As competition intensifies it becomes increasingly pertinent to ask “What sustainable competitive advantage should the Private Higher Education Institutions (PHEIs) have to achieve market leadership in the Malaysian education industry? ” For the smaller PHEIs, it is a question of survival itself. This paper aims to provide a theoretical study of some of the key strategic activities of the leading PHEIs to answer this question. The literature review covering both foreign and local sources indicates three key factors of sustainable competitive advantage, i. . branding and image, the physical aspects of higher education including location and facilities, and the mode of delivery. The paper will seek to identify these factors amongst the market leaders to ascertain the validity of the secondary data via critical analysis of their activities. The theoretical framework employed for the analysis will be Michael Porter’s Three Generic Strategies and Five Competitive Forces. The PHEIs have largely evolved into business entities and this development makes the framework appropriate for the study. 2082 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd List of tables Table1. Summary of expert views on sustainable competitive advantage Table 2. Analysis of competitive advantages in the context of the five competitive forces Competitive advantage: a convergence of views. 7 13 Table 3. 15 List of figures Fig. 1 McGee, Thomas and Wilson’s differentiation strategy. Fig. 2 The five competitive forces affecting the PHEIs Fig. 3 The nature of educational offering 5 8 16 2083 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING d nd INTRODUCTION Archer and Hutchins (2000) indicated that the reasons for undertaking a degree program were largely personal and economic: to earn more money and to avoid hard, dirty or dangerous jobs. Higher education allows personal development and facilitates social-class mobility by helping one move up in the socio-economic ladder. Prior to 1996 only the public higher educational institutions had the rights to confer degrees. The Private Higher Educational Institutions (PHEIs) could only confer certificates and diplomas.
Since 1996, the Ministry of Education Malaysia (MOE) had introduced legislations that have revolutionalized the higher education system bringing about educational reforms and the democratization of secondary education, increased student enrolment at PHEIs, new public policies and the privatization of higher education in Malaysia. While this development had generally benefited the industry, it had created a challenging, fluid environment where Government interference and legislative changes demand great flexibility and an even greater entrepreneurial mind set from PHEIs.
With the creation of the Malaysia Qualifications Agency (MQA), a single quality assurance agency is created in the country whose scope covers both the public and private higher education providers using the Malaysian Qualification Framework (MQF) as a basis. While the MQA has added value and has contributed to the growth of the PHEIs in recent years because it has bolstered confidence in the quality of education, the MQA has also raised the bar for the PHEIs and the PHEIs had to readapt to the new legislation to remain valid (Syed Ahmad Hussein, 2009).
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Even more challenging than the quality assurance standards set by the MQA is the proposed index-rating system for private varsities in 2011. According to the Higher Education Minister Datuk Seri Mohamad Khaled Nordin, it would be compulsory for all institutions of higher education to participate in the Rating System for Malaysian Higher Education Institutions (Setara) programme in 2010. By the year 2011, prospective students can check on the standing of private universities and university colleges before enrolling.
Poor ratings would guarantee the eventual demise of sub-standard institutions. According to the minister, all this stringent controls are necessary. Quote: “We’ve no choice but to concentrate on quality. We want Malaysia to be a hub of higher education. We want firstclass mentality students” (The Star, 2009) The PHEIs as an industry has been growing at an average annual rate of 5. 5% from 2000 to 2005 and the growth rate projected from 2006 to 2010 is expected to be 6. 7% (The Ninth Malaysian Plan 2006 p. 245). There are many factors driving the industry’s growth.
The democratisation of secondary education by simplifying the grading process thereby making it easier for students to reach the SPM (Sijil Pelajaran Malaysia)level, which is the minimum requirement for furthering studies at the higher education level, has increased the number of secondary students eligible for higher education. MAPCU (Malaysian Association of Private Colleges and Universities) estimated the industry to have generated a total fee income of RM1. 5 billion in 2008 (Oh, 2009), a sizeable business to attract intense competition.
According to Tan and Raman (2009), the intense competition has led to PHEIs lacking the competitive edge to close down. They further add that the former director of the Department of Private Education, Datuk Hassan Hashim revealed that 200 private institutions of higher learning had been closed down in 2002. The PHEIs can be categorised into three types: universities, university colleges and non-university status PHEIs. This study will focus mainly on the university status and university college PHEIs with significant investments in activities and within the Klang Valley region. 084 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd The university status and university college PHEIs tended to focus on science and technology while the nonuniversity status PHEIs offered Arts programmes. Further, the university status and university college PHEIs operates off purpose-built campuses with full facilities while non-university status PHEIs lack proper facilities and normally offer programmes that are easier to deliver and do not require high financial resources.
Funding, hence, appears to be a key factor for survival in the industry. Funding, particularly for the non-university PHEIs, comes mainly from student fees and sustained enrolment numbers become the key determinant of survival and market dominance. Indeed many PHEIs had gone for public listing for funding: Systematic Education Group (now known as SEGi University College) in November 1994, Stamford College Berhad in May 2005, Inti Universal Holdings Bhd in June 1996 and HELP International Corp Bhd in May 2007.
Furthermore, funding also comes in the form of corporate investments. The corporate sector, with vast resources and management experience, is in a much better position to invest, build up and develop the private sector education industry and to achieve the standard and quality required. They are also better equipped to provide the industrial link and experience for both the staff and students of these institutions, helping in the overall development of the student learning experience (Oh, 2009).
Some of these corporate-linked university status and university college PHEIs include Sunway University, Taylor’s University and KDU University College, not to mention SEGi University College. The university-status and university college PHEIs are expected to be the drivers of growth amongst the PHEIs: the university-status and university college PHEIs benefiting from their significant financial resources and aggressive activities and the university colleges from their upgrade that allows them to offer 3+0 programmes. Hence, these two categories of PHEIs, i. . the university status and university colleges will be the focus of this study. In recent years was a clear warning that significant funding was no guarantee of success. Kemayan ATC was delisted in May 2006, the Workers Institute of Technology and Goon Institute owned by Sateras Resources Berhad in October 2007 while Stamford College became a PN17 company in May 2009 from the second board of the KLSE (The Star,2009). This is a clear warning that not all is well despite the industry’s growth as only the well managed PHEIs will survive.
