International Schooling: A Maturing Market?

Part I: Signs of Maturity

Just as children grow and mature, so do markets.

As markets evolve, they change; they pass through periods of rapid growth, transitioning to what textbooks call industry maturity.

Consider the iPad. In the early days, Apple had the tablet market almost to itself. Sales rose rapidly. Today, the tablet market is mature. There are plenty of iPad alternatives, at a range of price points. iPad sales have stagnated.

As it did for Apple, transition to maturity signals important market changes. In this series of articles, we will consider what those changes might be for international schools.

In Part I below, we examine the signs of maturing markets; in Part II, the implications; and, in Part III, possible strategic responses to maturity.

Maturing markets: the signs to look out for

The famous California gold rush lasted from 1848–1855. Seven short years.

When it comes to writing the history of the international school gold rush, how will things compare?

We can probably pin the start date to 1996, the year Dulwich College (UK) became the first British private school to make a foray into overseas territory. It set a strong precedent. Over the last two decades Dulwich has been joined by other franchise operations (Harrow, Shrewsbury, Epsom and Repton to name but a few) and by corporations such as Cognita, Taaleem, GEMS and Nord Anglia. Back in 1996, there were fewer than 2,000 international schools, today there are over 10,000.

For the California prospectors, few stopped to ask when the gold rush might end. Many suffered greatly as a result.

Lest we forget the lessons of history, for how long might the international school gold rush last? Reflecting on your own context (the market in which your school operates), consider the following:

· Has there been a recent focus on price, service and/or promotional activities by schools in your market?

· Are parents becoming more discerning, and more demanding?

· Have schools in your market been rapidly investing in facilities and equipment?

· Do schools have surplus capacity (spaces for additional enrolment)?

· Have schools started to change/offer new curricula or new modes of education?

· Do schools in the market offer an increasingly similar school experience?

· Is the ‘quality gap’ closing (the difference between the ‘best’ schools and others narrowing)?

This isn’t one of those glossy magazine personality tests (heaven forbid), but, if you mostly answered ‘yes’, then you are likely in a maturing market.

While many of the signs of maturity are implicit in the questions above, there is value in deeper analysis:

New game, new rules

As market growth slows, competitive attention turns to other schools.

Maturity requires attracting children away from competitor schools, and working harder to ensure that you are first choice for new entrants. No longer is there enough demand for everybody.

Critically, this shift changes the nature of competition. It changes the rules of the game.

Two (real but anonymised) examples serve to illustrate:

· On entering an increasingly saturated market, a branded school marketed itself heavily as the best of its type. The new school’s marketing implied that rival schools were lacking. You can imagine the reaction from incumbent schools! Heavy marketing was a feature of the market, but nobody had previously dared be this direct. Needing to make an impact in a maturing market, the new entrant changed the rules.

· A longstanding and well-respected school suffered an enrolment dip. In response, the school aggressively lowered various financial requirements of enrolment and offered new entry points for children. In terms of both price and curriculum offering, it moved into space occupied by its competitors. Those competitors now faced a newly active rival; and a game with new rules.

These rule shifts are often subtle. Day-to-day they may be hardly noticed, or might be passed off as the actions of one rogue competitor. Cumulatively though, they represent shifting market dynamics, from growth to maturity.

More knowledge (for them), less power (for you)

In mature markets, international schooling is no longer a new idea. Parents are increasingly knowledgeable and become more selective and more demanding in their requirements. They now have choices and, unlike when the market was new, they are better informed about those choices.

For some readers, this might sound ominously familiar.

Where once families may have been enrolling in an international school for the first time, this is less and less the case. Rather than transitioning from local schools, many children will be moving from other international schools; as a result, their parents will place greater demands on the new school.

Overcapacity to undercutting

As market growth slows, the rate of capacity addition (new schools/school expansions) must be disassociated from the euphoria of the past.

However, just like the forlorn California gold miners, this rarely happens…at least not in time.

As many of you will be experiencing, new schools keep entering the market and incumbents keep adding new classes, new year groups, and new boarding houses. As a result, in markets shifting from growth to maturity, excess capacity is all too common.

This overcapacity accentuates the tendency toward price-based competition. For example, if you are a boarding school with spare places, price discounting (whether in the form of scholarships, fee reductions or other financial benefits) is an obvious strategy. The danger is that when competitors follow suit it can become a race to the bottom, cheapest wins.

A new normal

Maturing markets also precipitate changes in curriculum offering. A British school might start to offer the IB Diploma; a US school might offer A-Levels in specialist subjects.

Alongside, schools start to mirror each other’s co-curricular elements.

It becomes difficult to be unique.

Where once school golf societies were distinctive, they become de rigueur. The school with a climbing wall is no longer novel, it is the norm.

World-class facilities, expertly qualified teachers, outstanding IT provision, school coffee shops and a full range of school-branded merchandise…all become the expectation.

FROM BLACKBOARD TO BOARDROOM

How many of those tendencies are present in your market?

If you reflect on the initial questions again, and on the descriptions above, are you in a mature (or maturing) market?

When doing this reflection try to consider your school’s situation objectively. It is all too easy to assume that your school is special and unique, that you are immune from the changes.

Maybe.

But then many a California gold digger thought that he/she had a claim nobody else knew about, an undiscovered plot of land rich in gold. Most were suffering from the same ‘gold fever’ as everybody else.

To mix my metaphors, remove your gold-tinted spectacles. Is your market maturing?

In the next article, we will consider what to do if the answer is ‘yes’.