Assignment 2

Industry Analysis
Of
Higher Education Sector of Nepal

Submitted to:
Mr. Pradeep Raj Pandey
Visiting Faculty
Strategic Management

Submitted By:
Shradha Pradhananga
Term VI (FALL MBA 2013)

Ace Institute of Management

16th August, 2015

Background

Nepalese Education has only recently started to develop. The Rana regime in Nepal
has suppressed education in Nepal so much that it had inflicted a blow to Nepalese
Education. Rana regime feared educated public so education was never encouraged there.
There were only few English middle and high schools and a girls' high school in Kathmandu
prior to Second World War. After end of this regime in1951, education in Nepal was given
importance. Though an education System was established in Nepal, thousands of poverty -
stricken people could not send their children to school. During 1975, free primary education was
offered to children by the then government. Caste problem was a major deterrent in development
of Education of Nepal then. Some of the schools were set in town, so children staying in
village cannot attend there. Moreover the cost of living in town was so high
that people could not afford to stay there. English education and its supremacy spread in
1991.Illiteracy rate in Nepal is about 58%, 72% being women. The Education System of Nepal is
based on that of United States. Nepal has received assistance from various NGOs. Several
International Organizations also helped Nepal with its education syst em and in giving
primary education to rural children. Nepal Government has realized that education
is the only way to curb poverty in Nepal and is trying hard to develop education. Now
there are about 26 thousand schools, 415 colleges and five universities and two academics of
higher studies.

Education in Nepal is structured as school education and higher education. School

education includes primary level of grades 1–5, lower secondary and secondary levels of
grades 6–8 and 9–10 respectively. P r e - p r i m a r y l e v e l o f e d u c a t i o n i s a v a i l a b l e
i n s o m e a r e a s . S i x y e a r s o l d i s t h e p r e s c r i b e d a g e f o r admission into grade one.
A national level School Leaving Certificate (SLC) examination is conducted at the end of grade
10.Grades 11 and 12 are considered as higher secondary level. Higher Secondary Education
Board (HSEB) supervises higher secondary schools which are mostly under private management.
Previously these grades were under the university system and were run as proficiency certificate
level. Though some universities still offer these programs, the policy now is to integrate these
grades into the school system. Higher education consists of bachelor, masters, and PhD levels.
Depending upon the stream and subject, bachelors’ level may be of three to five years' duration.
The duration of masters’ level is generally two years. Some universities offer programs like
M.Phil and post-graduate diplomas.

Prior to the establishment of the first college in the country, Tri -Chandra College in
1918, higher education in Nepal was nonexistent. Until 1985, Tribhuvan University had
remained the one and the only university in Nepal. In the early 80s, His Majesty's
Government developed the concept of a multi-university system for the country. One important
assumption behind the concept was that each new university should have a distinctive nature,
content and function of its own. The first new university that was established was
Mahendra Sanskrit University. The inception of this university was soon followed by
Kathmandu University in 1990, Purbanchal and Pokhara Universities in1995 and 1996
respectively. Many schools and colleges are run by private initiatives but none of
the universities in Nepal are private.

B. P. Koirala Institute of Health Sciences is the first and foremost Health an d

Medical University of Nepal, established in 1994 and upgraded to university in 1999.
Currently there are six universities in Nepal, and two institutions recognized as universities:

 Tribhuvan University
 Kathmandu University
 Pokhara University
 Purbanchal University
 Mahendra Sanskrit University
 Lumbini Bouddha University
 Mid-Western University, Birendranagar
 Far-Western University, Kanchanpur
 Nepal Agriculture and Forestry University, Rampur, Bharatpur

At present there are only five accredited universities operating in Nepal. Other four universities
have been proposed for establishment but the government has not allocated the funds for
universities and the issue has not been decided yet. Along with the four new universities, one
more are supposed to be established in Nepalgunj.
SWOT ANALYSIS

SWOT is short for strengths, weaknesses, opportunities, and threats. Ideally, the analysis helps
a company build on its strengths, find a cure for its weaknesses, identify and grasp its
opportunities, and keep it safe from threats. In response to this higher educational
industry SWOT analysis is one of the important tool to measure the industry strength
and upgrading it, minimizing weakness, grabbing opportunity timely and responding the possible
threats in a professional way.