Strategic developments like the public listing of HELP University College in the KL Stock Exchange (Education Guide 2003), Laureate, USA’s purchase of INTI University and Limkokwing University’s initiative in exporting education overseas are some examples of the level of competition in the industry. ‘Market leadership’ amongst the PHEIs is defined by the researcher not just in terms of outstanding revenue sales or student enrolment but includes their image and branding as perceived by their markets. The question then remains which of these PHEIs would survive the competition in the long run?
Put simply: What sustainable competitive advantage do the PHEIs have to achieve market leadership in the Malaysian education industry? ” The researcher would delve into the key areas in the activities of the selected leading university status and university college PHEIs to uncover sustainable competitive advantages using the five competitive forces structure developed by Porter (1985). Theories and propositions The parent theories selected for the research is Porter’s competitive strategy and the five competitive forces (Porter 1985). Porter’s theories were selected ecause they have “shaped a generation of academic research and business practice” (Harvard Business Review, 2008). The theories are widely accepted by both academia and by industry leaders worldwide. In the words of the editor of Harvard Business Review, Peter Crowther p6. “It started a revolution in the strategy field”. 2085 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Justification for the research Based on the existing literature, Porter’s theories of competitive advantage and the five competitive forces have never been applied to an education industry.
Moreover, the three factors of competitive advantage, branding, physical aspects and mode of delivery are areas not well covered vis-a-vis the university status and university colleges PHEIs. This view is supported by Kim, Kim, Holdsworth and Chai (2006), when they remarked in their research that “despite the numerous literatures on choice in international education, little has been written about the influence of brand message on student’s choice of education in Asia”(p2).
This research is also underlined by the fact that no research has as yet been carried out to assess the strengths of the industry players and, by inference, the industry itself. LITERATURE REVIEW Parent theories for the research According to Porter (1985), the sustainability of a firm’s competitive advantage is, firstly, dependent on the ability of a firm’s strategies to resist erosion by competitive activities and, secondly, the firm’s ability to anticipate the evolution within the industry which it competes in.
By strategies, Porter refers specifically to the three generic strategies of low cost, differentiation and focus which Porter posits could be a source of competitive advantage for the firm. However, for the strategy to succeed the firm must possess some barriers that make imitation of the strategy by competitors difficult. The evolution within the industry refers to changes or challenges within the industry structure that could render the abovementioned competitive advantage ineffective. In addition, having a competitive strategy per se is insufficient.
It must be translated into an above-average performance in the long run – a sustainable competitive advantage. Porter’s three generic strategies. To quote Porter (1985, p. 3): “Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price”.
Although a firm can have many strengths and weaknesses compared to its competitors, there are basically two types of competitive advantage that a firm can possess: low cost or differentiation. Derived from these is a third variation, the focus advantage which has two variants, cost focus and differentiation focus. (Porter,1985). Cost leadership. To pursue a low cost strategy usually requires the firm to seek economy of scale to bring down costs or through proprietary technology or preferential access to raw materials.
In the services sector, it would mean lowcost labor and efficient training procedures because of high turnover. Low-cost firms usually sell a standard, nofrills product or service. (Porter,1985). The cost leadership strategy is deemed inappropriate for the education industry as highly qualified educationists, up-to-date modern facilities, technology and attractive premises are the standard hallmarks of a quality institution and these make low cost unachievable at best.
To provide a standard, no-frills education will be at the expense of marketability. Rather than target low cost which, in this case, could mean a low cost education, the antithesis of ‘quality education’, Porter’s model includes a differentiation strategy. 2086 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Differentiation. In the differentiation strategy, a firm seeks to be unique along some dimensions that are valued by its customers and the attributes chosen must be different from that of rivals.
Differentiation can be achieved through the firm’s product, the delivery system, the marketing approach as well as a range of other factors. (Porter,1985). Differentiation by adding value to products and services can provide a more sustainable competitive advantage compared to the cost leadership strategy provided, that is, that competitive advantage is not easily copied by the firm’s competitors. One of the key methods for achieving differentiation is through brand loyalty.
Dibb and Lowe contend that in the growth stage of a product’s life cycle the typical marketing strategy adopted would be to encourage strong loyalty and this is supported up by Mohd. Nazari Ismail and Mulkit ‘s (2003) study of Porter’s generic strategies as adopted by selected multinational companies in Malaysia. Their study included Nestle, Phillip Morris and Ajinomoto. In their study Mohd. Nazarin Ismail et al summarize that these multinational firms are not willing to dent their image, i. e. randing, if the process ( low cost operations) cannot be controlled because of competitive cost activities. This suggests the greater importance multinational firms give to the differentiation strategy as opposed to the low cost strategy. Mazzarol and Hosie (1996) too take the differentiation view when they quote Hill (1988) and Murray (1988) in saying that for successful long-term competitiveness customers attach weight to product attributes other than price and that a differentiation strategy is generally essential. McGee, Thomas and Wilson’s (2005) differentiation strategy grid in fig. underscores specific factors which are pertinent to the discussion: Fig. 1 McGEE, THOMAS AND WILSON’S DIFFERENTIATION STRATEGY Advantages •Superior service •Utilizing strong brand names •First to offer innovative features •Wide distribution coverage •Full range of course covered Strategy •True differentiation is only achieved by satisfying buyer needs uniquely. • Objective is to achieve a price premium that exceeds the cost of differentiation. Differentiation Competencies •Strong marketing skills •Pricing expertise •Strong co-ordination of business functions. Ability to attract creative people. •Corporate reputation for quality. Risks •Creating differentiation that buyers do not value. •Excessive price premiums (or too low) •Failure to understand costs of differentiation. •Failure to stay ahead. • Wrong customer segmentation. Adapted from McGee et al, 2005. Strong brand names, innovative features, strong marketing skills, strong coordination of business functions are closely related to Porter’s “firm’s product, the delivery system, the marketing approach”.
