Competitive and Commercial Strategy in a Consumer-Driven Australian Higher Education Sector - Case Study Example

COMPETITIVE AND COMMERCIAL STRATEGY IN A CONSUMER DRIVEN AUSTRALIAN HIGHER EDUCATION SECTOR Name: Institution affiliated: Date of submission: Tutor: Introduction The higher education sector in Australia is developed and guided by a number of principles among them being strategic alignment, conformity, sensitivity, partnerships, good decision making, learning environment and project management. The development of the higher learning institutions are usually enhanced by a strategic plan. It is important for the institutions to have a strategic plan which defines their objectives and goals and provides a time frame for which the goals are to be achieved. Conformity means that the higher education sectors in Australia needs to comply with the acts that are set by the government to control them [MdR13]. Sensitivity means that the institutions need to develop designs that are in consideration with the relevant disciplines. Partnerships offer good reputation to the organization and provides a base for the development of a good decision making process through consultations. The decision making process should encourage transparency, accountability and allow risk averse decisions to be made. It is important to understand that there are always weaknesses and threats that usually in any given organization. The institutions of higher learning are usually consumer driven and thus the consumers have the privileges of making informed decisions based on the reputation of the organization. To win the greater share of the consumers, the organizations have to ensure that they provide the best quality of services available in the market. With the advancements in technology, and as the world grows to become a global village, then it is important for the organization to encourage consumer driven decisions [Bes09]. The higher education sectors aims to ensure that they remain competitive in the market and become international organizations with good ranking around the world. Such are the factors that make the organizations have a good reputation and make consumers want to be associated with them. There are different department in every organization and each of the organization is expected achieve its set goals. The universities and other institutions of higher education are not any different. They each consist of different environments that consist of different factors that determine the performance of the organization as a whole. The paper will focus on the porter’s five force model and how each of the forces affects the different environmental factors. External analysis Analysis of environmental factors The PESTEL analysis is a strategy that companies need to adopt in order to analyze both the internal and external factors affecting business. The components of PESTEL analysis are subdivided into the internal and external business processes. PESTEL analysis encompasses the political, economical, Socio- cultural, technological, and environmental and the legal environment of the company. The political factors are those that determine the degree to which the government interferes in the economy. The government provides political stability to enhance trade by providing laws and restrictions such as tariffs and barriers. The economic factors have a major impact on how the business operates and how decisions are made. Such factors include interest rates, inflation rates and the exchange rates that determine the economic growth of the country. The social factors are mostly the demographic factors that affect those living around the business premises, and such factors include population growth rate, health consciousness, age distribution, safety and the career attitudes of the people [MdR13]. The technological factors are determined by the level of technological advancement and automation as a form of technological incentives. The rate of technological advancement is usually triggered by the research and development (R&D). The technological factors determine the entry barriers for the different countries and the efficiency of production. The technological advancements determine the quality of products, costs and innovation in the type of products and services that they provide [Por03]. The environmental factors are the factors that include both the ecological and the environmental aspects of a business such as the weather patterns, climate and its changes that may have effects to the business and in most cases have drawbacks to the business. Finally, the legal factors are the laws set to protect both the consumers and the suppliers or the producers. The legal factors affect how a company is run and determines its operations by determining the costs that it sets for its products and the demand that is there for the same products. Such factors range from discrimination law, antitrust law, consumer law, health and safety laws and the employment laws [Por08]. Porter five forces analysis The porter’s five forces analysis was a framework that was developed by Michael E. Porter, a professor of the Harvard University. The framework was developed to analyze the various levels of competition within the business strategy development. It portrays the industrial organization (IO) economics to obtain the forces that are important in understanding the intensity of competition that the organization faces in the market. The Porter five forces analysis is used for strategic management [Mic082]. Porter developed the five forces analysis for the purposes of complementing the SWOT analysis that had become famous in business analysis. The Porter five forces analysis was to identify all the threats that the business faces. Porter divided the analysis into vertical and horizontal threats [Nad09]. According to porter, competition is the greatest threat that businesses face and thus the vertical competition for businesses are the bargaining power of customers and the bargaining power of the suppliers. The horizontal competition is divided into three parts namely; the threat of new entrants into the market, the threat of established and already existing rivals and the threat of close substitutes for products and services provided for by the business [MdR13]. Strength of the force Force or threat High Competitive rivalry The higher education sector is a very competitive sector especially in the Australian economy. Very many higher education sectors have been started in the country to provide the students with the knowledge to ensure competitiveness in the market. Competition on the quality of services offered by each institution is growing almost every day. To reduce competition and the competitive rivalry that exists between the institutions, the different institutions choose to partner up and become bigger thus they command a bigger market share [Mic13]. Medium Threat of new entrants The institutions of higher learning have increased in number and each time, more and more institutions are set up in the country. It is easy for new institutions to be set up as long as they comply with the set rules and regulations thus competition is always increasing with every new institution of higher education that is set up in the country [Mic09]. Medium Entry barriers into the market The entry barriers of new institutions are limited for new start up institutions in Australia. When new institutions are set up, the only requirement is that they follow the regulations provided by the government