PRIVATE COLLEGES IN MALAYSIA: ARE THE KEY MARKETING ENVIRONMENT INDICATORS PROMISING?

Transcription

1 PRIVATE COLLEGES IN MALAYSIA: ARE THE KEY MARKETING ENVIRONMENT INDICATORS PROMISING? PREPARED BY NOORAINI MOHAMAD SHERIFF ROZITA HJ. NAINA MOHAMAD

2 Surat Kami : 600-CM(UPP. 01/3) Tarikh: 12hb Jun 2003 Puan Nooraini Mohamad Sheriff Pensyarah Universiti Teknologi MARA Kampus Alor Gajah. MELAKA. UNIVERSITI TEKNOLOGIMARA KAMPUS ALOR GAJAH ; MELAKA UNIT PERUNDINGAN & PENYELIDIKAN (UPP) KM 26 JALAN LENDU ALOR GAJAH MELAKA TEUFAX: Puan, TAJUK PROJEK: PRIVATE COLLEGE IN MALAYSIA: ARE THE KEY MARKETING ENVIRONMENT INDICATORS PROMISING? Dengan hormatnya perkara tersebut di atas dirujuk. Sukacita dimaklumkan bahawa Mesyuarat Jawatankuasa Penyelidikan dan Perundingan UiTM Kampus Alor Gajah, Melaka pada 26hb Mei 2003 telah membuat keputusan : I.. Bersetuju meluluskan cadangan penyelidikan yang dikemukakan oleh puan dan Cik Rozita Hj. Naina Mohamad...1. Tempoh projek penyelidikan ini ialah 6 bulan, iaitu mulai Ihb Julai 2003 hingga 31hb Disember Ill. IV. Kos yang diluluskan ialah sebanyak RM2550.QO sahaja. Penggunaan geran yang diluluskan hanya akan diproses setelah perjanjian ditandatangani...,.. V. Semua pembelian peralatan yang kosnya melebihi RM satu item perlu menggunakan Pesanan Jabatan Universiti Teknologi MARA (LO). Pihak puan juga dikehendaki mematuhi peraturan penerimaan peralatan. '... VI..VII. Kertaskerja boleh dibentangkan dalam seminar setelah 75% deraf awallaporan akhir projek dihantar ke Unit Penyelidikan dan Perundingan untuk semakan. Walau bagaimanapun.jiuan perlu mernbuat perrnohonan kepada UPP. Pihak puan dikehendaki mengemukakan Laporan Kemajuan Projek penyelidikan ini bagi tempoh Julai 2003 sehingga Disember Laporan akhir perlu dihantar

3 scbaik sahujn projck penyelic\ikan disiapkan. Format lapornn akuir belch diperolcni eli Unit Pcnyclidikan dan Pcrundingan. Bcrsama-samu.ini discrtakan tiga salinan pcrjanjiun untuk ditanduiaugai olch pihak puan. Sila pcnuhk an pcrjanjian bcrkcnaan dcng~\i1 mcnggunukun pen bcrdal.wat hitarn dan kcrnbalikan ke pejabat Unit Pcnvclidikan clan l'crundingan untuk tiudakan selanjutnya. Sckian, terima kasih. "SELA.\L\T ;\IENJ:\LANKAN PENYELIDIKA:'I" Yang benar,iadya DR.l\IOHAMAD KA:\L\L IIJ. HAReN s.k. I. Pcnolong Naib Canselor (Penyclidik.nu Biro Penyelidikan dan Perundiugan Universiti Tcknologi MARA 4(H50 Shah.\Jam. 2 Penolong Beuduhari Universiti Teknologi tvl!\[~a Karnpus Alor Gajah Mclaka.

4 December 2003 Project File No.: 600-CM (UPP.0l/3) Assistant Vice Chancelor (Research) Bureau ofresearch and Consultancy Universiti Teknologi MARA Alor Gajah Melaka Attention: Tuan Hj. Shawal Kaslam Dear Sir, SUBMISSION OF BRC'S PROJECT RESEARCH REPORT: PRIV ATE COLLEGES IN MALAYSIA: ARE THE KEY MARKETING ENVIRONMENT INDICATORS PROMISING? With reference to the above, I hereby submit THREE copies of the project research report for your kind attention and action. On behalfofmy group member. Rozita Hj Naina Mohamad, we would like to express out heartfelt thank to Universiti Teknologi MARA and the Bureau ofresearch and Consultancy for the grant approved and all the support given during the period of our research. Thank you. Yours sincerely, C~l,-1~vJ~11 NOORArNlMOHAMAD SHERIFF Research Project Leader Faculty of Business and Management Universiti Teknologi MARA Alor Gajah Melaka