In these respects, Limkokwing Creative Technology University, Inti-Laureate University, UCSI University, Taylor’s University and SEGi University College are in active competition. 2087 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Focus. The cost leadership and differentiation strategies seek competitive advantage in a broad range of industry segments, while focus strategies aim at cost advantage (cost focus) or differentiation (differentiation focus) in a narrow segment. Both variants of the focus strategy depend on segments ith buyers/customers with unusual needs or the production and delivery system required to serve these buyers/customers differ from those in the other industry segments. Limkokwing Creative Technology University appears to pursue the differentiation focus although market pressures have dictated that it adds courses that are not focussed strictly on ‘creativity’. Porter’s five competitive forces Porter further adds that cost advantage and differentiation in turn stem from industry structure. They result from a firm’s ability to cope with the five competitive forces better than its rivals.
These five forces are: 1)The entry of new competitors, 2)The threat of substitutes, 3)The bargaining power of buyers, 4)The bargaining power of suppliers and 5) The rivalry amongst existing competitor Based upon the above arguments, it is the present researcher’s view that key to the research is an analysis of the perceived competitive advantages of the PHEIs, the intention of which is to evaluate them within the framework of the three generic strategies, i. e. , which of the three strategies were adopted, if at all.
These competitive advantages will then be assessed against the backdrop of the five competitive forces of industry structure to gauge their sustainability. Opposing views to Porter’s theories Notwithstanding the above, it must be noted that Porter’s theories have met with naysayers. The strongest of them being Hamel and Prahalad (1994) who posit that to build leadership, a company must be capable of reinventing its industry and to rebuild leadership, a company must be capable of regenerating its core strategies and that it must have the capacity to become different.
They further add that there is a need not only to keep score of existing advantages – what they are and who has them – but to discover the ‘engine’ that propels the process of advantage creation. The tools of industry and competitor analysis, i. e. as suggested by Porter, are much better suited to the first task than the second task (Hamel and Prahalad, 1994). The arguments of both Porter and Hamel and Prahalad have been succinctly summarized by Doole and Lowe (2005) as the ‘two principle views as to how competitive advantage can be achieved – ‘the resource view’ by Hamel and Prahalad and the ‘competitive forces view’ by Porter.
Doole and Lowe’s view the two conflicting theories, i. e. , Porter’s and Hamel and Prahalad’s, as being compatible when Doole and Lowe concede that while organizational learning or ‘the collective learning organization’ are commendable theories, market intelligence, an analysis of how the market is affected by the SLEPTC factors (social/cultural, legal, economic, political, technological, and competitive) and knowledge of other environmental and industry factors remain the basis for developing competitive advantage. Quoting Khairuddin’ study, Mohd.
Nazari Ismail and Mulkit Singh(2003) noted that 30 percent of the small and medium enterprises (SMEs) in Malaysia followed Porter’s differentiation strategy while 26 percent adopted the cost leadership strategy. The relatively widespread use of Porter’s generic strategies in the Malaysian context appears to further justify this researcher’s use of these parent theories to study the PHEIs competitive advantage in the education industry. 2088 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING d nd Sources of sustainable competitive advantage Various researchers have proposed their respective interpretations of what signifies sustainable competitive advantage in the education industry. The following are examples: 1) The competitive forces view (Porter, 1985) believes the success of an organization’s competitive strategy depends on the positioning of the organization within its environment, particularly its industry and its ability to defend itself against competitive forces, or influence them in its favour. ) The resource based view (Hamel and Prahalad, 1994) believes that the firm will perform well if it is able to develop distinctive competencies which allow it to outperform its competitors. 3) By identifying specific ways in which an organization can differentiate its products or services and promoting those differences that will appeal mostly to its target market (Baharun, 2002). 4) Organizations should be driven by market focus and innovation, are flexible and responsive to changing arkets/circumstances and international in perspective (Baharun, 2002). 5) Courses, career information, physical aspects and facilities are critical issues that must be kept in mind when educational institutes are trying to create sustainable competitive advantages in marketing strategies (Joseph & Joseph, 2000) 6) Davidson (1987) identified eight sources of competitive advantage and for a winning strategy at least one competitive advantage is needed.
For above average growth and profits, however, more are usually needed:i) A superior product benefit, ii) A perceived advantage perhaps created through imagery and effective communication, iii) Low cost operations, iv) Legal advantage, because of patents, copyrights or a protected position, v) Superior contacts, vi) Superior knowledge of customers, markets, science or technology, vii) Scale advantages, viii) Offensive attitudes, competitive toughness and a determination to win. Summary of expert views on competitive advantages amongst Malaysian university status and university college PHEIs.
Table 1. A SUMMARY OF EXPERT VIEWS ON SUSTAINABLE COMPETITIVE ADVANTAGE Expert views 1 2 3 4 5 6 7 8 Positioning of the organization within its environment to defend itself. Distinctive competencies of the firm: Superior contacts, superior knowledge of business and customers, offensive attitudes. Product and services differentiation/superior product benefit. Market focus and innovation. Courses, career information, physical aspects and facilities. Imagery and effective communication. Legal advantage Scale advantages
Application of the five competitive forces model to the Malaysian education industry. An adaptation of Porter’s five competitive forces framework (Elements of industry structure, Porter, 1985, fig. 1. 2, p. 6) to the education industry in Malaysia is presented in figure 4. The elements indicated have been selected from Porter’s extensive listing on the basis of relevance to Malaysia and the PHEIs under study. 2089 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Fig. 2
THE FIVE COMPETITIVE FORCES AFFECTING THE PHEIs . Entry Barriers: Proprietary product differences Brand identity Capital requirements Proprietary learning curve Government policy Potential Entrants Rivalry determinants: Industry growth Product differences Brand identity Diversity of competitors Corporate stakes Exit barriers Industry Competitors Bargaining power of suppliers Rivalry Among Existing Firms Determinants of supplier power: Importance of volume to supplier Impact of inputs on cost or differentiation.
