1. Public Education Private Funding
Rod Henry
Bemidji State University

2. Or... The Shake-Out

3. My prediction for 2011 was...

4. That was optimistic...
As we now know and as other speakers have illustrated, the reality is far worse.
Not only are our budgets under attack, but the underlying idea that a college or university education is desirable and worthy of government support is also under stress.

5. Strategy Analysis
If publicly funded education is being transformed into publicly assisted education, where can our institutions go?
How can we compete with for-profit institutions to serve our public?
Trends in the for-profit market are shown by public filings and analysis...which may indicate areas where we are competitive.

6. Overall State of For-Profit Higher Education...
“...a bubble fueled by free government money...”
“...online will continue to be more profitable...”
“...lower-priced programs will do best...”
Career-oriented, for-profit higher education is counter-cyclical.

7. Market Conditions
The market for educational products tends to be counter-cyclical
Demand depends on the eligible population and funding ability
Public Higher Education is not-for-profit
Competing against private non-profit and private for-profit institutions.

8. Comparison of Publicly-Traded For-Profits
Name
F 2010
Enrollment
Enrollment Change
Market Share
High Stock Price
Current Stock Price
APOL
440000
-42%
35% 66 42
CECO
118000 3%
9.4% 36 25 DV
112000 9%
8.9% 74 56
EDMC
96932
24%
7.7% 27 23
COCO
114000
-21% 19 5
LOPE
42000
22%
3.3% 28 15
ESI
88000
-4% 7%
122 79
CPLA
39000
-11% 98 53
APEI
78000
10% 6% 49 43

9. For-Profit Strategies
Commodity Product, Broad Market
APOL, CECO
Commodity Product, Narrow Market
Differentiated Product, Broad Market
CPLA, LOPE
Differentiated Product, Narrow Market
ESI, DV

10. Generic Strategies Cost Leadership -“No Frills” products or services
- achieved through standardization, efficiencies in production, distribution, design, or technology
Example: Generic online business degrees
Differentiation
Distinctive offering or truly unique offerings
Distinctive to the consumer; using design, quality, service, variety of offerings, brand name, etc.
Example: DeVry

11. Value-Based Strategies
These will seek to maximize profits through maximizing customer perceived value.
Best Price - None
Best Product – LOPE, CPLA
Best Service – Almost all have tight service requirements

12. Quick Strategic Comparison
For - Profit
State - Funded
Must respond quickly to changes in markets
Low overhead, lower labor costs
Ability to quickly outsource
No community service requirements
More focused students
Have not had to react quickly to change
High overhead, high labor costs
Outsourcing is done haphazardly
Community service overhead
Students less goal-oriented

13. Financial Comparison For - Profit State - Funded
Many spend as much money on promotion as on instruction
Able to place infrastructure wherever it is most efficient to do so
Still able to generate substantial profits
Promotion takes traditional forms – sports and PR
Locked into infrastructure that may be very costly to maintain
Generate less funds for new product development, etc.

14. Summing up...
The for-profit sector is starting a shake-out where a number of firms will be forced to merge with other firms or go out of business.
The for-profit survivors will be tough competitors for state-funded or assisted institutions that are forced to compete...
The easy markets are already taken.