Industry Analysis and Company Report: EIC Group - Case Study Example

Industry Analysis and Company Report: EIC Group Name: Institution: City: State: Date: Part 1: Industry Analysis a. Overview of the Industry Over the recent past, Australia has risen to become one of the leading international education in the world after the UK, the US, France, and Germany. In Australia, this industry ranks among the four largest exporters in addition to tourism, Iron ore, and coal. The EIC Group is one of the major players in this industry working with some of the most popular universities in the world, colleges, and schools. This number includes 43 of the leading 200 universities in the world. However, despite its strong position in the industry, the competition within this industry is very intense. However, the EIC Group reaches far and wide therefore increasing its competitiveness in the industry. From 1992 to 2006, the education exports experienced an annual growth rate of 15.3 percent from education exports worth $1.2 billion in 1992 to $10 billion in 2006 (Australian Education International, 2006). This represents the period in which the international education industry in Australia experienced a turn around. In 2014, export income derived from international education industry in Australia was estimated to have reached an all-time high of 17.6 billion (The Department of Education and Training 2015). In 2006, approximately 383,818 international students were enrolled in the Australian educational institutions with more than half of this number (172,297) having been enrolled in higher education courses, 77,468 in English language courses, 83,685 in technical and vocational education courses, and 24,717 in schools (Australian Education International, 2006). In 2014, it was estimated that approximately 600,000 students were enrolled in Australian educational institutions (The Department of Education and Training 2015). At this point international education sector was ranked as the leading services provider and the fourth largest exporter after natural gas, coal, and iron ore. The industry plays a major role in the Australian economy by offering jobs to around 130,000 jobs across the country. The Australian’s International education industry has several markets in the world. China represents the leading market for Australian education, and India comes second after China. Other markets include Germany, Brazil, Canada, Vietnam, Sri Lanka, and the Middle East. These countries and region have recorded impressive growth as markets for Australian education exports. However, the industry has witnessed a decline in some of the top 10 markets including Japan, Malaysia, Hong Kong, the United States, and Indonesia (Australian Education International, 2006). Therefore, as evidence, EIC major market is in Australia. EIC is considered to be the largest and the most renowned education agency. Other than having over 20 offices around China, EIC Group has offices in one of the most popular countries in offering international education. Therefore, EIC Group becomes one of the players in one of the countries that provide the world with education. b. Competitiveness In the recent past, however, the Australia’s international education has experienced intense and increasing international competition. Australia has taken decades to build what has come to be viewed as one of the highly successful international education industries in the world. The industry ranks fifth in the world in terms of the most popular study destinations. However, Australian share of the world’s higher education has stagnated for a period of time now despite having impressive figures. This is a reflection of increasing international competition for international students. Australia’ education export market is increasing facing great threat from international competitors. The greatest competition comes from the Asia-Pacific region with Asian universities seen to be offering modern education due to their modern facilities. Other nations have continued to enhance both their domestic and international capabilities. In 2007, one professor in Australian Vice-Chancellors’ Committee (AVCC) raised concerns about the effects declining international student revenues can have of Australian universities (Young 2007: 47). Some of EIC competitors include IXL which is located San Mateo, California. IXL offers products and services such as professional development, virtual schools, and distant learning solutions. Edutor represents the other EIC’s competitor. Edutor is located in Hyderbad, India. PharmaMOOC is also another competitor which competes with EIC in pharmaceutical and biomedical courses. PharmaMOOC is the first organization with Massive Open Online Courses. c. Competitive Strategy and Target Market EIC Group has a good competitive strategy which enables it to reach its target market. The company markets its services both in China and abroad. The organization has significantly increased its presence in China to the extent that it has a very strong presence. As such, for any institution that is not widely recognized in China, EIC Group provides it with an opportunity to get itself known. In each country of operation, EIC has in-country representatives who enable the organization to work closely with its institutional partners. There are many competitive advantages that the EIC-based in-country representatives bring to EIC Partners, including dedicated marketing presence, target the Chinese markets, direct access to EIC Counselors, market adaptability, effective communication, and lower costs and legal compliance. The organization differentiates itself from its competitors by being one of the most flexible international education providers in the world. Its representatives are always available to attend all the EIC marketing events in its countries of operations. The Groups also develops independent marketing initiatives to build the brand of the institutions it represents. This is one of the factors that have made EIC become highly competitive and establish strong presence in its target markets. However, due to the increasing competition in the international education industry, EIC Group needs to focus on a wide target market rather than focusing on Asia, America, and Australia. Other regions and continents