acts regarding institutions of higher learning. It is thus natural for more institutions to be set up in the country for the owners to enjoy profits. Although the demand by consumers is high as they demand for opportunities for higher education, the competition created by the new institutions might end up reducing the quality of education as they focus on getting more consumers instead of the quality of education they provide [Ste01]. Low Bargaining power of consumers The usage of internet has increased the awareness of the consumers and the interaction of the consumers. This has resulted to a force that makes the institutions have no option, but to set lower prices according to the demands of the consumer. Connecting the PESTEL model and 5-forces analyses The analysis is a form of strategic management that is used for the analysis of the macroeconomic components of the business. The components of the business PESTEL analysis provides the business with an overview of the opportunities that the business can take and the problems that they need to solve in order to improve the performance of the business. The PESTEL analysis is based on providing the means to improve the performance of the organization strategically. Both PESTLE and SWOT analysis are used together to provide business with the best options available to provide for the success of the business [Anj09]. Threats in business analysis are mainly the negative issues that face the company from outside the business premises and they encompass the political, economical, Socio- cultural, technological, and environmental and the legal environment of the company [Sar04]. Both the PESTEL analysis and the porter’s five forces analysis thus work conveniently together to help the management identify the different types of threats that a company uses and how they can be best solved. All the aspects of the PESTEL analysis have their effect on the threats provided for by the 5-forces business analysis. Each of the aspects is a determinant of the amount of competition that businesses face. Both the political and legal aspects in the PESTEL analysis provide for laws that control all the stakeholders of the company to protect the suppliers, buyers and the business entity [Hel14]. The bargaining power of the suppliers and the buyers are limited to a given level to ensure that no one suffers negatively from the actions of the others. The technological advancement of business allows them to stay ahead of the rest and reduce the competition that they face from rivalries. The economic and environmental conditions help to provide the business with the means to cab threat faced by close substitutes and those of new entrants by understanding the demographics of those living around the business promises, the wants, resource utilization, key competencies and their capabilities [Son01]. Strategies that differentiate the higher education institutions There are two major strategies that the institutions of higher education use to improve their consumer base thus improving their performance namely; international partnerships and diverse geographic markets. The institutions of higher education in Australia try to offer their products and services to as many consumers as possible so as to improve their reputation and thus attract more consumers [Cha12]. The reputation of the universities determines the attractiveness of the organization to its consumers. International partnerships allow the organization to reach more consumers as they partner with other institutions around the world and have their products and services offered by the other institutions in the other countries. Similarly, the institutions of higher learning also try to diversify their geographical markets in two major ways among them being introduction of more products and services into the already existing institutions and the introduction of new institutions in areas where they have not been in existence before [Ric093]. Governance to support those strategies Proper governance for the institutions of higher education means that they need to prepare a master plan that accommodates for the achievements of the set strategies. The master plan should offer the requirements that are necessary to achieve the strategic goals of the institutions. Among the requirements include the promotion of research that encourages the achievements of the endeavours of the institution, optimization of the returns on capital to be reinvested back to the institution for future use and inclusion of more projects in the institution to help integrate the working institution [Rob091]. Developing capabilities The universities and other institutions of higher education are rated according to their capabilities and thus their reputation increases with each growth in their capabilities. Developing the institutional capabilities means that each of the organizational environments is looked after and some structural adjustments are integrated to the organization [Ian12]. To help develop the capabilities of such institutions, some important structural adjustments need to be considered among them being; support and engagement activities, technology advancements and learning environments, communication and the introduction of policy controls within the organization [Jos081]. Leadership The missions and visions of most organization depend on the leadership of the organization in order to be achieved. Leadership is thus a crucial part of the organization. Apart from meeting the organization’s mission, vision and objectives, leadership also plays an integral part in inventions, innovations, and implementation for change in the organization [Ass06]. Leaders participate in innovation and change development and implementation through rules such as inspiring others, enhancing participation and interactive organizational culture, offering monetary or exposure support, or corrective supervision [Mic03]. Recommendations Current computing technology is the main drivers of the current strategies for the institutions of higher education. The sector is usually very competitive as there are very many market entrants in the market. Whereas some of the entrants are by the foreign investors, most are by the local investors. The government should increase the entry barriers for new institutions so as to reduce the new start up institutions in the country. With a reduction in the number of new entrants, quality will be upheld by the institution that making them more competitive. The institutions of higher education should also put into consideration the environmental changes that are usually experienced in the organizations. The consumer needs and preferences are usually diverse and always changing thus the institutions should consider these changes should be integrated in the institutional environment. The management of the institutions should ensure good governance in the organization by ensuring leadership in management is encouraged. REFERENCES MdR13: , (Hassan, 2013), Bes09: , (Bessant & Tidd, 2009), Por03: , (Porter & Ketels, 2003), Por08: , (Porter, 2008), Mic082: , (Michael, 2008), Nad09: , (Nadine & Anne, 2009), Mic13: , (Michael, 2013), Mic09: , (Michal, 2009), Ste01: , (Stephen, 2001), Anj09: , (Anja, 2009), Sar04: , (Sarah, et al., 2004), Hel14: , (Helen, 2014), Son01: , (Sonja, 2001), Cha12: , (Charles & Gareth, 2012), Ric093: , (Richard, et al., 2009), Rob091: , (Dransfield, 2009), Ian12: , (Ian, 2012), Jos081: , (Joshua, 2008), Ass06: , (Assink, 2006), Mic03: , (Michael, 2003), Read More