Threat of forward integration Determinants of substitution threat: Relative price performance of substitutes Buyer propensity to substitute Determinants of buyer power Bargaining leverage and choice Buyer information Substitute products Price sensitivity Product differences Brand identity Impact on quality/performance Bargaining power of buyers Threat of substitutes Potential entrants and entry barriers. Proprietary product differences. A university status or university college PHEI has the privilege of developing their own syllabus and awarding their own degrees over and above the foreign egree programmes which they are currently offering. This development allows these PHEIs to create proprietary product differences while non university status PHEIs make do with foreign partner degree programmes which are, by and large, ‘generic’ and are ‘shopped’ off the market. Examples of such proprietary product differences include SEGi University College’s degree programmes in environmental technology, construction management and optometry; Nilai University College’s Bachelor in Automotive Engineering and UCSI University’s degree in Traditional Chinese Medicine amongst others.
However, these proprietary product or service differences cannot be patented and can be easily duplicated. In short, there is no real proprietary product or service differences to prevent entry by new or existing university status or university college PHEIs Brand identity. Heavy brand building activities by well funded university status and university colleges PHEIs like IntiLaureate, UCSI, Taylor’s and Limkokwing Creative Technology University have raised the entry barriers to new entrants. Buyers/consumers choose ‘reputable’ institutions and reputation is closely associated with brand identity.
The unknown, new entrants will be at a major disadvantage. Capital requirements. Unlike the education industry of the 1970s and 1980s, shop house and shopping complex colleges are no longer encouraged by the government. The top PHEIs today, whether university status or otherwise, are housed in stand- alone building complexes or located in their own purpose built campuses complete with modern, up-to-date facilities. Massive capital investments in building fixtures and facilities are a pre-requisite for success in the industry. 2090 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Government policy. Ong (2008) noted that as part of the Government’s effort to stem the outflow of foreign exchange to the Organisation for Economic Cooperation and Development Countries (OECD), the Government has liberalising education. Further, since the economic downturn in 1997, 26 colleges have been granted the approval to conduct 3+1 degree programmes with selected foreign universities and this added to the plethora of options available to students (Tan, 2002).
The competitors are varied representing government-linked, financially robust organizations, prestigious off-campus universities with global resources to newly awarded university status private colleges which are often backed by major corporations. Amongst the PHEIs alone there is a proliferation of options for the students. The government’s policies are generally pro-PHEIs and represent no real barriers to entry despite the setting up of the MQA (Malaysian Quality Assurance) to monitor the quality and development of the PHEIs. Threat of substitutes and determinants of substitution threats.
Relative price performance of substitutes. Pricing is an important factor for the PHEIs as fees are significantly higher compared to public higher education institutes although much lower than a foreign education in the UK, USA, Australia or New Zealand. Obviously those who stayed home have pricing as a key consideration. This is also evident in the increasing number and value of scholarships, loans, grants given out year on year to attract enrolment. Limkokwing Creative Technology University is by far the most aggressive, advertising RM34 million in scholarships in 2010 followed by UCSI University at RM5 million.
SEGi University College offered RM500 off enrolment fees as an incentive to potential students. Despite this, however, buyers will make their buying decisions based on customer value, i. e. , the price will be weighed against the bundle of benefits offered. Price ultimately will not determine market leadership. Buyer/customer propensity to substitute. University-status and university college status PHEIs must create a point of differentiation in order to successfully compete in this crowded market place.
Specialization of their individual curricula is one option but with educational institutions pursuing their own financial interest and catering to popular needs a “dynamic of convergence and not divergence” is the contrary result. All universities will attempt to cover the complete spectrum of higher education instead of specialising. (King, R. 1995). With PHEIs offering largely generic programmes, similarly prestigious foreign degrees and similarly competitive facilities, differentiation becomes blurred. There are many choices in PHEIs, programmes and fee range.
Buyer substitution is indeed a real threat and only the PHEI with the competitive advantage most valued by the buyers can succeed. Bargaining power of buyers/customers and the determinants of buyer/customer power Buyer/customer information Advertising spend by the PHEIs to promote their programmes is estimated at RM560 million in 2009 and with the many education fairs, point-of-sale materials and other recruitment drives factored in, significant monies have been invested to keep buyers/customers informed.
This flood of information increases ‘noise’ and ‘clutter’ and makes buyers/customers’ purchasing decision difficult and competition even more intense. Ultimately advertising cut through’ is critical for a share of buyers’ mind. This is only possible with a strong, distinctive advertising or promotional campaign. Limkokwing Creative Technology University’s marketing communications with their highly original and distinctive ‘creative’ ads and communication materials represent an excellent example of buyer awareness ‘cut through’.
Sunway University College’s Tan Sri Jeffrey Cheah distinguished 2091 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd speakers series advertising campaign is another attempt at advertising cut-through while at the same time building brand image for the institution. Institutional websites are common to all the PHEIs and these represent important sources of information, direct marketing and interactive activities between the buyer/customer and the PHEIs.
The Internet technology similarly allows potential buyers and customers to shop around and compare between PHEIs giving them the advantage of choice. Substitute products The options available to students are many: excluding public universities there are 559 PHEIs (2000 – 2005 projected) including private universities, branch campuses of foreign universities, university colleges and other private colleges. (Adapted from Department of Private Education, Ministry Of Education Malaysia, 2003, p. 3). As the university status PHEIs proliferate, choice will continue to increase.
It becomes, in short, the buyers’ market. The PHEI with the distinctive competitive advantage most valued by buyers will stand a better chance of being chosen. The question remains: what are the competitive advantages that drive buyers’ choice? Product differences (Service product) Despite the many similarities amongst the PHEIs’ offerings there are sufficient product differences to command the buyer’s interest, not just in terms of courses available but also other factors such as reputation and affiliations.
