ECON 515 PROJECT China Industry Analysis Education Industry : Preschool

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ECON 515 PROJECTChina Industry
AnalysisEducation Industry Pre-school
Wu, MuheHu, Yuanyuan Gu, Minyan Pan, Yajing
Zheng, Hong Kathy Cheung
GROUP 1
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Agenda

• Background
• China Education Industry Analysis
• Industry Attractiveness Assessment
• Our Entry Strategy
• QA

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Background - ChinaEducation System
Age Schooling year
27
22
Ph.D
26
21
25
20
24
19
Masters degree
23
18
22
17
21
16
Bachelors degree
20
15
? ?
Higher vocational ed.
19
14
18
13
17
12
General high school education
Vocational high school education
16
11
15
10
14
9
Vocational middle school education
General middle School education
13
8
12
7
11
6
10
5
9
4

Primary education
8
3
7
2
6
1
5
Pre-school ed.
4
3
4
Background- ChinaEducation Development

• International Education Development

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Background

• Industry Flow

Plan Location choose Program design Purchase
facilities
Register to the local government
Being Evaluated
Acquire Certification
Recruit students Hire Teachers staffs
Criteria Teachers certifications Facilities
standard Size of the class Minimum fund Etc.
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Background

• 2004 Major Data of the Education System

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China EducationIndustry Analysis
Context
SocialValues
Competitors
Technology
Rivals
Buyers
Entrants
Global
FirmCompetencies
Customers
Politics
Substitutes
Suppliers
CoreProductAttributes
Economy
Regulation
Lifestyles
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The Five ForcesMeasurement metrics
Source Michael E. Porter, The Competitive
Advantage of Nations, The Free Press, 1990.
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v
Buyer Analysis

• Buyers volume is increasing
• Number of students enrolled ?
• The factors affecting the desire of parents to
  send their children to preschool include
• Household income ?
• Parents concern over education.?
• Number of kindergartens is constant.

The bargaining power of the buyers is LOW!
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Substitutes Analysis

• Substitutes are another options for satisfying
  compulsory school attendance requirements. Some
  examples are
• Home Education Private Tutors (????)including
  babysitting
• Private Tutoring School (????)
• Special Talent School (????,e.g.???),
• Children Sport School of China(??????????)

The threat of the Substitutes is LOW!
Availability
Price
Performance
Switching Costs
Low
Low
Low
moderate
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Supplier Analysis

• The supplier force is strong
• No enough teachers
• Few education material suppliers
• Kindergartens are intended to buy
  materials only through several suppliers.

The bargaining power of the suppliers is HIGH!
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New Entrants Analysis

• Entry Barriers
• Government Policy is Positive and encouraging
• Regulations on the running of the educational
  institutions with social recourses, the State
  Department, 1997
• Non-governmental Education Promotion Law, 2004
  
• low tax rate preferred loan policy
• Entry Cost
• Fixed Costplace, decoration and facilities etc.
• Variable Costeducation materials, salary and the
  electricity, water expense etc.
• Ministry of Education has set a minimum standard
  of investmentRMB 30,000/class
• Exit Cost
• No regulation on the exit mechanism

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New Entrants Analysis

• Trend of New Entrants
• Increase in private investment
• After China joined in the WTO, the education
  market is more open to foreign investment

The threat of the new entrants is HIGH!
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Internal Rivalry Analysis

• Market Concentration
• Government owned kindergartens have a leading
  position of the market.
• The market of private kindergartens is not
  concentrated and suffers high pressure from
  government owned sectors.
• Industry Growth
• Enrollment rate of pre-school children is below
  50 on average.
• Education expenditure will increase with the
  growth of disposable income.

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Internal Rivalry Analysis

• Differentiate Products
• Government owned kindergartens differentiate in
  reputation of the public.
• Private kindergartens are hard to be
  distinguished except offering multi-language and
  multi-skill education.

Rivalry among existing Competitors is HIGH!

• Fixed Cost
• Not a major component of
• total cost
• Low effect of economic
• of scale

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Industry AttractivenessAssessment
Source Michael E. Porter, The Competitive
Advantage of Nations, The Free Press, 1990.
HIGH
LOW
Bargaining Power of Buyers
Threat of New Entrants
Substitute Threats of Products or Services
Bargaining Power of Suppliers
HIGH
LOW
HIGH
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Industry AttractivenessAssessment

• Complicated situation
• Positive aspects
• Expanding demand
• Low entry barrier
• Few substitutes
• Negative aspects
• Intense competition
• Insufficient supply

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ConclusionOur Entry Strategy

• Based on Different Market Segments
• High-end Segment
• Good profit margin
• Less competitors
• Middle Segment
• dominated by public preschools
• Low-end Segment
• high competitiveness
• low profit margin

Our Target Market!
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ConclusionOur Entry Strategy

• Differentiated Services
• High quality services
• Brand building
• Location Choosing Developed Cities
• Income level high
• Economic growth fast

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Questions Answers
Wu, MuheGu, Minyan Hu, Yuanyuan Pan, Ya Jing
Zheng, Hong Kathy Cheung
GROUP 1