Industry Analysis on Education Sector

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Industry background:
Education is the base for economic growth as well as social transformation for any country. Among all the key indicators of socio-economic development like economy's growth rate, literacy rate, birth rate, death rate and infant mortality rate (IMR), the literacy rate of the country is one of the most vital one as the rise and fall of others largely depend upon country's literacy rate. In India, high literacy rate leads to low birth rate as well as low IMR and it also increases life expectancy rate. So, the importance of education industry in India can be understood. Fifty percent of India's population is the youth. This means that the Indian education sector is huge with a population of 1.13 billion. India has around 367 universities, 18,000 colleges, about half a million teachers, and 11 million pupils. The private education industry is estimated to be between 20,00025,000 crores. There are about 1,500 management institutes, 3,500 engineering institutes, and 1,200 medical colleges in the country. With an increase in the average Indian household, more money is being kept aside for education purposes. Also, because of the initiatives of the government, more students are enrolling themselves for higher education. This means that more colleges are needed to cater to these students. Also, the demand for education is inflexible; that is, no matter what, the education sector is not going to collapse. Primary education is expanding. Many foreign schools are making their presence felt in India. Parents are enrolling their kids into international schools for better education directly from the primary level. Education is one of the largest service sector industries in India characterized by a unique set of attributes One of the largest services market Huge Demand-Supply Mismatch Largely fragmented industry Over 95% is held by the unorganized sector, with few large players Combined market size of more than 450 mn students and USD 50 BN per annum* Investment requirement of approx. USD 100 BN by 2014 to meet expected demand * Robust growth rates expected Higher rate of returns Opening up of regulatory environment propensity of people to pay for Higher Education

It is also one of the biggest contributors to the economic growth of the nation. Besides various government initiatives, the role of the private institutions in the development of education industry in India cannot be denied. India's private education market was worth $40 billion in 2008, which is expected to reach $68 billion by the year 2012. However, there are also some glooming statistics as well. Despite such rising investment in education industry, 40% of country's population is still illiterate. Only 15% of the students can go to next level to reach high school. In probably one of the most daring decision, the Indian government has passed the Right to Education [RTE]. India has joined the list of few countries where Right to Education is a fundamental right. The Act promises to ensure education for all children between 6 and 14, a whopping 22 crore children, out of which nearly 1.1 crore are out of school and the act makes it obligatory for the appropriate governments to ensure that every child gets free elementary education. Trends in the Education Industry in India Pre School Entry of Big Corporates Joint ventures with builders Upward integration towards K-12 Expansion to Tier I and II cities Leveraging infrastructure for economic viability K-12 Education Emergence of new operating model Foreign partnerships Hybrid Teaching Methodology Emergence of International Schools CBSE going global economic viability Higher Education Collaboration with foreign players Multi campus model Increasing adoption of technology

Vocational Education Growing interest of PE/VC firms Rise of online and correspondences courses Indian players expanding abroad Stricter policy landscape Partnerships between corporates & institutes Facilitation by government Up gradation of quality of education

Prominent Institutions There are a number of Indian universities/colleges/institutions that have crafted its name in the world of education through its quality of education and infrastructure. Many of those have won awards. Some of the prominent institutions are listed below: World's Top 200 Universities (Times Higher Education)

Indian Institute of Technology Indian Institutes of Management Jawaharlal Nehru University

Top 20 Science and Technology Schools in Asia (Asiaweek)

Indian Institutes of Technology Birla Institute of Technology and Science

Global MBA Ranking (Financial Times, London)

Indian School of Business, Hyderabad (15th)

Medical Research and Treatment

All India Institute of Medical Sciences (AIIMS)

Education Sector- The Future Ahead The Indian education industry is poised for growth. This sector is changing rapidly with more private players entering the field. The government is also taking many measures to improve the quality of education in India. This industry is going to achieve its peak as the idea of business via education catches up. Technology-oriented courses are gaining in popularity due to the rising demand in these industries. The medical industry is also revamping itself. There is a need for more doctors and skilled professionals in this area. Thus, engineering and medical colleges are going to be in demand. The demand for management education is also rising. Many international management institutes are creating ties with Indian colleges or setting up their own centers in India. Specialized courses, such as aeronautics and biotechnology, are also popular. There is immense scope in India for universities offering specialized courses and research potential. The R&D sector requires more expertise and quality professionals to cater to its design and needs. Many foreign universities operate via the twinning mode as of now. This essentially means the collaborating institution can offer the curriculum of the other university in its first half. These students thus gain credits, which are transferable to the foreign university. This helps the students choose from an array of subjects and also complete a year in India itself. Thus, these programmes are successful and present a good opportunity for investment. E-learning and Distance learning programmes are also gaining popularity. Many students and working professionals are taking these courses to get a quality education. The drawing factors for these programmes are the world-class curriculum, comfort, and low costs. As many Indians go to foreign shores for quality education, the market for foreign universities is very present in India. The government is also encouraging FDI in this sector to improve the quality of education in the country. 100% FDI is allowed in this sector as long as the rules and regulations are met. Thus, this sector offers multiple benefits and is becoming a favorable area for investment.