Inti-Laureate University brings global reputation and an international network of affiliations to the local education industry which the organization claims 300 just in the USA alone. UCSI provides an enviable range of science and arts programmes covering medicine to Traditional Chinese Medicine; Limkokwing University of Creative Technology specialises in creative arts and sciences including architecture and movie production; and Taylor’s University boasts the highest student success rate and the highest number of award winners. Brand identity A PHEI with a strong brand identity can limit the power of buyers.
Brand identity is closely associated with reputation and that, in turn, with quality education. Brand identity and reputation can be created via strategic and effective marketing communications. Short of a firsthand experience of a PHEI’s education services, branding serves as a proxy for decision making by buyers. Amongst the PHEIs Limkokwing Creative Technology University,Taylor’s University, Sunway University, HELP University College, SEGi University College and KDU University College appear to stand out in terms of branding.
These institutions were winners in the 2010 Putra Brand Awards, awards which are measured based on consumer preferences and a robust and unbiased consumer research polling system developed by a profession research organization called the Pulse Group. Touted as the largest consumer research sampling of its kind in Malaysia involving a total of 6000 consumers, the awards were stewarded by the MMVB (Malaysia’s Most Valuable Brands) board of governors and endorsed by the Malaysia External Trade Development Corporation (MATRADE). (Pulse group. 011) Furthermore in the government’s SETARA ’09 rating of Malaysian Universities and University Colleges, Sunway University and Taylor’s University were the only two PHEIs in the research to be awarded the tier 5 excellent rating followed by HELP University College, Inti-Laureate University, Limkokwing Creative Technology University and UCSI university in the tier 4 very good rating. (MQA 2011) Such recognition would have afforded these institutions with substantial competitive advantage and makes them the PHEIs of choice amongst buyers/customers. 2092 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd d Bargaining power of suppliers and determinants of supplier power Importance of volume to suppliers The export of education is a major source of income for the UK, USA and Australia and to a lesser degree, New Zealand. Like any business, volume counts. If enrolment falls and the foreign partner does not achieve their business objectives the programmes may be withdrawn and transferred to PHEIs with better profit potential or, more often than not, offered to multiple PHEIs without exclusivity to any institution. A Herriot-Watt, UK, a Northumbria University or a University of Curtin, Australia, twinning degree is available to multiple PHEIs.
In short, size matters. Needless to say, the leaders in the industry would be in a better position to negotiate and be able to obtain the most prestigious foreign degrees at a better cost and offered to buyers/customers at a higher price hence achieving cost advantage and better profit margins. Cost relative to purchases in the industry The accreditation fees have increased over the years eating into the PHEIs’ profit margins and necessitating fees increases making them increasing less attractive as a source of alternate education.
It has been reported that the British government is proposing a drastic cut in subsidies to the public and private universities in the UK in the near future (The Star, p56). This development may result in new increases in accreditation fees and may make the popular 3+0 UK degrees even more expensive for the PHEIs to offer. The PHEI solution appears to be in their own local degrees which are permissible upon achieving university or university college status. The cost can be more affordable and the profits greater but the prestige of a foreign degree is irreplaceable.
Threat of forward integration To date, there had been no forward integration amongst the major PHEIs. In the education industry where activities are self-contained the issue does not arise. Student recruitment agencies are more common for overseas markets and foreign students are not part of the current research. Industry competitors and rivalry amongst existing firms Industry growth As mentioned in the introduction, the private higher education industry has been growing at an average annual rate of 5. % from 2000 to 2005 and the growth rate projected from 2006 to 2010 is expected to be 6. 7% (Adapted From The Ninth Malaysian Plan 2006 p. 245). MAPCU (Malaysian Association of Private Colleges and Universities) estimated the industry to have generated a total fee income of RM1. 5 billion in 2008 (Oh, 2009), not including other related incomes. The size and growth of the industry will stimulate intense rivalry not to mention attracting new entrants. Brand identity Brand identity is often a result of positioning, advertising and promotional activities.
The bigger university and university college PHEIs with more financial resources to carry out such activities usually command greater buyer identification. Nevertheless, there are only a handful of university and university college PHEIs that have strong brand presence based on advertising. They are Limkokwing Creative Technology University,Taylor’s University, Sunway University, HELP University College, SEGi University College and KDU University College as attested by their Putra Brand Awards 2010 selection. (Pulse group. 2011). 2093 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Diversity of competitors While there is a general lack of diversity and specialization in programmes except for Limkokwing Creative Technology University, UCSI University and technology-focused UCTI-APIIT University College, there is, however, diversity in the PHEIs’ differing corporate visions and marketing strategies. Laureate, USA’s purchase of INTI University has added new dimensions to the competition bringing new, advanced management and marketing skills to the organization.
Limkokwing Creative Technology University with its many off-campus branches in the UK, amongst other foreign countries, has not only taken on the new role of exporter of higher education in line with the Ninth Malaysia Plan, 2006, but has also added prestige and marketing value to that institution. Corporate stakes Capital investment being a key success factor in the education industry it is then not surprising that corporate funding and ownership is common amongst the PHEIs.
Corporate involvement also has the added advantage of industrial links that provide the necessary internship training to enhance the marketability of the graduates and increase their job placement opportunities. These are major considerations when choosing a PHEI to further one’s studies. Sunway University, KDU University College and SEGI University College are owned by renown and successful property magnates with the resources to develop and promote their PHEIs.
They would be formidable competitors in the provision of the physical aspects of education such as premises, excellent location and facilities to compete with the other PHEIs. Exit barriers Exit barriers are high for those PHEIs that have invested significant sums of money into purpose-built campuses and first class facilities. The competition to survive will be intense. The stronger PHEI may absorb the weaker ones to form an oligopoly where the scenario could be one of a battle amongst titans. Inti-Laureate appear to have taken this route by absorbing Metropolitan University College and UCTI’s merger with APIIT.