are also increasingly becoming rich markets for international students. Students enrolled under EIC have direct access to the Group’s counselors. Even the new students find the going easy because the counselors are always ready to help them overcome the many challenges that they may encounter. Counselors also visit schools for product training, school briefings and to interact with students. Another role of EIC representatives is to identify potential growth areas as they continue with their work activities. These representatives also consult with EIC counselors, conduct competitor analysis, and trend analysis of markets in which the Group operates. These representatives also maintain a direct access to Chinese students and their parents. These representatives also act as the bridge between the EIC’s senior management and institutions in order to speed up response and solve service issues in a timely manner. Education programs are often characterized by hidden issues, including student experience, program offerings, cultural expectations, student experience, and admission issues. It is the role of EIC’s representatives to identify these issues and advise the educational institutions on the most practical solutions. To minimize the cost of services provision, the Groups avoids moving staff in and out of China. EIC Group emphasizes the need to move from using ‘push’ advertising into more effective and current marketing strategy. The technological breakthrough in advertising has enabled organizations to breakdown the deadlock that existed before the intervention of internet. Consequently, EIC Group strengthens the ‘touch points’ between the partners and the student. ‘Touch points’ represent the interaction network between EIC and the students. However, in all these activities, EIC Group seeks to maintain integrity and enhance Partners’ brands. They also seek to provide their services based on the guidelines of its Partner. As such, the Group maintains a high degree of autonomy Part 2: Site Visit and Company Report a. Key Activities in Production of Company’s Main Products The main objective of EIC Group is to work with the world’s leading universities, colleges, and schools. The Group seeks to maintain the existing relationships with educational institutions and develop new relationships through formal agency contracts as it builds a strong portfolio of partnerships covering a wide range of educational institutions. EIC provides various products and services especially in higher education and schools. EIC Group works with its partners to deliver pathway and for-credit academic programmes, which it delivers in conjunction with leading Chinese and International Universities. EIC has three offices in Australia namely, the Sydney office, the Melbourne office, and the Adelaide office. The services that EIC Group offers include student recruitment, English language training, and career planning programs to Chinese students who have intentions or are seeking to study in foreign institutions. As such, the Group establishes partnership agreements with major educational institutions around the world through marketing support. EIC Group has greatly expanded and as it continues to expand, it will continue facing competition from its rivals. Therefore, EIC has to have competitive strategies that will enable it to retain existing clients and attract others and retain them. As it concentrates on increasing its competitiveness in the market, it has to do so through competitive pricing, advertising, sales promotion, and products and services differentiation. EIC Group seeks to increase its dominance in the most promising countries such as Australia, compete with the existing competitors, and take the largest market share by increasing consumption among the existing clients. The company is always striving to produce new products and services for its clients. These are in form of in-country training and academic developments that make students enrolled under it overcome the rigors and challenges that accompany studying in foreign countries. Among the competencies that students are provided with are language and study skills which are crucial for a student studying in a foreign country. Therefore, the Group offers a wide range of recruitment activities covering the requirements of many regional markets. The management accounting function in an organization should continue formulating strategies that will maintain its competitiveness in the market (Ongaki, Bichanga and Muturi 2013: 40). Most of these strategies will hinge on EIC Group’s ability to reinvent, improvise, adapt, experiment, and regenerate as competitive and market conditions shift rapidly. A competitive strategy is a plan which an organization uses to interact with the competitive environment in order to achieve its organizational goals. There are two important generic strategies. Cost leadership is different from differentiation because it is a strategy in which organizations achieves lower costs compared to its competitors and compete across a broad range of segments. Differentiation takes place when an organization has a number of clearly differentiated goods or services which appeal to different market segments (Thompson and Martin 2007: 287). EIC Group follows a focus strategy. The services offered by EIC are exceptional and of an unusually positive brand image. These services are also of low cost. However, these services are focused on a narrow segment. EIC Group focuses its activities to Asia, America, and Australia while largely avoiding some continents and some regions such as Europe and Africa. According to Robbins, Bergman, Stagg, and Coulter (2014: 319), focus strategy is a combination of cost advantage and differentiation advantage in a narrow niche or segment. EIC strategy is based on product variety and geographical location. Therefore, EIC exploits a narrow segment of international education market. EIC Group does not cover a wide area of the world, including many countries in Europe, the whole of Africa, the South America, and a large part of Asia. This implies that there are certain destinations which the Chinese students prefer to take their studies, including Australia, North America, United Kingdom and Ireland, and China. EIC Group works with some of the most popular