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Porters Five Forces Analysis of EF Language Schools
Before processing to Porters Five Forces analysis, it is necessary to make a brief acquaintance with an EF Language school. The abbreviation EF means Education First. This organization was found by entrepreneur Bertil Hult in 1965. EF is a private organization with fifteen divisions that offer a full range of educational services from educational travel, academic degrees and language training to cultural interchanges. With a mission to overcome obstacles in language, geography and culture, Education First has helped people of all nationalities and ages become world citizens (Our Programs, 2013).
From Beijing to Berlin, Mexico City to Moscow, Denver to Dubai, EF operates four hundred fifty offices and schools in over fifty-four countries; the expansion continues every year. EFs global-wide network consists of 15 thousand full time office staff, 3,5 thousand full time faculty and 16,5 thousand part time teachers, leaders and tour directors. To date, EF has helped over fifteen million people discover the world, to learn a new language or earn an academic degree. On the organizations official web-site, it is mentioned that Education First represents much more than their company name. The motto is their corporate passion (Our Programs, 2013).
A large number of models are applied to estimate and analyze organizations competitiveness in the context of globalization and internationalization. According to Michel E. Porter (1980), five forces determine the competitive intensity and, therefore, attractiveness of a company. Three of his five forces refer to the competition from external factors. They consist in threat of the new entry, the threat of substitute products and the bargaining power of a buyer/customer. The last two forces are internal threats. They are bargaining power of suppliers and the intensity of competitive rivalry.
The Threat of the Entry of New Competitors
The thread of the entry of new competitors into the market is rather high since there are only few factors discouraging new entrants to start gaining the market share, and few considerations that may make competitors easily enter the market.
Labor: the large availability of qualified teachers.
The requirements and qualifications to teach English language as a second language are relatively low. In spite of the fact that bachelors degree is frequently required qualification, it is common for teachers not to have one. A certificate of TEFL (Teaching English as a Foreign Language) can be obtained in 4 weeks for about 1, 500 dollars. For this reason, there are a great number of teachers looking for a new job (TEFL Course Dates & Prices, 2013).
Initially, maximal exit costs.
Students from international market require a long lead time of advertising, and marketing as opposed to the local market students who can be obtained rapidly.
Low vertical integration.
EF Language School runs effectively with only one core competency teaching English. Very few opportunities of vertical integration are available supplementary products and services (textbooks, workbooks and extra-activities) can be both managed internally and outsourced.
EF Language School has been operating since 1965, and it has grown and reinvested funds into local and international development. At the moment, EF has 450 schools and offices in over fifty four countries. Each facility looks expensive and prosperous what adds scores to the prestige of the organization. Initially collaborating with Apple Company, EFs Efekta System represents the worlds most advanced English learning technique. This product is used to power EFs language schools. To add, EF helps 1,200 corporations with English training (Bear, 2013).
Government regulation depends on the country specifics in which EF school is based on. The governments of South Sudan, Rwanda, Turkey, South Korea, the Russian Federation, Japan, Chile, Malaysia, China, Vietnam, Brazil and Argentina have established federal programs designed to increase English level. Some of the new governmental mandates are minor adjustments to current mandates. For example, in June 2011, Saudi Arabia started giving English language learning in fourth grade, which is two years earlier than the previous mandate. Starting from 2012, English language learning began in first grade in the UAE (United Arab Emirates). At the moment, English is learned by Dubai students in kindergarten (Adkins, 2013).
Need for established reputation.
Having been operating for a long time, EF has a stable reputation and attracts students and teachers based on the perceived and proven reliability. The organizations network includes 15 thousand full time office staff and 16,5 thousand part time teachers. It had helped over fifteen million people in learning the English language (Our Programs, 2013).
The Bargaining Power of Suppliers
In this type of market, there is a low dependence on Supplier. EF renders services, materials and suppliers are not very necessary. Moreover, labor is obtainable at a low cost.
Great availability of teachers.
The labor market offers a large number of teachers who are ready to be hired at a reasonable wage. Moreover, it is relatively inexpensively to provide them with the benefits. To conclude, EF can replace the leaving teacher with a new one without considerable operational costs.
A lot of suppliers available.
The school materials are rather basic and as standard as the office materials that is why they can be easy obtained from a wide range of suppliers. EF can easily receive discounts and credits from suppliers under the favorable and flexible conditions since they depend on the organizations.
Difficult to find a location for school facility.
It is quite hard to find a space that is already accustomed for education usage, so it is necessary to spend money and time to upgrade it. If EF decides to rent a school facility, rental costs will be bigger than an office space.
The Bargaining Power of Customers
Customers vaguely differentiate the quality of services. Therefore all language schools provide almost similar services for their customers. For this reason, students view the price as the most important factor.
Advertising influences buyers decision.
With such a uniform product, advertising activity is able to influence the choice of a customer. EF possesses a well-developed, properly optimized and advertised web-site, a range of commercials, printed information materials, flexible discount system and so on. EF won the tendering for the Official Language Training Supplier to the Beijing Olympics. At the moment, EF is assisting Brazil prepare for the 2014 World Cup (Bear, 2013).
The Threat of Substitute Products
Although there are various ways to learn a language, the threat of substitute product is rather low. Study at home can hardly be compared with educational services provided by EF.
The students choose conversational clubs because these clubs give an opportunity to meet many international friends and to chat with them. Besides, clubs are cheaper, than EF offerings.
EF possesses a wide range of educational services including Educational Tours, Online Language Training, Cultural Exchange, Corporate Language Training and High School & University Education. However, telephone English classes, interactive CD-ROMs, talking dictionaries are all the substitutes to EF products (Korzeniowski, 2003).
The Intensity of Competitive Rivalry
The level of competitive rivalry is very strong due to the high bargaining power of customers combined with a threat of new entrants.
The high season requires larger space in order to be able to make the profits maximal. However, in the low season EF spends a lot of money for empty space. Rivalry gets quite strong, especially during the low season when fixed costs are rather high and students are not numerous (Ronquillo, 2012).
High fixed costs.
In order to stay competitive EF continually invests in a great amount of promotions and in advertising campaigns as well as in maintaining their high-quality facilities all over the world.
New language schools compete on price.
With high expenses on space, cost taxation expenditure, lack of reputation, new language schools will try to obtain initial market share by competing aggressively on price.
Many of competitors.
With a high demand for English language teaching the competition for market share is fierce.
A service that is teaching the English language in a fixed period is very difficult to differentiate in the customers opinion. That is why EF has two options: either compete on price, or compete on additional services and quality of rendered services (Korzeniowski, 2003).