Summary analysis of the five competitive forces in the Malaysian context According to Porter an assessment of a firm’s competitive advantage must take the industry’s structure into account. The analysis indicates that the only true barriers to new entrants are a strong brand identity and capital investments. Sufficient capital investments is required to build branding through heavy advertising and promotional activities although such activities can only be successful if they are backed by a differentiated brand positioning and an effective advertising and promotional campaign.
Such activities can provide a strong communication and information platform for buyers/customers and hence influence their decision making. This will reduce the threat of substitutes; offset the lack of product and service differences and diversity; and reduce the power of the buyers/customers. As a consequence of this, a strong PHEI with the financial and enrolment clout would have a strong negotiation power over suppliers. Despite the intense competition and rivalry, the PHEI would have achieved a significant competitive advantage over its competitors.
To reconcile the discussion thus far: Table 2. Analysis of competitive advantages in the context of the five competitive forces Expert views of competitive Five competitive forces analysis advantages Product and services No barrier to new entrants. Product and services differences differentiation/ surmountable. Superior product benefit. Threats of substitutes. Subject to the bargaining power of buyer and suppliers. Industry rivalry will render any product or service differences marginal. 2094 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Market focus and innovation Courses, career information, physical aspects and facilities. Positioning of the organization within its environment to defend itself. Distinctive competencies of the firm: Superior contacts, superior knowledge of business and customers, offensive attitudes. Imagery and effective Minimises threats of potential entrants, substitutes, the communication. bargaining power of buyers/customers and rivalry.
Legal advantage Government policy is pro-industry. No barrier to new entrants and rivalry. Scale advantages Reduces the bargaining power of buyers/customers, suppliers and the threat of substitutes. The table above appears to indicate that the competitive advantages that satisfy the five forces of competition analysis are courses, career information, physical aspects and facilities, positioning of the organization within its environment to defend itself, distinctive competencies of the firm, imagery and effective communication and scale advantages.
However, “positioning of the organization within its environment to defend itself” is generic and encompasses elements of “physical aspects and facilities, distinctive competencies of the firm, imagery and effective communication and scale advantages”. Hence, the following convergence of views is perceivable: • • • • Brand identity and image. Capital investments to support the physical aspects of education and the facilities; and the brand communications. Core competencies of the firm be it in an organization’s collective learning or its superior knowledge of its business.
Scale advantages. Buyers’ purchasing behaviour Available consumer research findings regarding the buyers’ purchasing behaviour appear to support these conclusions. Research findings collected from 616 business students in New Zealand by Joseph and Joseph (1997) indicated that amongst the top three factor criteria considered the most important attributes looked for in institutes of higher education are academic reputation and physical aspects. Joseph and Joseph (1997) in the same research noted that physical aspects are the tangible aspects of the education service.
Webb, Coccari, Lado, Allen and Reichert’s study (1998) indicated that of the ten criteria used by students when selecting a college the top three included academic reputation of institution and marketability of the degree conferred; and reputation and branding are closely related. Wagner and Fard (2009), in their separate research also found that physical aspects and facilities as well as institutional information (advertising, websites, fairs, etc) have significant relationships with the students’ intention to study at a PHEI.
Similarly, in Baharun’s research “A study of market segmentation in tertiary education for local public higher education institutes” (2002) the two specific university selection attributes identified were ‘quality’ and ‘brand image’. In that study, Baharun noted that: “The image represents the Local Higher Learning Institutes (LHLI) in the customer’s mind and gives him or her a pre-taste of the university. “. (2002 p40) Small segments vulnerable to the bargaining power of suppliers.
Physical aspects minimise threats of potential entrants, substitutes, the bargaining power of buyers/customers and rivalry. Minimises threats of potential entrants, substitutes, the bargaining power of buyers/customers and rivalry. Minimises threats of potential entrants, substitutes, the bargaining power of buyers/customers and suppliers and fend off rivals.. 2095 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd
Reiterating the importance of image, Baharun’s research paper “Identifying Needs and Wants of University Students in Malaysia” highlighted several aspects relating to student’s choice of tertiary education institutions in Malaysia, one of which is image. It is noteworthy that in all the previous researches (Joseph and Joseph and Webb et al), academic reputation was highlighted. Reputation is closely related to image and in this sense all the researchers agree with the importance of image as a factor in college selection.
Further Baharun also identified “conducive facilities and resources” as amongst the attributes considered important by students and explains that a failure to react to these attributes or issues will result in losing sustainable competitive advantage. Ancheh, Krishnan and Nurtjahja’s findings (2007) based on 17 universities and 64 colleges list the “recognition and reputation of the institutions” and “campus environment, atmosphere and facilties” as important criteria for the selection of private universities and colleges in Malaysia.
Ancheh et al’s comments on “lower costs” are pertinent to the study. Nooraini Sheriff’s (2007) research on information sources influencing students’ choice of private colleges in Malaysia, on the other hand, drew the following findings: 1) Influence from friends and family, 2) The NAB (National Accreditation Board or LAN) today upgraded to MQA (Malaysian Quality Assurance) and the Ministry of Education, 3)Course counsellors and advertisements, 4) Personal inspection of the PHEI, i. e. experiential sources such as college facilities, design, facade and layout. Influence from friends and family” a function of WOM (word of mouth) is usually related to reputation and, hence, branding and image as is quality as measured through MQA recognition. “Personal inspection” points to the importance of the physical aspects of education. Summary analysis of buyers/customers’ purchasing behaviour findings It is noteworthy that all the researchers above have “academic reputation”, “physical aspects”, “institutional information and advertisements” and “brand image” as common higher education selection criteria.
These factors can be grouped into the same two broad categories of “branding identity” and “capital requirements”. Competitive advantages: a convergence of views Table 3 below sums up the areas of convergence based on comparing the discussions above. Table 3. Competitive advantage: A convergence of views Experts’ view of competitive advantage/Competitive advantage in the context of the five competitive forces 1. Brand identity and image. 2. Capital requirements/physical aspects and facilities. 3. Core competencies. 4. Scale advantages.