universities in the world, including University of Melbourne, University of Edinburg, University of Manchester, University of Toronto, and University of Massachusetts among many other universities and colleges in those regions. EIC partners with 6 universities in Canada, 10 universities in the United States, 9 universities in Australia and New Zealand, 23 universities in United Kingdom and Ireland, 3 universities in Netherlands, 2 universities in Hong Kong, and one university each in Sweden, France, and Germany, Singapore, and Korea. The China’s education market has witnessed a high participation rate since 2000. This increase goes hand in hand with the growth of Australia’s growth as a provider of international education. For a period of around 15 years, China’s higher education system has witnessed incredible growth with the student base increasing from 9.3 million students to a number exceeding 33 million students. EIC Group commands a 16 percent of the national market share. Among the 22 cities in which it its offices are located, it leads 8 cities and occupies top three position in 18 cities. EIC growth has been rapid with EBIT CAGR of 60 percent over a period of 2011 to 2013. This growth is largely driven by the growth in students’ volume and ASP growth. The participation rate of the 18-22 year old group is expected to almost double increasing from the current 24.2 percent to 40 percent in 2020. However, this is a smaller increase compared to the one that has been witnessed since 2000. Nevertheless, the number of students seeking opportunities outside China is steadily increasing. This shows that there is strong demand for international education. The greatest benefits will therefore go to the institutions that will succeed in offering the courses and services that Chinese student’s need. b. Aspects of Management Accounting in the Company Currently, managements of organizations diagnose the effect that measures have on performance. EIC has listed several ways in which it measures success, development, and wellbeing of its staff, including measuring the satisfaction of its staff and success and achievement. Regarding integrity, EIC seeks to deliver timely, accurate, and honest information to the students enrolled under it. Consequently, EIC emphasizes that it maintains integrity in enrollments and admissions arguing that it deals vigilantly with fraud. Whether compliance is maintained, is measured through systems that monitor and control risk across the organization. Regarding professionalism, the organization supports and seeks a very high professionalism level capable of matching or exceeding the standards and Codes of Practice in the industry. The organization ensures that a high level of professionalism by participating in recognition of industry standards and accreditation processes, including AIRC. EIC Group ranks as the first PRC organization cooperate with the Australian Government and achieve e-Visa status. EIC Group commands a 16 percent of the national market share. Among the 22 cities in which it its offices are located, it leads 8 cities and occupies one of the top three positions in 18 cities. EIC growth has been rapid with EBIT CAGR of 60 percent over a period of 2011 to 2013. This growth is largely driven by the growth in students’ volume and ASP growth. Porter’s Five Forces Michael Porter’s (1985) framework is one of the most important models in analysis of competitive conditions prevailing in an industry and the relationship between these conditions and profitability of the same industry. Porter identified five important forces that work to drive competition or determine the strength and profit potential of an industry. Porter’s Five Forces model shapes the competition between different organizations in an industry. These forces include the threat from new entrants; the rivalry between existing organizations within an industry; buyers’ bargaining power; suppliers’ bargaining power; and the substitutes products and services (Hill and Jones 2007: 42). This model enable the organization to overlook the situations existing in a small circle of organizations competing against each other to other influences and factors that determine the organization’s growth and profitability. Threat from Potential Entrants Existing organizations in an industry often play down the competitive impact and threats that are posed by new entrants. Even if such an organization has not yet ventured in an industry, that organization exerts significant pressure on prices, because profit margins and high prices often encourage new entrants in an industry. Therefore, in this case, barriers to entry play a huge role in determining the profitability of an industry. Based on international education industry analysis, great threat exists within the industry especially due to the proliferation of private international education providers who are entering the industry. Rivalry from Existing Organizations A big number of competitors within an industry lead to more intense price competition and lower profit margins because each competitor is increasingly seeking to expand her share in the market. The competition becomes even intense when there is slow growth within the industry because organizations seek expansion at the expense of their competitors within the same industry. The competition becomes even more intense when there are homogenous products and services among all the organizations within that industry because firms are unable to compete based on product differentiation. Furthermore, when a product or service consumer can freely switch from one product or service to another, organizations are plunged into a struggle of trying to capture customers a situation that increases the intensity of rivalry. Since 2000, EIC Group has positioned itself well within the international education market and is looking to expand its market further. Most of the products and services that EIC offers are very similar to those of its competitors. Considering that the products and services offered by EIC Group are homogenous in nature, many providers mainly compete on price. The increasing number of students seeking international education has made many existing providers to increase their competitiveness. This has led to increased rivalry between the existing providers