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Apr, 19 2010

INDIA ATTRACTS GLOBAL SCHOOLS

With the entry of the foreign education providers in India, Indian institutes may have to work hard to compete successfully with the foreign establishments which are ready with huge outlays to set up their campuses in India. A study of how the Indian educ

With the entry of the foreign education providers in India, Indian institutes may have to work hard to compete successfully with the foreign establishments which are ready with huge outlays to set up their campuses in India. A study of how the Indian education system has changed.

INDIA has become a favoured business destination for companies across the world. Global brands are vying to grab a larger pie of this market. Like any other sector, education too is an inviting domain for entrepreneurs. At the same time, there are many Indian institutes trying to foray into foreign countries and achieve global scale.

According to the quarterly report of Technopak, (Volume 1, 2009), India has the largest student population worldwide with about 1.85 lakh Indians studying abroad and spending $ 4 billion annually. However, during the immigration process, they face various problems related to visa, safety and high living cost. Another section of the society is eager to send their children for studies abroad but can not do so because of the high fee structure.

On the positive side, there are many foreign universities queuing up to make their presence felt in India. Even though the demand is huge for such institutions in India, government apathy and red tape keeps them from entering the borders of India. The Union Government has yet to approve the Foreign Universities Bill which would let foreign universities set up campuses in India, and award degrees.

FDI in education

Although since 2000, 100 per cent Foreign Direct Investment (FDI) is permitted in the education sector via the automatic route, the legal structure of our country does not permit granting of degrees by foreign educational institutions on Indian soil, said Kapil Sibal, the Union Minister for Human Resource Development in a press release. “India is in the process of introducing suitable legislative framework in regard to foreign education providers, which would regulate the entry of foreign education providers as per our national priorities,” he added. Currently, it is not possible for non-profit companies under Article 25 of the Companies Registration Act  like industry associations  to set up an institution and get university status and recognition from the University Grants Commission (UGC). Foreign institutes in India can be set up only by trusts, societies and charitable institutions, but the profits cannot be taken out of the institution and have to be reinvested. According to a Technopak report, “Currently, any university or deemed institute has to seek All India Council for Technical Education's (AICTE) approval before getting into foreign collaboration for technical education. The National Knowledge Commission (NKC) has also suggested the setting up of an independent regulator for higher education, which would also have degree-granting powers.”

Diverse business routes

According to recent media reports, out of 225 existing collaborations in education, 83 institutions are from Britain while 79 are from the US. They are adopting the routes like franchisee, joint venture, licensee and link programmes. Crestcom, Tumble Tots, FasTracKids, UCMAS, Helen O' Grady, Mad Science, the Linguaphone Group, Morpheus Global University (South Asia University) and UEI Global are some of the institutions which are already present in India through either of these routes.

According to a media report, Columbia University, Imperial College London, University of Glasgow, Keele University, Harvard University, Yale University, Massachusetts Institutes of Technology, Boston University and University of Surrey are keen to start their operation in India either through setting up their campuses or through twinning arrangements with the universities in India.

Franchising eulogized

Franchising is one of the best suitable routes for institutes to make their foreign entry. FasTracKids entered the Indian market through the franchising route. “Our existing centres act as a source of referrals helping us to achieve growth of 88 per cent over the past two years,” said Kevin Krause, Chairman, FasTracKids International. “Mad Science has also chosen this to be the best way forward to expand the outward reach of 'teaching science hands-on' to primary school children the world over,” said Anirban Chanda, Managing Director of Mad Science of Kolkata.

Some of the Indian entrepreneurs, who are running their centres outside India, also accept franchising as an appropriate business model to expand across the globe. “Right from the beginning, we have started foreign operations through the franchising route. Apart from strong brand, strong know-how, strong product, high quality content and curriculum, we also require significant amount of local know-how, knowledge of local territory, local rules and regulations, consumer behavior as well as language. All these business traits could be brought by a local franchisee,” said Anuj Kacker, COO and Head of retail and international business, Aptech Ltd.

“In every country the local partners share international education business division's vision of mass computer literacy and quality computer education. The business model fosters entrepreneurial spirit and lets stakeholders enjoy the fruits of their labour,” said Ajay Lal, Senior Vice-President of International Education Business (IT), NIIT Ltd. “The key route adopted for international expansion was and continues to be franchising,” he added.

And Lina Ashar, Chairperson of Kangaroo Kids Education averred, “No other business concept can offer such an attractive and beneficial arrangement. Franchising route allows us rapid growth feasible with minimum capital expenditure with fair capital returns - a motivated localised management that is well aware of what works in their market.”

Licensing

On the other hand, the Linguaphone Group has spread its presence in India through master licensing. “We have licensed partners for two of our brands  Linguaphone and Direct English. Lotus Learning is the master franchisee for Linguaphone in India while the master franchisee for the second brand is taken by Rutledge Job Link,” said Sarah Cole, Head of Marketing, Linguaphone group. Linguaphone group has over 108 years of experience; the group has an extensive network of 200 learning centres worldwide.

Little demand, higher returns

Like any other business, education business also faces various challenges. According to the Technopak report, in terms of percentage, there is only 0.001 per cent of the total students' population, who are pursuing their courses in any foreign country. This miniscule segment could become one of the important challenges which any foreign institution could face in this country. This could also become a hurdle for them to meet the break even point.

On the positive side, this small segment of students are spending $ 4 billion annually, which is almost 10 per cent of the private spending on education. This could benefit the Indian economy.

