The Business of Higher Education

The Business of Higher Education

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The global picture

Maintaining a high standard of education can directly impact a country’s economy, says Carrie Lennard, government, labour and education manager at Euromonitor. “If they’re not, it can result in skills shortages and labour outsourcing to other countries. This results in rising unemployment, lower living standards and lower consumer spending power.”

Yet youth unemployment across the globe is an increasing challenge. “The reason for youth unemployment being so disproportionately high across the globe is because, in a recession, employers tend to opt for more experienced workers over young workers who have no experience of the working world,” Lennard explains.

This means more students are continuing their education longer to gain a competitive advantage in the workplace.

Key trends to watch

MOOCs

Massive Open Online Courses pose the biggest challenge to established training courses, growing more popular as technology spreads. Although most online courses are geared toward undergrad education, the field is expected to broaden.

US education franchises

Tutoring alone in the US is a $4 billion industry. Though the industry remains largely fragmented, in 2008 it had around 58 200 establishments that hauled in $19,4 billion in revenue. The vast majority of this comes from tuition or programme fees with gross profit ranging from 60% to 90%, while net profit averages 2% to 10%. Popular home-based models employ a franchisee as a broker who acts as an intermediary between educators and students – meaning no education experience is necessary.

 

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Adult education

Around 16 million American adults are enrolled in an education and training services programme, from occupational training and business, organisational and leadership skills, to financial planning and home finances.

Trends across emerging nations

From an international perspective, there’s a huge boom in the number of higher education students, particularly in emerging nations. As emerging middle classes continue to grow, so will their ability to open their wallets for higher education. What this means is a huge opportunity for private education institutions to enter the market.

  • India

Increasing numbers of students in primary and secondary education are outstripping existing places in tertiary education institutions. In 2011, Mumbai University received
38 000 applications for 800 places. – Euromonitor

  • Brazil

Latin America saw the biggest increase in the number of higher education students, driven by a population boom in the 2000s coupled with government reforms increasing its role in prioritising education. – Euromonitor

  • South Africa

Census results show that of South Africans older than 20, only 12,1% have higher education qualifications. Only 14,8% of people older than 24 years are attending
an educational institute. – SA Census

A case in point

An emerging economy that is making the world sit up and take notice, Brazil’s higher education industry is also turning heads.

1. Money-making merger

Brazil’s two largest private tertiary education companies — Kroton Educacional and Anhanguera Educacional Participacoes — announced in April their intent to merge and create the world’s biggest for-profit operator by market capitalisation. Valued at around $6 billion, with one million students, the deal demonstrates the highly lucrative potential of private higher education.

2. The money spinner

While Brazil’s public universities offer free tuition to those who can pass its rigorous and highly competitive entrance exams, these positions are few. This has created a market opportunity for entrepreneurs to grow higher education institutions focused not on academic research, but providing college education for degree-seeking students.

3. Education sector investments

Educational businesses are also expanding beyond private higher education to areas like language schools and test preparation. Earlier in 2013, Abril Educação, owned by billionaire Roberto Civita, agreed to pay $440 million for Wise Up, an English language school group.

 

 

Tracy Lee Nicol
Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.