Buyers/customers’ purchasing behaviour 1. Brand image and reputation. 2. Campus layout, location and facilities. 3. Product-service differences. The areas of obvious commonality are the importance given to brand identity and image which is a function of brand communications. The second significant area of convergence is capital requirements which is necessary to acquire the physical aspects and facilities provided by the institutions of higher learning as well as the investments on communications and information provision.
Capital is also important in obtaining scale advantages by building more branch campuses in and outside the country. “Product-service differences” while dismissed earlier as fairly generic, should not be discounted altogether as it is the core of the education service product – the programmes and the quality of delivery. It represents the core competencies of the organization. Having analyzed the competitive advantages of the education institution in isolation it is now pertinent to discuss them with direct reference to the university status and university college PHEIs.
To better understand their 2096 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd existing competitive advantages Kotler and Fox’s (1995) three levels of the service-product offering model (education offering) will be used for the purpose. The competitive advantage of the PHEIs: an analysis of the education offering: THE NATURE OF THE EDUCATIONAL OFFERING Figure 3 Three levels of an offer Augmented product Accessibility: campus location Packaging: Campus/environment, facilities.
Branding: Reputation, image Financial terms: Fees, scholarships Core service: Information/ Knowledge Features: Courses/curriculum extra-curricular activities Follow-up service: Customer service& care Styling: Lecture methods/ Mode of delivery. Core product Tangible product Quality: Prestigious degrees, Qualified lecturers. (Kotler, 1995) Guarantee: Job placements Core offer The core offer represents the program’s benefits from the student’s perspective or an institution’s marketability upon graduation.
This varies from institution to institution: a foreign degree program would doubtless be seen as better in terms of quality, prestige and marketability when compared with local degrees which are also offered by university status PHEIs like UCSI University and Taylor’s University. The country of origin of the foreign degree is also a key factor for student consideration be they British, American, Australian, New Zealand or Canadian.
However, almost all the PHEIs discussed offer the complete gamut of countries and these do not constitute any significant or sustainable competitive advantage. Dual degree programs, i. e. two degrees awarded for the same course, one from the foreign university partner and the other from the local university, as offered by Limkokwing University of Creative Technology, Taylor’s University and Nilai University College would, by the same logic, double the graduates’ marketability and may constitute a product service difference although this will proliferate over time. 097 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd Tangible offer Branding The brand is a name, term, symbol, or design, or some combination, that identifies them with the institution and differentiates them from competitors’ offerings. Brand names simplify the search for goods and services, guarantee a specific level of quality and if the firm succeeds in fostering a degree of customer loyalty to the brand, it can charge a premium price for the product or service (Dibb and Lowe, 1997).
Branding helps in the reduction of uncertainty in consumer purchases, the reduction of social and psychological risks associated with use or ownership of the wrong product (Berthon, Hulbert and Pitt, 1997). And, according to Aaker and Biel (1993) advertising is the main marketing activity that implants ideas about a brand’s uniqueness or positioning in consumers’ minds. Tucciarone (2008)’s research found that one of the influencers of student preferences was the advertisements of the institution. The advertisement influences from the component of liking an ad and can create a positive feeling for a brand.
According to Goi and Goi (2009), branding is powerful in providing competitive advantages and quoting Stensaker (2005) they posit that one of the benefits of branding for higher education institutes is providing information and image. Koku (1997) too states that the phenomenon of rebranding often occurs in the service industry, and is specifically crucial for universities and colleges. According to Dibb et al, a brand helps buyers evaluate the quality of a product or service, especially when they are unable to judge its characteristics. It helps makes repeat purchase easier.
Branding also helps foster brand loyalty and leads to referrals. (Dibb et al, 1997) Branding helps students choose a specific university or college despite the many competitive options available, often even at a higher cost and at times disregarding the shortcomings of facilities or services. Branding can add value to the institution’s offer and more satisfaction for the consumer (Kotler et al, 1995). Students take pride in noting that they are graduates from well-known and established institutions and this represents a key selling point in a job interview.
The ‘INTI- Laureate’ brand name brings the full force of the global education network of Laureate, USA, to support INTI University’s advertising campaigns. Limkokwing University of Creative Technology rides on the renown and highly recognisable personality of the founder and owner of Tan Sri Professor Emeritus Lim Kok Wing as its brand ambassador. Academic reputation is an aspect of the brand name as it represents the institution’s ‘identity’ on the same footing as its name. It is an attribute of branding just as ‘Oxford University’ and ‘Harvard’ are names that spell academic reputation.
Branding is often achieved through imagery and effective communication, a competitive advantage singled out by Davidson (1987). Limkokwing University of Creative Technology’s marketing communications stand out not only in terms of their highly creative content that utilises futuristic graphics, distinctive advertising layouts and the ‘iconization’ of its brand ‘ambassador’ and spokesperson Tan Sri Professor Emeritus Lim Kok Wing but also their “offensive attitudes, competitive toughness and a determination to win”, another source of competitive advantage according to Davidson (1987, p. 6). Limkokwing University of Creative Technology employs person marketing and brand endorsement ideas using the high profile personality of its owner Tan Sri Professor Emeritus Lim Kok Wing as the vehicle to promote and ‘brand’ the institution. His many philanthropic campaigns for the Palestinians, the peace awards he received and his strong link to the government were prominently advertised.
Accolades from the government that Limkokwing Creative Technology University encapsulates the meaning of ‘innovation’ in line with the government’s 2010 economic theme “growth through innovation” were featured full page across all the major dailies in the country. This strong branding strategy is consistent with the institutes’ academic specialization and positioning and is expected to strengthen the brand equity of the institute. Their winning of the gold prize, the highest award in the Putra Brand Awards 2010 education and learning category attests to their success in this area . Pulse group 2010) Inti-Laureate University benefits from the marketing expertise of Laureate, USA. Their increasing efforts in advertising and branding activities challenge those of Limkokwing University of Creative Technology. From 2098 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd press advertising, billboards to all promotional materials, the distinctive Laureate ‘star’ was used as a mnemonic device to establish brand recognition and association with Laureate, the American owner of the institute, and by implication the American quality and resources available to their students.
