Education sector in India

Author : Siddhartha Dua

When I got the news of my posting in Delhi, besides elation the first thing that started rankling my mind was how to secure admission for my daughter in a good school. It is disturbing but harsh reality of the times we live in. Even though hundreds of schools have mushroomed in our metro cities all claiming to be better than the other but no one can vouch for the authenticity of these claims, also teaching standard at most of these schools is abysmally low. There are few established players but to get admission in those few is a miracle of sorts. Year after year parents have to run from pillar to post to get their child admitted in nursery. To get into these so called temples of learning parents have to embezzle the system and pay lakhs of rupees in bribes. To add insult to the injury the fee charged by these schools is exorbitant and end up ruining the household budgets.

Money is extracted from gullible parents under the guise of securing their future. It’s an open secret and this hegemony by top private schools has continued unabated often condoned by authorities and parents. Even in my locality I have seen people paying hefty dough to get admission into top notch schools. Lucre can vary from two lakhs for good schools to ten lakhs for established names. So what is it that bedevils our education system.

As a marketer lest us consider the primary education or schooling industry. If we analyze the forces acting on this industry, this is how the situation looks like. Product for this industry is students and customer their parents who are willing to pay thru their nose in order to get a high quality product.

Rivalry among the industry Members:

1. Supplier power: Suppliers are aplenty and have little or no bargaining power, be it school books, furniture, stationery or other peripherals. But there is one major component which makes or break a school it’s the quality of teachers. What separates a good school from an excellent school is the quality of teachers and their experience. Ability to attract and retain the best available talent is what makes or breaks the school’s reputation. A good school with superb infrastructure will not be able to churn out an excellent product if teacher employed is not dexterous enough.
2. Buyer power: There are only limited number of schools which are offering quality education whereas the number of buyers who want to buy this quality education is ever increasing. There is a huge upside potential to increase the prices in this case fees. Even though there have been numerous agitations but still there is only one direction where fee is headed, north. This is the most alluring part of this industry. Burgeoning middle class who have high disposable income and also willingness to pay. This is one of the most important factor which makes the industry attractive for a new comer.
3. Competitive rivalry: This is a highly fragmented industry where established players have a huge experiential advantage. In this industry experience in running a school and proven track read is of paramount importance. It is what separates wheat from chaff. Established schools like DPS, Sanskriti, St. Francis, Bal Bharti have a huge demand as the market is growing and will continue to grow. All these brands can afford to charge a premium which people will pay readily. There is always a fight for supremacy as each school wants to attract the best talent but this is not such a strong a force which can deter new entrant as there is a consumer surplus and supply constraint.
4. Threat of substitution. Lot of open schools are coming up. At the same time there are coaching centers which are mushrooming but these are all complementary in nature. As the education industry grows number of substitutes will also continue to grow along with the industry but schooling industry has relatively remained unaffected by these substitutes.
5. Threat of new entry. As this industry is profitable for established players and number of buyers is ever increasing, there are very few barriers to entry and government policy is also encouraging so there is a scope for new players to enter.But a new player entering into the market should have deep pockets as existing customers will go only to the established brand and also existing brands have the best resource to attract teachers. The existing players are strengthening their positions by opening new branches. To get the best teachers new entrant will have to hire experienced personal as they are the ones who can make this venture profitable.

Based on the above five forces it can be concluded that primary education industry in India is a lucrative industry but profitability largely depends on experience and there is a very steep learning curve which is to be followed. Even though industry is highly fragmented and bargaining power of suppliers is limited but it is more of a product driven industry, if you can churn out quality product there’s no stopping you. Name of the institute largely depends on the results and that is where role of teacher or bargaining power of supplier comes in.

A good experienced teacher doesn’t come for peanuts. Unfortunately, in this profession teachers are not paid well and that is the reason why this sector fails to attract the best talent. Even though there was a decent hike in salaries after 7^th pay commission but that hike is restricted to Government institutions. Private schools are reluctant to pay these pay scales as it impacts their profitability and also they can get teachers at much lesser salaries.

But that is where experience comes in, it’s a school and not a coaching center, stakes are much higher, huge amount of capital is invested, if you want a quality product hire the quality resource and quality resource doesn’t come cheap. Even Reliance industries when it started out had to pay double the amount what other oil companies were paying to attract the best talent. The success of this industry is largely dependent on this aspect and players with deep pockets can only hope to survive. Only fittest player who understand the nuances of the game will survive and for established there is no imminent threat as long as they continue to innovate.

For others exit door looms large.