PESTLE ANALYSIS: Political factors

Schools being privatized: The private sector is inducted in education so that it can share the burdens of the state in funding education. The expansion of the horizons of knowledge is taking place at a rapid pace all over the world. The technological growth like Satellite TV and other development in computer education have increased the requirements of highly educated and well-trained technical manpower. The public sector is hampered by lack of resources and cannot meet the needs of industry and other sectors of the economy. Therefore, the private sector is expected to initiate the program of training skilled manpower to take advantage of hi-tech opportunities. Privatization can respond more promptly and efficiently than the public sector which is hamstrung with structural and operational inflexibilities to market signals or market demand for labour and take effective steps to promote human resource development to keep pace with the emerging requirements.

Changes to the skills required to be a teacher/ tutor The NCTE (National Council of Teacher Education) was established under the NCTE Act, 1993. Teacher education is offered at certificate, diploma, degree, and post graduation levels. Qualifications acquired from institution not recognized by the NCTE are not valid for employment in schools, colleges, universities and other educational institutions governed or aided by central and state governments. However, one may be appointed as teacher in a non government funded school even if one does not have these degrees. In the colleges, that is the post school education, however the qualification does not a teacher training degree, but remains to be national / state level examinations and qualifications decided by UGC.

 Changes to curriculum with short lead times The National Council of Educational Research and Training (NCERT) is the apex body for curriculum related matters for school education in India. The NCERT provides support and technical assistance to a number of schools in India and oversees many aspects of enforcement of education policies. Apart from this, the various curriculum bodies governing school education system are: The state government boards, in which the majority of Indian children are enrolled. The Central Board of Secondary Education (CBSE) board. The Council for the Indian School Certificate Examinations (ICSE) board. The National Institute of Open Schooling (NIOS) board. International schools affiliated to the International Baccalaureate Programme and/or the Cambridge International Examinations. Islamic Madrasah schools, whose boards are controlled by local state governments, or autonomous, or affiliated with Darul Uloom Deoband. Autonomous schools like Woodstock School, Auroville, Patha Bhavan and Ananda Marga Gurukula.

For post school education, University Grant Commission (UGC), a national body, coordinates and looks after the maintenance of standard of university education in India.

Requirement to be self financing For a self financed education institution, it is compulsory to be affiliated to a course curriculum of a university/course curriculum of a school education regulatory body. Also they need to fulfill certain criteria/norms set by the regulatory body before they can be recognized or affiliated.

Economic Factors

 Central or local government funding decisions It may affect school/ establishment finances in building infrastructure and basic amenities required. Ability of parents to raise funds for optional activities Many self financed schools these days provide some extra curricular activities in school premises for the overall development of the child. Cost of providing resources Staff teaching & support Basics books/ paper Technology solutions like IT Labs etc Interest rates Various banks offer education loan to students for higher education at interest rates between 10-15% according to the amount required. Highly valued, key staff moving on to more up and coming schools/ academies as they provide more economic and social benefits.

Social Factors
Decline in birth rate, reflecting national trends Demographic changes As we see these days that most of the population is moving from rural areas to the urban areas, there is a change in the requirement of education. People have started encouraging their kids to take up English as a first or a second language in school seeing the trend. Even in rural areas English is being made as a compulsory second language taking into account

Inability to attract staff Government schools dont pay as much as the self financed institutions. Also the changes in the qualifications expected also plays a major role for not getting good staff for this industry.

Not enough training support provided to the staff.

Integration of students with special needs Degrees and diploma in special education are the required qualifications for teaching students with various disabilities. The Rehabilitation Council of India (RCI) in respect of five categories disabilities, viz., Hearing Impairment, Visual Impairment, Mental Retardation, Learning Disability, and Neuromuscular Disabilities. Courses at diploma level include, Visual Impairment, Cerebral Palsy, Autism and Spectrum Disorder, and Mental Retardation.

Parental preference an increase in parent power has allowed parents more freedom of choice over their childs school Apart from this the government also supports programs like Sarva Shiksha Abhiyan (which says that every individual has a right to education) and to improve women literacy rate in rural India.

Technological Factors
A predominant trend over the last three decades has been increased use of on-line information. This automation has now taken the form of the World Wide Web, i.e., the Internet. For those in higher education, the Internet will be restructured into Internet 2, and there will continue to be even greater access to information. With these changes, come increased costs for both the infrastructure and staffing. Technology is constantly changing and the pace of technological change is rapidly increasing. A greater percentage of university/school budgets will inevitably go to technology to cope with change. The student population is more and more computer literate and as a result the university/schools must provide staff expertise and resources to meet student demands. More and more instruction is being integrated with technology and as such instruction grows, Media Services will need increasing support. There appears to be an increasing reliance on electronic media without a marked decrease in reliance on printed materials.