Diverse cultures, different challenges

Apart from this, education business is highly regulated in most of the countries. It also acts as a cultural barrier for the international business. The product and the product presentation are needed to be localised. “Initial challenges faced by NIIT were the localisation of the product portfolio, regulatory structure at many countries and lack of market information,” said Lal.

“We have to conform to the local rules and regulations which can vary with every country.” Kacker said. Different countries have different education systems. Countries like Middle East, Saudi Arabia and Dubai are strongly Islamic countries. Explaining this, Kacker said, “In Saudi Arabia, a female student should be taught by only female faculty and not by male faculty. In Russia, the course should be affiliated to their universities. Following their education system, we affiliate our course content as part of their course curriculum itself.”

“Being a British company, we have to learn the Indian business operation. We have the master licensee for five countries - India, Bangladesh, Sri Lanka, Philippines and Poland. Indian market for English language is different from other countries. The target market is different,” said Supriyo Chaudhuri, Director, Rutledge Recruitment and Training, London, and the master licensee for Direct English in India. Elucidating this, he said, for example, in France, English language is learned by those who want to do their business in England or America. In China, people do not speak English; they learn English to get into the world. But, in India, it helps in getting better job. In India, most students look for employment after completing their graduate degree, while in many of international markets, students want to enter the job market right after school.

Novelties also run into hurdles

Other hurdles could also appear in the business way. If the product is novel to its kind in the market, then this could also become an obstacle. This was the case with UCMAS. UCMAS is a Malaysian company providing Abacus mental arithmetic programme for the age group of 7-12 years. “Since the product was totally new in the Indian market, there was lot of resistance initially. Innumerable presentations, practical demonstrations and referrals made us to overcome the resistance. The assured results and total satisfaction of parents actually made us to overcome the problems,” said AV Sekhar, GM, Franchise Operations, UCMAS India.

The way out

Despite various companies facing diverse challenges in different countries, their poise and confidence help them bring about success in their business. “We addressed not just the issue of language but also the cultural aspects in our localisation efforts. Today, our vast product portfolio can address many of our learners demands. This portfolio is upgraded regularly to reflect the changing requirements of the industry and the learners. We have closely worked with the regulatory bodies and have created business models that benefit all stakeholders. We have also invested and continue to invest in professional market research to arm us with the most accurate information to address specific markets effectively,” said Lal.

“The initial challenge of establishing any new brand in a market is gaining name recognition. However, the quality of our FasTracKids franchisees in India, has helped us to gain and maintain momentum in the marketplace,” says Krause. “In my perspective, India has come a long way in terms of streamlining and speeding up of many processes. Having said that, challenges that are specific to India, exist just as they do in other countries and are handled just as respectfully as all business operating here continue to do,” said Chanda. Sometimes an emerging country with less number of seats in their formal education system could become a good market.

Demand for diverse courses

Indian economy is only seven per cent the size of the US, but the country has almost 50 per cent more seats for MBA. Over the next five years, 90-100 million jobs are expected to be created in India. India has a huge potential in terms of demand for such vocational education. The young are restless, and seek to bridge the gap between the formal education system and the knowledge required for the workplace vicinity. According to a media report, the highest number of collaborations is in management and business administration. This is followed by engineering and technology /computer application/information technology, hotel management and house keeping courses. Today, we can find different foreign institutions providing different educational courses. They are catering to different age groups.

FasTracKids has found enormous potential for early childhood education business in India. There are over 22 million children under the age of six in India. “We are currently focused on finding entrepreneurs and educators with an interest in offering high-quality educational programmes to children and their communities, and helping our existing centre owners continue to grow their business,” said Krause. Supporting it, Chanda said, “Mad Science has received encouraging response. We have a well spread and growing market base and demand from all areas of business.”

Other potential markets

Apart from India, other international potential markets in the education sector are China, New Zealand, the UK, Malaysia, Australia, the US, Canada, Ireland and many countries from Middle East, APAC, CIS and Africa. Nevertheless, education market is a never ending market. Its potential could not be challenged with any other sector in this world. However, in today's commercial world, capital has become the most important criterion even for the education sector attracting more number of businessmen in this field. FasTracKids has locations in more than 40 countries around the world.

Foreign Universities Bill

As discussed earlier, despite foreign players of every brand jostling to enter India, in various sectors, there can be no denying the fact that the degree of response in education sector has remained far below than the rest of the sectors. People may think differently, but the ultimate reason that keeps revolving is the same, i.e., the Indian government and its education regulation. When TFW spoke to Dr Venkata Ratnam, Director of International Management Institute, Delhi, he stated, “This is because, India discouraged companies offering education.” Says Kacker, “The education report has been tabled in Parliament. As we go forward, the expectation is that the government will allow the foreign universities to get in. This is something which will change over a period of time.” Chanda adds, “I believe the reality of population pressure on India's university system. The rapidly growing economy's requirement of skilled human resources will find a way to create a collaboration, which will suit the foreign universities as well as address the concerns of the Indian government. It is just a matter of time when a way is found to match the demand and supply for a recognised university degree in this country for all aspirants.” Says Lal, “Though the size of the Indian education market continues to interest foreign companies, investment in this sector would largely depend on the policies made by the government.” On a positive note Supriyo adds, “The Foreign Universities Bill has been placed in Parliament and we expect the government to recognize it as long as the foreign education providers follow the norms of the country.” We can keep our fingers crossed, as one House of Parliament has already okayed the Foreign Education Bill and this is all set to revolutionized the education sector.

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