An overview of the SWOT confronting the higher education industry is as follows:

Strengths

 Strong academic reputation with well -developed public education system. CATI
 English is language of instruction and communication, which means a large addressable
market
 Cost-competitive
 Already a regional magnet for students seeking quality education
 We have that potential to grow our society (population), potential investment opportunity
 Nepal have good universities
 Awareness of government and private sector
 Large talent pool of educated students.
 Importance given to spoken and written English makes us a better fit in the globalized
world.
 Growth in supporting sectors like the stationeries, educational aids etc.
 Foreign universities affiliated colleges, well experienced and diverse faculties.
Weaknesses

 Different standards
 Inequality in Quality of education
 Poor wage for teachers
 Regulatory hurdles, e.g. private commercial schools can only operate as
middlemen of foreign universities’ programs
 Lack critical mass of quality professors & teachers
 Shortage of affordable accommodation
 Student quotas local universities
 Local institutions’ efforts to attract international students are fragmented
and uncoordinated
 Lack of quality assurance and accreditation agencies, which results in uneven
quality among service providers, especially the private commercial schools
 Quality of the students passing higher education need to be improved to make them
employable
 Lack of concentration on the primary education
 Lack of infrastructure to educate the economically backward class
 Lack of teaching faculty in rural Nepal

Opportunities
 The demands of the youth of the country for more enhanced and participatory education.
 The cost of studying abroad is too high for an average Nepali; hence we can deliver it at a
lower cost.
 The ease and comfort of attaining a sound academic back in the comfort of our own
country.
 The improved curriculum and participatory approach to teaching and learning.
 The availability of enough funds and executing bodies that are required to execute this
vision.
 Education contributes 16% of GDP which indicates that education can be a
significant and sustainable contributor to the economy
  Globalization Impact where foreign universities willing to set up in India and
it has effect in Nepal too.
 Use of latest technological aids for education.
 Foreign aid could be a great opportunity to enhance our education industry
 Scholarships
 About 10,000 peoples are going abroad for higher study each year. If we can hold them it
will be beneficial for both institution and government.

Threats
 Political instability
 The rigid and unaccommodating law
 The nominal competition for international affiliations
 Poor economy of the country.
 Reluctant attitude to change and innovation.
 Inclination of Nepali youth to foreign lands.
 Excess concentration on English might cause losing out some of our local languages in
the long run.
 Rising costs of the education
 Brain drain due to the lack of importance for research and development
 Availability of internship and post-graduation job opportunities for international students
in other countries.
 Concerted marketing efforts of other host countries to attract international students and
funded by the government, e.g. British Council, IDP Australia, US Department of State
Industry Analysis

Industry analysis—also known as Porter’s Five Forces Analysis—is a very useful tool for
business strategists. It is based on the observation that profit margins vary between industries,
which can be explained by the structure of an industry.

The Five Forces primary purpose is to determine the attractiveness of an industry. However, the
analysis also provides a starting point for formulating strategy and understanding the competitive
landscape in which a company operates.

The five forces defined by Porter are as follows.

The Threat of New Entrants

New entrants to an industry bring new capacity and a desire to gain market share that puts
pressure on prices, costs, and the rate of investment necessary to compete. If the barriers to
entry remain high, the threat of new entrants is low.

Supplier Power

If there is a limited number of a supplier for a larger number of customers with few substitutes
available, then supplier power is great and the supplier can both capture the value themselves and
charge premium prices.

Buyer Power

Powerful customers are the flipside of powerful suppliers, and can capture more value by forcing
down prices and demanding better quality or more service, there
by forcing industry suppliers to compete more aggressively against each other, usually at the
expense of industry profitability.
The Threat of Substitutes

A substitute product performs the same or a similar function as an industry’s product by

a different means. When the threat of substitution is high, industry profitability suffers, as such a
threat can place a ceiling on prices. If an industry does not distance itself from substitutes
through product performance, marketing, or other means, it will suffer in terms of both
profitability and growth potential.

Industry Rivalry

Rivalry among existing competitors takes many forms, including price discounting, new product
introduction, advertising campaigns, and service improvements. High rivalry limits the
profitability of an industry.

Applying Porter’s Five Forces Model

The Threat of New Entrants

Currently, the higher education industry faces threats of new entrants. The universities are giving
affiliation permission to many colleges. Also, foreign affiliated higher education institutions are
getting popular in market. Due to high competition, many colleges are starting with low cost to
attract more number of students.

