International Business: China Education Market Analysis Report

This report provides a comprehensive analysis of the education market in China, focusing on the opportunities and challenges for international businesses. The report begins with a background on China's education system, highlighting its rapid growth and the increasing demand for overseas education among Chinese students. A mixed-methods approach, including industry reports and interviews, is used to analyze the market. The report examines industry trends, the demand for educational consulting services, and the target market segments. It identifies opportunities for businesses, such as English tutoring and consulting services, while also addressing challenges like credibility issues within the industry. The analysis includes demographic and geographic segmentation of the Chinese consumer market, identifying the "Mainstream" and "Affluent" segments as the primary targets. A competitor analysis of major domestic consulting firms is also provided. The report concludes with recommendations for effective entry strategies, emphasizing the importance of understanding the market dynamics and addressing the specific needs of Chinese consumers.

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Background of the Country
Education is probably the best thing that can ever happen in people's lives. Countries
all over the world have developed an education system that would compete with other nations
in the industry. China, the most populated country in the world, is probably the one with the
greatest education system. The country has developed regarding technology. Being the most
populated country with adequate labour, it necessitates the idea to look at the education
system in details and understand its market to the rest of the world. Countries across the
world have been at the forefront in marketing their education. The significant economic
growth in China makes it more suitable for the introduction of a more flexible education
system. According to Benji (2017), the education market of China is vast, and the
Government has plans to expand it even further in the near future as most families in China
prepare their children for the global competitive economy that is dynamic in nature. The
education market in China was reported to be US$ 240 billion in 2015, and it is predicted to
double to US$450 in 2020 (Benji 2017). Chinese families give education a priority to assist
their children to cope with the modern China. This presents an opportunity for private
investors who would wish to introduce a learning institution that recognizes diversity. As at
now, it is reported that the China’s education industry is leading globally (China Education
Industry Report 2016). The cases of investment are reported to have risen from 190 in 2014
to 270 in 2015 (China Education Industry Report 2016). The demand for foreign education
services is high since competitive customers value the proficiency and quality of expatriates
(Lu 2014). The demand for foreign education services presents an opportunity for us to
introduce a service aimed at providing consultation services in China. Currently based in
India, there is a plan to expand services in China in order to exploit the opportunities
currently present. This report is aimed at analyzing the education industry in China with a

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view of to come up with effective entry strategies to the China market. A learning institution
that teaches English and recognizes diversity can be a lucrative business.
Methodology
The methodology used in developing the report is a mixed-methods approach. The
research utilized both quantitative and qualitative approaches. Under qualitative approach,
industry reports from certified websites such as IBISWorld were used to determine the
current trend in the industry. Direct interviews with renowned companies staff and some
students and people had prior experience with the education system in China were also
utilized. The data collected was then analyzed and combined into a report to guide in making
investment decisions.
Industry Analysis
Education consulting in China can be classified as one of the products in the
management consulting industry. According to IBISWorld report (2017), the industry was
established just two decades ago; hence, it is still on a small scale as compared to other
countries globally. According to IBISWorld Report (2017), the industry has experienced a
revenue increase for the last five years at a rate of 11.1% annually to $25.3 billion. The
industry revenue is projected to increase annually at a rate of 7.1% for the next five years to
reach $35.6 billion in 2022 (IBISWorld Report 2017). The robust growth of the national
economy of several businesses is expected to raise the demand for professional consulting
services.
Industry Outlook
Education consulting services, according to IBISWorld Report (2017), contributes to
7% of the overall revenue in the management consulting industry. The primary services
offered in this segment are overseas consulting and agency services. The potential customers
are graduate schools and students seeking to further their studies who need assistance in their

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applications. The consulting firms charge a fee to assist students in their applications to
overseas universities. They assist students in finding the best undergraduate and graduate
programs which best fit them and guide them through the entire application process. The
application can involve passing an English test which most of the Chinese students find it
hard. These challenges have led to a fast-growing client base in China. According to Luk
(2013), China is leading in sending students to study abroad. The number has been growing
annually at a rate of 20% (Luk 2013). The Institute of International Education report (2016)
confirmed that China and India are the leading countries in exporting students to the U.S.,
accounting for 84% of the overall growth between 2015 and 2016.
Demand for Educational Consulting Services
The main drivers of the education consulting services in China are the increasing level
of globalization and the standards of living. The revenue in the education consulting services
in China is expected to grow in the future due to the increasing number of students applying
to study abroad (Export.gov 2017). The major drivers of this segment are China's increasing
globalization level and living standards. As more students apply for foreign schools, the share
of revenue contributed by education consulting is expected to increase in future years
(Export.gov 2017). According to 11E Report (2010), most Chinese students value the quality
of U.S degrees. Several students are attracted to the U.S. by the liberal arts culture which
gives students opportunities to study in different subjects (Export.gov 2017). The desire for
Chinese students to enroll in the U.S. learning institutions is increasing day by day and,
according to the Institute of International Education (2016), the demand is inspired by the
increase in disposable incomes and the prestige that comes from attending top-rated U.S
higher learning institutions.
The increasing demand for overseas education by Chinese students confirms that
educational consulting services are, indeed, a lucrative venture. As reported by Fischer