In terms of branding and image Taylor’s University, Sunway University, KDU University College, HELP University College and SEGi University College too stood out from the rest. Taylor’s University, Sunway University both received gold awards in the Putra Brand Awards 2010 as well while KDU University College, HELP University College received silvers. Distinct positioning and brand imagery aside, the important role played by heavy advertising expenditure to establish consumer recall cannot be ignored.
In this context, SEGi University College would achieve ‘branding and image’ simply through frequency of their advertisements. They won the bronze award in the same award ceremony. Nevertheless, it must be noted that the branding and imagery presented by Limkokwing Creative Technology University and Inti-Laureate are sources of sustainable competitive advantage as they are not easily duplicated by competitors.
The first is backed by a strong and reputable personality in the creative field and the other by association with an iconic American institution. Taylor’s University emphasises their many record academic successes and by inference, their quality teaching, and while this offers strong branding it does not constitute a sustainable competitive advantage if it rests on service quality which is variable and not its organizational competencies and culture. The quality Quality represents the perceived level of performance of a service.
Berry and Parasuraman (1992) argue that the strategic success of a service organization depends on the ability of service providers to enhance their images by consistently meeting or exceeding customers’ service expectations. Where the students have not yet enrolled into an institution and have no direct experience of the ‘quality’ as defined above, ‘tangible’ quality would mean the awards won, academic performance, MQA recognition, affiliations to reputable foreign universities, a strong R&D culture and the physical aspects such as campus buildings and facilities.
In this context, Taylor’s University’s frequently advertised academic achievements through its multiple award winning students over the years including awards for being voted ‘Most popular private college/university in 2009’, the 2010 Putra Awards gold for the education and learning category which was voted online by 6000 consumers nationwide, would be good examples. Or Limkokwing University of Creative Technology’s high profile export of education to over 10 countries in the world including London would qualify as symbols of quality education.
The Inti-Laureate American education association and its global networks with a choice of 300 universities in USA and Canada alone would also translate into quality in the minds of consumers. While ‘quality’ can be subject to multiple interpretations and may not constitute a clear competitive advantage, international and global networks, i. e. , a basis for “collective organizational learning”, such as those offered by Limkokwing University of Creative Technology and Inti-Laureate can be sources of sustainable competitive advantage as they represent core competencies within their organizations that are hard to duplicate.
Quality has always been cited as an important competitive advantage in the education industry. However, quality means different things to different people and according to the context (Lovelock and Wirtz, 2007). In view of the above, quality as a determinant of competitive advantage is a rather abstract concept and opens itself to broad interpretations. Hence, the exclusion of quality from the research forms part of the delimitations for the study. The packaging According to Kotler et al,(1995) the college campus’s environment serves as the packaging of the academic product.
The architecture, topography, and landscaping of the campus should support the educational function of the university. This ‘packaging’ represents the most obviously tangible aspect of the education service. Students 2099 2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd in large part choose their institutions of learning based to a great extent on appearances – the size and impression of the physical environment of learning.
This statement is supported by Hawkins and Frohoff (2008) when they quoted Hayes (2008) in describing how physical facilities can translate into perceptions of quality and that the appearance of the lab sporting the latest technological advances may make a statement that’s hard to counter through other facts even when an older lab may boast a Nobel laureate on the faculty (p3). With the upgrade to university and university colleges, the PHEIs had invested significant monies to create an impressive exterior to attract students.
SEGi University College’s RM150 million purpose-built main campus in Kota Damansara has more affinity to the architecture of Europe than Malaysia, the purpose of which is, no doubt, to create the appearance of a foreign university and by extension symbolize the “quality” it represents. Nilai University College’s 105-acre award winning campus recreates a self-contained township surrounded by rolling hills and pleasant greenery far away from the distractions of the city.
Quoting Architect Bruce Carmichael, Kotler (1995) indicated that physical resources play a far more important role in recruiting students, and especially retaining students, than is generally recognized. ‘Atmospherics’ are also consciously and skilfully built in the design of buildings to create or reinforce specific effects on students such as feelings of well-being, safety, intimacy, or awe. The Limkokwing University of Creative Technology is one good example where the facade of the main campus resembles a gigantic and colourful work of art.
Taylor’s University’s new imposing RM450 million 27-acre purpose built lakeside campus captures a relaxed, peaceful atmosphere that is highly conducive to the pursuit of higher education. UCSI University frequently advertises its grandiose KL campus with its North Wing and South Wing campus which would soon include a proposed UCSI sky scraping tower and hotel block which is aimed at creating awe amongst potential students. The hotel is an obvious boost to its Faculty of Hotel and Management division. UCSI University also boasts real operating theatre and hospital facilities in their campus to promote their medical courses.
HELP University College’s new campus in Subang Jaya will be a self-contained monolith compared to the current premises and KDU University College’s new campus in Glenmarie is planned on a scale resembling a mini township. All the university status and university college PHEIs under study have their own purpose-built campus as part of the MQA requirement. However, in the packaging competition size and appearance seems to matter and the PHEIs with the financial resources have significant advantage over those that do not have the resources to dazzle their consumers.
Packaging, because of the enormous capital investments required, could represent a sustainable competitive advantage that could raise entry barriers to smaller institutions and reduce the power of suppliers and buyers/consumers. The features Features are individual components of the offer which could be easily added or subtracted without changing the service’s style or quality (Kotler et al). E. g. Range of courses, specialized courses and extracurricular activities. The use of features has many advantages. The institution can create specific features to target specific segments.
However, range and variety of courses offered are not by themselves sustainable competitive advantages as they can be duplicated, bettered