The new entrant’s colleges are coming up with new infrastructure, facilities and using new
technology. Today colleges are using foreign e-books; power point slide for teaching and
students can submit assignment through mail. The internet has changed teaching methodology of
higher education system of Nepal.

Kathmandu University when established gave Tribhuvan University a hard time due to its
infrastructure, teaching methodology. Kathmandu College of Management is giving threats to
many management college of Nepal due to its new way of teaching methodology, strong
management and faculties’ member.
Suppliers’ Power

Due to competition, faculties member have high bargaining power over colleges. The faculties
bargain over their wages as there are few experienced and well-educated faculties. In the
government college there’s fixed wages for teachers, in case of private institution like Ace,
KCM, NCM, Apex, etc. wages are flexible. These institutions fight to get well experienced
faculties, in a same say faculties highly bargain with college management on wages and other
facilities.

The universities have also high bargaining power over affiliation permission. College’s wants
affiliation of university like T.U., Pokhara, and Kathmandu, and universities can ask extra
charge/ fees or ask grants for affiliation.

Buyers’ Power

In the case of higher education, the buyer is the student and his or her parents, where applicable.
There are many options of college in Nepal as well as foreign land education is quite popular
among Nepalese students. The college which satisfies the need of students is more popular
among students. So, colleges are ready to provide facilities that match with students needs. The
students bargain over fees mainly, so some of the colleges are lowering down their fee to attract
large number of students. Mainly, new colleges are highly bargained by students and parents.

The high numbers of prospects students are going abroad as they are not satisfied with quality,
facilities and political instability and interference in education system. This segment can bargain
over sound education environment without any disturbance of politics.

The students’ unions of different political bodies have strong bargaining power over fees,
scholarship, admission, etc.

The Threat of Substitutes

The government has liberalized foreign universities to start new branch in Nepal, which is
attracting students for foreign degree in homeland itself. Colleges like British College, Kings
College, Islington College, etc. are foreign affiliated institution which are free from political
intervention are attracting students.
Due to development of internet technology and globalization, online studies are quite popular
among students. Through online, students can learn and get degree of foreign university staying
at homeland. College websites provide facilities of books, notes, journals, interaction with
professors and online examination. The development of e-payment also helps college and
students in fee-payment procedures. In Nepal too, specifically job holders prefer online degree
due to hectic schedule of job. Also, these online degrees are cheaper than of other degree.

To attract job holders, various international universities are coming up with Saturday MBA
Degree i.e. student can attend and study at college only on Saturday.

Many graduate colleges are threatening by such facilities.

Industry Rivalry

Due to intense competition, competitor colleges are coming up with low fee structure, recruiting
well experienced professionals by charging high wages than of competitors. Also, some colleges
come up with new schemes like free tuitions/extra classes, scholarship for toppers, free internet
facilities, free laptops as well for student attractions. The infrastructure development and
technology advancement has also created intense rivalry among colleges. Today students chose
college with its infrastructure.

Government hasn’t enforced strong regulation regarding fee structure of private colleges so they
charge what they like which has created competition.
 Higher Education Viewed through Porter ‘s Five Forces Framework

Threats of New
Entrants
-New Institutions

Suppliers Power Rivalry Among

Existing Buyers
-Faculties
Higher -Parents
-Universities Education -Students
Institutions

Threats of
substitute
products
-Online Degree
-Foreign
Institutions

\
Conclusion

Conducting a very detailed and intense industry analysis can provide business owners with
specific knowledge regarding the economic marketplace. Business owners may discover a
market niche not currently being met by other companies. Business owners can also conduct
consumer surveys to learn about new goods or services that could have high demand in the
marketplace. This information can provide new business owners with a significant benefit over
existing companies in a business.

From the above analysis of higher education industry of Nepal, there’s intense competition
among institutions due to high number of colleges and number of options for students. Due to
advancement of technology, there existed a competition, substitute’s product like online degree
as well as threats of new entrants in industry. There’s a high bargaining power of faculties for
wages and facilities. The variety of options has also lead high bargaining power of students and
parents.

The educational institute with high infrastructure of development, technology advancement, well
qualified faculties’ member, strong management teams and various facilities and schemes to
students can easily enter industry and can threaten existing institutions.