who are striving to increase their presence and reputation. The threat of substitute products and services The threat of substitute goods or services is present when the demand for a certain good or service is influenced by the change in the price of a substitute product. The availability of substitutes limits the extent to which an organization can charge its customers. Buyers’ bargaining power of buyers The bargaining power of buyers represents the influence that customers have on an industry. If a buyer is purchasing products or services in a huge number, he/she can have a considerable bargaining power and can significantly influence the price because he/she has power to demand price concessions. There are some buyers who even threaten to purchase the product or service to a rival if the selling organization does not reduce the price. However, when there is no standardization of products and services in an industry, the buyers will find the switching costs very high and will thus constrain them from switching from one product or service to the other frequently. Bargaining power of suppliers To produce products and services, organizations within an industry will require raw materials, labor, and other supplies. Therefore, in an industry, there has to exist a buyer supplier relationship between an organization and other organizations or individuals who supply it with raw materials and labor. When a supplier possesses monopolistic control over a certain product or service he/she can demand higher prices for the products and services provided. If the raw materials or labor are in plenty, or there are a high number of suppliers, the supplier may not have the ability to place higher prices upon his/her products or services. Because of these forces, Porter proposed three generic strategies namely cost leadership, differentiation, and focus with which an organization has to approach the competitive market. When an organization selects the most appropriate generic strategy and the one that will fit the organization, it will be able to place itself well in the market and will remain competitive. These strategies enable organizations to overcome the adverse effects of the five competitive forces. Accounting Management can be approached via four perspectives and the organization can adopt them in their day-to-day activities: Financial perspective – Cash flow, Asset value, Net income, Revenue, and Expenses Customer perspective – Customer retention, customer satisfaction, brand strength, and market share Internal Process Perspective – Inventory, resource allocation, orders, cycle time, and quality control Growth/Learning Perspective – Employee skills, employee education, and employee satisfaction In customer perspective, EIC Group has increasingly been ensuring that its customers are satisfied by providing them with faster response to their needs and requests, ensuring on-time delivery, and reduction of the time it takes to develop new products and services and bring them to its customers. In this case, the organization emphasizes more on time-based measures which have proved to be an important competitive variable. The organization also uses the measure of cycle time representing the time it takes them to develop a product or service and deliver it to its customers. Cycle time has four components in it namely processing, move, wait, and inspection times (Drury 2006: 14). EIC Group has significantly shortened the duration it takes for a product or service to move from processing time to inspection time. Processing time represents the only factor that adds value to the service whereas other activities are considered as activities that do not add-value to the service in the sense that they can be eliminated or reduced without influencing the service potential. As a result, EIC has been striving to minimize the cycle time in terms of reducing time spent on such activities. EIC uses its MA information to assist the organization to identify the time dedicated to value added and non-valued added activities. To attain the fete it has attained, EIC has developed a number of new and innovative services and also has the ability to adapt to the changing needs of its customers. EIC Group has incorporated performance measures focusing on innovation and flexibility into its management accounting systems. By flexibility, this report means the responsiveness of EIC to meet the requirements of its customers. According to Drury (2016), flexibility incorporates the time it takes an organization to launch new products or services, the time development cycles takes, and the ability of the organization to change its product mix quickly. EIC Group operates in a dynamic environment. As a result, EIC continually improves its performance to enable it maintain its competitiveness and to remain ahead of its rivals. Continuous improvement enables the organization to stay ahead of its rivals (Hansen, Mowen and Guan 2007: 11; Turmey and Anderson 1989). EIC achieves satisfies its customers by adopting a continuous improvement philosophy. As Drury (2005) observes, to remain competitive in the market an organization has to adopt a philosophy of continuous improvement. The continuous improvements enable the organization to measure its goods, services, and activities against rivals within the same industry. A continuous improvement process means that an organization will continue to reduce costs, improve the quality of its products and services in order to ensure that its customers are satisfied. In its quest to improve its services, EIC Group relies more on the workforce closest to its customers and processes. The people who are more close to EIC’s customers and processes are its representatives. EIC maintains a very close relationship with these people. This strategy ensures that EIC’s customers are continually provided with relevant information by EIC’s representatives. This EIC method allows representatives to take active role in the activities of the company which also makes them empowered. This empowerment has enabled these representatives to respond faster to EIC’s customers in different countries. International students always have hardships in foreign countries. Other than providing these students with language skills, EIC also ensures that these students are provided with