 Legislative Factors
State Policy is articulated through legislations. Some of the important Central legislations having a bearing on the subjects allotted to the Department of Higher Education are: The University Grants Commission Act, 1956 The All India Council for Technical Education Act, 1987 The National Council for Minority Educational Institutions Act, 2004 The Copyright Act, 1957 The Apprentices Act, 1961

Health and Safety legislations This takes care of various basic amenities like Toilet facilities, medical rooms, Lighting, ventilation, Fire escapes etc.

Raise the age of school leaving age Raise/ lower the age of starting school. Nursery/ kindergarten Change to school opening hours During winters the school opening hours are delayed in the morning.

Changes to funding of charity based organisations

Environmental Factors
A new highway layout near an institution may create new dangers for pupils etc Waste disposal Reduction of green space available for activities Using a significant amounts of paper and photocopier toner to produce printed information.

PORTERS FIVE FORCES MODEL

The Threat of the New Entrants: Extent: High

The education industry comprises of Universities, colleges and schools both public and private, these organizations are most of the time very large and build over time. These organizations have great deal of infrastructure, administrative staff, teaching staff and other facilities. The universities and colleges that are known as a Brand are well established with great amount of alumni base. There have lot being spent and is spent in the form men, money and material by these universities to be in that position and that makes a formidable barriers for a new competitor to enter into the industry. There are public universities and schools which are supported by the state and central governments and good amount of budget is allocated to the sector which helps in building the required infrastructure which act as a great barrier for a new private entrant.

Most of the students in good universities are backed by loan and the public sources for these loans are declining and there is lot of difficulties to recover these loans and so the profit margins are declining in this sector. An additional barrier to entry, although tangential, is the existence of intellectual property and technology transfer offices within most university systems. These offices protect and monetize university research, which represents addition cash flow, and benefit from existing economies of scale and departmental synergies. Probably one of the most controversial barriers to entry into specific areas of higher education is the requirements and restrictions imposed by accrediting associations. These organizations, while promoting curriculum standards, affinity group branding and visible education outcome metrics, also cleverly protect the incumbent members with an accredited by license. The success and reputations of business schools, medical colleges and law schools are critically interwoven with certification and accreditation. Surprisingly, incumbent universities control most accreditation boards.

The Bargaining Power of Suppliers Extent: Low

The suppliers have very less amount of bargaining power, as we supplier concentration and suppliers are very important for any industry. They need to complement each other to have economies of scale. Most of the time suppliers are closed located graphically to an industry, because they are the once which provide essential services and products. For an industry, if there are few suppliers located around the industry than the bargaining power of those suppliers would be high compared to any industry. For the education industry considered on the whole there are numerous number of suppliers who are ready to provide all the material and services related to an industry at very negligible margin. The different products required by the industry can be categorized as follows: Infrastructure: Furniture, equipments, computers, etc,. Intellectual Property: Books, research papers, magazines, scholars, lecturers etc. The highly established publishers also fight for their share of faculty and university time, they compete for each book to be read and sold. Universities and colleges most of the time act as a stable and large client, so the different vendors need to give a big fight to bid and grab them. So that brings down the bargaining power of the suppliers. The vendors mostly supple generic products so the universities have fair amount of information to choose the vendor for every supply. The vendors need to directly fight on the price that is quoted to the university.

The university on the other hand can actually select a vendor which comes up with the best price. There have been instances where the organization in these industry have gone for vertical integration, publishing their own books and papers, this acts as a low motivational factor for the vendors in these kind of industry. So the ability to influence the industry is low.

The Bargaining Power of Buyers: Extent: High

The number of students enrolled has increased from a mere 17.9 million in 1961 to 72.4 million in 1991 in the India, which indicates that the buyers are fragmented and diffused across the market. On a whole the buyer characteristic limits the effective power of one specific student who can negotiate tuition rates, admission requirements and other facilities. Aggressive recruitments by public and private universities whose intake is about 15-25 percent of high school classes at the expected rate, but unpredictable autonomy of giving this market segment generous power to the students or parents in choosing their options and to negotiate. In the present generation, the curriculum of any educational course description is only a mouse click away with various websites available for reference including the schools/colleges own websites. School search and evaluation data is a easy, with a rapid phase and essentially free process. Two additional components that influence the bargaining power of the buyer are reputation of the institute and the facilities offered to them. Also the number of educational institutions that are coming to the picture also offers the buyer a variety of choices but of course is characterized by his/her income level and location.

Threat of Substitutes: Extent: Low to Medium

The threat of substitutes for education sector is low to medium as there are a few substitutes available. The substitutes that are available are coaching institutes and home tuitions. A consumer i.e. a student in this case would prefer any of the above substitutes owing to location, level of income or possible cultural influences.

OPPORTUNITIES & THREATS:

OPPURTUNITIES: Demographic benefit: India is becoming a younger country year after year. Therefore the market size is bound to expand. Globalization Impact: Willingness of the foreign universities to set up in India and Indian universities planning to set up colleges outside India. Tutoring jobs are being outsourced from the western countries to India. Use of latest technological aids for education.

THREATS: Excess concentration on English might cause loosing out some of our local languages in the long run. Rising costs of the education Brain drain due to the lack of importance for research and development Reluctance of educated people to take up the traditional jobs like the ones in small scale industries.