long-term.

Strategic-Engagement with Private Corporations

The push for more responsible business practices has
caused some corporations to seek out COs as partners to
help them implement solutions to development problems.
The CO may benefit from financial support, or through funding
diversification. While this development strategy can be a powerful instrument for COs to develop a self-sustaining pattern of
activities, private corporations may lack sensitivity to the needs
of consumers (beneficiaries).14 Thus, this may require the CO
to make some adjustments or possibly compromise in order to
be more pragmatic about its mission.15

Strategic Engagement with Governments

A CO may also forge partnership with governments, whereby some mechanisms are also established either by law or
through administrative procedures that may include provisions
on resource (financial) allocations.16 The form of partnership
with governments may be facilitated by the different levels of
assistance which can be either fully-supported or partially-supported. A CO forging this type of facilitated partnership may
gain some financial advantage, management experience and
networks with policymakers. On the other hand, governments
may gain specialised services without the work, reduced costs
and ability to tap into local knowledge. This new way of subcontracting is often referred to as partnerships and has created
interesting challenges for both government and non-government sectors. These range from threats to the autonomy of
NGOs to the downloading of deficits to the private sector.17

CO Model 3: Service Delivery

The CO carries out one or more of the vital functions as a
consumer organization and charges fees for its products and
services, in generating its revenues. The CO thrives to be relevant to specific groups of consumers where the CO believes in
empowering its beneficiaries (targeted consumer groups) by
providing specific information and knowledge, offering specialized products/services which may be in the form of niche
publication (magazines), product testing, or product information that is sought by the targeted beneficiaries or consumer
segments. Thus, for COs in this model, their Strategic Engagement Orientation is targeted at consumer segments. Fees may
be imposed either through memberships, subscription, licensing, consultancy, production or the marketing of products/
services.
Journal of the Consumers Research and Resource Centre

CO Model 4: Entrepreneurial
The entrepreneurial model involves a CO venturing into developing social businesses,18 which includes production and/
or selling of goods and services for the blended purpose of
generating revenues and at the same time carrying out its CO
function to serve consumers interests, whether socially, cultually, and/or environmentally. A CO continues to engage with
consumers, creating value in providing public benefits by innovating in terms of an economic base.19 Social enterprises are
one more tool for this CO to meet their mission to contribute
to healthy communities,20 i.e. to maximize improvements in
humans, and the environmental well-being of consumers, but
not to maximize profits for external shareholders.21
The primary objective of the action is a social goal, it is not
profit driven. This does not mean that profits or revenues cannot be generated, but any profit must be primarily reinvested
to enhance the achievement of or expand the enterprises social objectives, and not going to owners or shareholders.
By definition, social enterprises or a social-enterprising CO can
exist as:
o

a co-operative businesses owned and operated

collectively by or for their members, whether they are
customers, employees or residents.22
o a mutual organization this means that instead of

having shareholders, it has members who collectively

own the business and are also its customers.23
o a social business is the ability for an organization to

use its communities to improve its performance or

the results for the organization as a whole.24
o a charity organization created for the purpose of

philanthropy, designed to benefit society or a specific
group of people.

The revenues generated are practically channelled or reinvested back into these non-profit organizations. These are also
referred to as hybrid social enterprises where these hybrids
pursue a social mission while engaging in commercial activities
that generate revenues to help them sustain their operations.25
Hybrids, however, must consider the delicate balance between
social and economic objectives, where mission drift in this
case, a focus on profits may cause detriment to social good.

Dimensions of NGO Sustainability

An additional tool to be used in developing a sustainable consumer organization is the NGO Sustainability Index which has
been generally used worldwide to assess NGOs.26 The assessment essentially covers the other three aspects of non-profit
business models through seven different dimensions:
i)
ii)
iii)
iv)
v)
vi)

legal environment
organizational capacity
financial viability
advocacy
service provision
NGO infrastructure

vii)

public image

As there is a growing recognition of the importance of organizational sustainability, these seven dimensions should be
regrouped, merged with the Consumer Organizations model
dimensions and discussed as the Key Dimensions of Consumer
Organization Sustainability.

Key Dimensions of Sustainable CO Business Models

In the context of building
a sustainable consumer
organization, the Malaysian consumer movement,
which is at least five years
in existence, is to be assessed based on 3 Key Dimensions of Sustainable
Consumer Organization
Business Models which are
the results of merging the
dimensions of CO models
(value propositions) and NGO sustainability dimensions (resources, processes and revenue generation), i.e. the institutional sustainability, financial sustainability and programmatic
sustainability.27
The Institutional Sustainability dimension addresses the operating and development of the CO. This includes management structure, organizational skills, strategic planning, decision-making processes, roles and responsibilities, human
resources etc. This is also where the stakeholder engagement
(value proposition) is merged.
The financial sustainability dimension addresses the means by
which the CO sustains itself financially to keep its operation
running after a particular project or work is completed, and before another one commences. Factors influencing the financial
viability of NGOs include the state of the economy, the extent
to which philanthropy as well as the extent to which government procurement and commercial revenue raising opportunities are being developed. The sophistication and prevalence
of fundraising and strong financial management skills are also
considered.
This programmatic dimension looks more closely into the
functions of an organization. This is where another of the dimension for the consumer organization business model, i.e.
the vital functions as a consumer organization (research, testing and publishing product/service evaluations; consumer
education, information, and legal advice ; policy formulation;
representation) are merged.
SUMMARY
Consumer organizations must evolve with market conditions
in order to sustain itself in this 21st century, and not only considering financial sustainability but the institutional and programmatic sustainability aspect as well as its business model in
order to continue servicing consumers.

I would like to acknowledge Dr.Anni Mitins work on organizational empowerment in Consumers International that the literature review is premised upon.

10

Journal of the Consumers Research and Resource Centre

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Ibid

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9

Models of INGO Sustainability: Balancing Restricted and

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10

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13

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11