any reviews, and help them overcome the challenges that they may face in foreign countries. Management accounting is continually moving from the emphasis of providing managers with information to monitor employees to providing employees with information in order to empower them because they are the ones that deal and interact directly with the organization’s customers. EIC has increased the attention it accords the value-chain analysis with an objective of increasing customer satisfaction and managing its costs in a more effective manner. EIC Group’s management accounting function’s role is to coordinate the individual parts of its value chain to deliver cost efficiency, quality, and delivery. EIC is also taking advantage of developments in information technology to improve customer satisfaction and stay ahead of its competitors. Many organizations have been able to rapidly increase their competitive advantages enabled by information technology because it greatly supports business activities. International education industry is one of the areas in which information technology has made the greatest contribution ranging from enabling distant learning to in-classroom learning. Regarding EIC Group, IT enables the management to communicate information to its representative and the representatives to communicate back to the management in a timely manner. Information technology is a very important factor in management accounting. According to Heidmann (2005), information technology adds to information quality dimensions, especially in regard to the system quality dimension integration, formalization, and flexibility. EIC has been using the integration of information technology to the improvement of its information quality dimensions. EIC Group also engages in a control process which it sets its targets and standards against which it measures the actual results. EIC then measures and compares its performance with its targets on a periodic basis. The management accounting function of EIC then provides the management of the company with feedback information displayed in periodic reports which it has already analyzed. This process enables the management to establish and know whether its operations in all areas of its operations are proceeding according to the initial plans. The management is also able to identify areas where it needs to conduct corrective action. The factor that makes EIC’s operations effective is that its management accounting function is able to provide the management of the company with the economic feedback. This feedback, in turn, helps the management to control and improve the efficiency of operations. Towards this end, it is clear that the EIC’s management accounting function helps the company achieve several objectives including formulating its plans and policies, interpreting its financial documents, assisting the management in its decision-making process, control of costs and budgets, providing reports, and facilitating coordination of operations. Therefore, the management accounting function in EIC Group has helped the organization achieve the success and gain the reputation it has gained as one of the excellent providers of international education services in the world. This has enabled the company to overtake some of its main competitors and stay ahead in terms of competitiveness. The Institute of Company Secretaries of India (2013: 27), the main objective of management accounting is to help the management of an organization to carry out its responsibilities efficiently in such a way that the organization will be able to maximize the profits and minimize the losses of management. To achieve this objective, EIC Group’s management computes plans and budgets that cover all the aspects of the business. Using management accounting, EIC’s managers have been able to allocate responsibilities for implementation of plans and budgets. Also, they have been able to analyze all physical and financial transactions to enable them make effective comparison between the forecasts and actual performance. International education is subject to regular changes; therefore, any provider of international education services has to remain updated about the current trends and changes, including changes in syllabus, and competitors’ offerings. Management accounting as has been investigated in the case of EIC Group is one of the most ideal functions in an organization because it enables the organization not only to know about the current state of the industry, but it also helps the organization to forecast future trends based on available information. It also provides an organization with a foundation for setting its goals, frame its policies, and decide on their program of activities. References Australian Education International (2007). 2006 annual international student statistics, Australian Education International. Drury, C. (2005). Cost and Management Accounting: An Introduction. South Western: Cengage Learning Hansen, D., Mowen, M. and Guan, L. (2007). Cost Management: Accounting and Control. South Western: Cengage Learning. Heidmann, M. (2005). The Role of Management Accounting Systems in Strategic Sensemaking. New York: Springer Science and Business Media. Hill, C. and Jones, G. (2007). Strategic Management Theory: An integrated approach. Seventh edition. New York: Houghton Mifflin Company. Ongaki, N., Bichanga, O. and Muturi, W. (2013). Influence of Management Accounting in Creating Sustainable Competitive. New Delhi: EdPedia Publications Porter, M. (1985). Competitive Advantage. New York: Free Press. Pyne, C. 2015. Education Exports Hit a Record $17.6 Billion. The Department of Education and Training. Available at https://ministers.education.gov.au/pyne/education-exports-hit-record-176-billion Robbins, S., Bergman, R., Stagg, I. and Coulter, M. (2014).Management. Sydney: Pearson Education. The Institute of Company Secretaries of India (2013). Cost and Management Accounting. New Delhi: The Institute of Company Secretaries of India. Thompson, J. and Martin, F. (2007).Strategic Management: Awareness and Change. Mason: Cengage Learning EMEA Turmey, P. and Anderson, B. (1989). Accounting For Continuous Improvement, Sloan Management Review, pp. 37-47. Young, I. (2007). Australian Vice-Chancellors’ Committee, Transcript of evidence. Read More