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(2011), 53% of respondents in a survey done by Zinch China showed that they could afford
up to $40,000 per year on tuition. The survey also showed the willingness of Chinese
students to spend money to secure admission in the U.S. learning institutions (Fischer 2011).
Opportunities
The education consulting service sector is currently facing a number of challenges in
China. According to Zhang (2017), a wide gap exists between spending power and the
education quality; thus, providing an opportunity for foreign investors to acquire a market
share. Cavanagh (2013) observed that several China families have resorted to supplementing
the Chinese curriculum in order to prepare their children for studies abroad. Although the
business is booming in China, the industry is currently facing a challenge of credibility. Most
families in China express doubts of who to be trusted in the sector (Luk 2013). As reported
by Carmicha (2012), there is an instance where a Hong Kong family spent $2 million to an
educational firm to offer tutorials and funnel donations in order to secure a place in Harvard
University, but the student did not succeed. The family decided to sue the firm when their
child did not get admitted. In some cases, consulting firms write admission essays for
students with no input from the students themselves, while others have been reported to
charge students recruiting fees, a practice that is prohibited in the U.S. (Luk 2013). There
exist education agencies in China which lack strong academic background. The industry has,
therefore, lost reputation and most of the customers do not trust some of the existing firms.
This further presents an opportunity for a professional company with personnel who are well-
educated.
Concerning government support, the China policies on education have demonstrated
strong determination to offer support to the development of the education sector. The
education market in China is expected to increase to RMB 3 trillion by 2020 (Luk 2013).
English tutoring has also been encouraged in order to send more Chinese professionals to

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overseas job opportunities and education. There are currently very few education consulting
firms in China which does not meet the market demand. The well-known domestic education
consulting firms are Hiall, New Oriental, and Bebeyond (IBISWorld Report 2017).
Market Analysis
Understanding of the market for the product being offered is essential for any
business venture. This helps in determining the most appropriate target segment. According
to Atsmon and Magni (2012), the economic profiles of the Chinese consumers are the most
crucial determinant of the market. China is seen as a potential market that will spur the
growth of many companies. There are significant consumer trends that will define the market
in the future.
Demographic Segmentation
There are rapid changes in the China market due to rising income, desire for better
education, and greater mobility. Other factors that define the market are the economic
imbalances among the Chinese regions. The consumer landscape is mainly shaped by the
economic profiles. According to Atsmon and Magni (2012) in the McKenzie quarterly report
2012, Chinese are becoming richer at a fast rate as evidenced by the increase in household
disposable income. According to the report, the disposable income for urban consumers is
expected to double up by 2020, from $4,000 to $8,000 (Atsmon & Magni 2012). Currently, a
large proportion of the population comprises of the value consumers whose annual disposable
income ranges from $6,000 to $16,000 (Atsmon & Magni 2012). The other proportion is
comprised of the “Mainstream” consumers whose disposable income is higher than their
counterparts and is estimated to be $16,000 to $34,000. Few people in the Chinese population
fall under the mainstream consumers. Another small group form the "Affluent" Consumers
and their household incomes are above $34,000. This segment makes up only 2% of the

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overall urban population (Atsmon & Magni 2012). The summary of the demographic
segments is shown in the figure below.
Figure 1: Source: http://www.mckinsey.com/global-themes/asia-pacific/meet-the-chinese-
consumer-of-2020
Based on the analysis, it is imperative to note that consumers with higher disposable
income are likely to be interested and ready to study abroad. The “affluent” segment
comprises of people with high income, although they form a small percentage of the market.
The “value” segment forms the biggest percentage of the market. However, they prefer
cheaper services. However, the consumers are expected trend is expected to change. It is
projected that with the rise in wealth of consumers, the value category will join the
mainstream segment by 2020 (Atsmon & Magni 2012). The mainstream segment will form
51% of the overall urban population.
Geographic Segmentation
Geography is another important criterion to analyze the market. There are cities
believed to be wealthy while others are poor. According to Atsmon & Magni (2012), about

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eighty-five percent of the mainstream segment lives in a hundred wealthiest cities in China.
In another category of wealthy cities, ten percent of the clients are Mainstream in 300
wealthiest China cities (Atsmon & Magni 2012). The families living in these cities will be
able to afford a broad range of services. Such cities are likely to attract more companies. The
wealthiest cities in China are Shanghai and Shenzhen. The figure below shows a detailed
analysis of the cities in China.
Figure 2: Source: http://www.mckinsey.com/global-themes/asia-pacific/meet-the-chinese-
consumer-of-2020
Target Segment
The business will target the “Mainstream” and “affluent” segments. The value
segment makes up the largest percentage of the entire market in China, but they will not be
willing to spend money on overseas education. This group is likely to be conservative and
would only be willing to study in China. They are not likely to be interested in prestige. The
mainstream and the affluent segments are people who value quality and have great propensity
to spend. This becomes essential to target them because they are the ones who are likely to be
willing to travel abroad. These groups comprise of families who can afford luxurious goods
and associate themselves with the West.
Competitor Analysis

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The education consulting market in China has attracted several investors due to the
rising demand for overseas education among the Chinese students. According to IBISWorld
Report (2017), the major domestic consulting firms in China are New Oriental, Hiall, and
Bebeyond.
New Oriental Education & Technology
New Oriental Education and Technology is one of the leading companies in the
education consulting sectors. According to Yang (2015), New Oriental is the largest
comprehensive educational consulting service provider in China. As described in Ft.com
(2017), the company provides private educational services in China. The company’s services
are divided into seven segments. The segments include Primary and Secondary education,
language training and test preparation, online education, pre-school education, content
development and distribution, study tours and overseas education consulting services (Ft.com
2017). The company trains English and other foreign languages. It offers courses for test
preparations for securing U.S. learning institutions admissions, admissions to the China
schools and Commonwealth countries (Ft.com 2017). It also offers online education.
The company applies the strategy of diversification. Its products are well diversified
to capture a big market share. New Oriental also employs highly talented professionals in
their field. The company has gained positive reputation and is currently the leading company
in the sector. As reported by Ft.com market (2017), the company’s revenue in 2016 was US$
1.8 billion with a net income of US $ 274.46 million.

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Figure 3: Source: https://markets.ft.com/data/equities/tearsheet/financials?s=EDU:NYQ
Hiall Group Ltd
The second largest company after New Oriental is HiAll Group Ltd. The company
offers a wide range of services and has a broad range of clientele. Its main business segment
is employer branding consultancy services (Bloomberg 2017). The company provides
analysis of big data, media operations, and mobile internet platforms, and integrated
marketing communication services in the People’s Republic of China for foreign and local
companies to recruit and provide training to fresh graduates and job seekers (Bloomberg
2017). The company also offers educational consulting services for people seeking to study
overseas. Its offices are located in the wealthy cities of China such as Shanghai, Chengdu,
and Shenzhen (Bloomberg 2017).
Bebeyond Training Centre
Bebeyond is the other competitor in the market. The company is relatively small and
has not expanded its services in the market. The company offers training services to students

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who want to join overseas institutions and local institutions. Bebeyond Training Centre
usually conducts graduate workshops to educate fresh graduates seeking overseas education.
It is aimed at helping students secure admissions overseas and provides personal development
training services (Bebeyond 2017). The company does not offer many threats to incoming
investors.
Key Success Factors
The key success factors in this particular sector as identified by IBISWorld (2017)
include having a high profile in the market. When a company has a high profile, it is likely to
attract more clients. Another key factor is access to a highly skilled labor. It is essential to
recruit highly competent employees because the sector is highly skill-intensive. The other
factor is having well-developed internal processes. The employees should have the ability to
ensure that there are necessary cost and time-management systems for easy monitoring of the
processes. The last key success factor is the ability to quickly adapt to new technologies.
Since technology is ever-changing, it is essential for companies to ensure up-to-date usage of
technology.
SWOT Analysis
Positive Negative
Internal Factors Strength
 The firm is highly diversified,
offering a wide range of
educational consulting
services
 The company has highly
trained professionals with
experience in the field
Weaknesses
 The company is not
known to many in the
Indian market.
 The company has not
dealt with any foreign
clients before
 This might include

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 The company has established
good relationship with clients
in India
 It offers affordable services
high cost of
establishing an office
in China
 There are currently no
employees who can
speak Chinese, hence,
creating a possibility
of language barrier in
China
External Factors Opportunities
 Increased disposable income
in China will increase demand
for overseas education
 Growing middle classes will
create a wider market in China
 Increased interest in overseas
education will increase
demand for overseas education
consulting services
 Government support will also
boost the sector
Threats
 There is pressure
from large consulting
firms such New
Oriental.
 The growing use of
agencies who offer
the same services at
lower prices poses a
threat
 A possibility of
increased government
regulations is likely to
emerge due to cases
of fraud reported in
the industry