5 KUMPULAN PENYELIDIK NOORAINI MOHAMAD SHERIFF KETUA PROJEK,'1"...-,;... O AY~' II "'j I ~-----~ ,/1..--, Tandatangan ROZITA Hl NAINA MOHAMAD Ahli

6 ACKNOWLEDGEMENT SYUKUR ALHAMDULLILAH, praise to ALLAH for giving us the courage and strength to complete this piece of task. Our special thanks to Universiti Teknologi MARA and the Bureau ofresearch and Consultancy for providing us with the grant and time to pursue both our collection of secondary and primary data. The encouragement extended has definitely motivated us to embark on more research in the future. Despite ofthe challenges faced in approaching private colleges to participate, we were ultimately able to persuade seven private colleges to participate by ensuring confidentiality. To the middle managers ofthe private colleges who have consented to participate as our respondents, special thanks to making this research a reality. Finally to our family members who consistently gave us the strength and courage to complete this task, our heartfelt thanks. You are our source of inspiration now and ever. Finally may ALLAH Bless those who have lend their hands and contributed to this research in one way or another. Nooraini Mohamad Sheriff Rozita Hj. Naina Mohamad.

7 TABLE OF CONTENT PAGES ACKNOWLEDGEMENT LIST OF FIGURES LIST OF TABLES ABSTRACT IV CHAPTER 1: INTRODUCTION 1.1 Preamble 1.2 Statement of Problem 1.3 Objectives 1.4 Significance of Study 1.5 Scope of Study 1.6 Definition ofterms 1.7 Limitations of Study CHAPTER 2: LITERATURE REVIEW 2.1 Contemporary Status ofprivate Higher Education in Malaysia Importance of Private Higher Education in Malaysia Key Forces of an Organization's External Marketing Environment Key External Marketing Environmental Forces Confronting Private Colleges in Malaysia The Competitive Environment Competitive Environment ofthe Malaysian Private Higher Education Market Regulatory Forces Regulatory Forces Governing the Private Higher Education Market Technological Environment Impact oftechnology on Private Higher Education in Malaysia 26 11

8 TABLE OF CONTENT PAGES CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research Design 3.2 Data Collection 3.3 Population of the Study 3.4 The Sample 3.5 Individual In-Depth Interview 3.6 Analytical Procedures and Techniques 3.7 Validity of Qualitative Research CHAPTER 4: FINDINGS AND ANALYSIS 4.1 Competitive Environment 4.2 Legal Environment 4.3 Technological Environment CHAPTER 5: CONCLUSION AND RECOMMENDAnON 39 REFERENCES APPENDIX A - DISCUSSION GUIDE

9 LIST OF FIGURES Figure 2.1 Macro/Wider & Micro/ Immediate Environment Figure 2.2 External Environmental Forces in Marketing LIST OF TABLE Table 2.1 Enrolments in the Public and Private Higher Education Institutions IV

10 ABSTRACT Private colleges have been long established in Malaysia since 1930's. Being the key sector ofthe private higher education market in Malaysia, private colleges have assumed great responsibilities in providing private higher education to Malaysians. Their concerted efforts have complemented and filled the vacuum left by the public higher educational institutions. Although private colleges have grown in leaps and bound, the dynamism displayed by its marketing environmental forces has been a cause for concern as they could pose as opportunity and threats. Henceforth there is a need for private colleges to understand the nature and magnitude ofchange plaguing these forces as well as the severity oftheir impact on operational and strategic activities. The main objective ofthis paper is to analyze the key marketing environmental forces surrounding the private higher educational market namely competition,. legal and technology. An analysis ofthese forces has uncovered the presence of intense competition among private colleges in Malaysia. Two factors were identified as key sources ofthis competitive environment namely a large number ofindustry players (approximately 700) and homogeneity ofcourses offered. Competition too was present from a broader perspective that is internal, external and external territorial. As a result, the industry is currently face with saturation, v

11 thus making survival a priority. This has led to cost-cutting measures and soldouts especially by the small players. Additionally competition too has compelled private colleges to enhance their present standard and hence giving customers an opportunity to choose their best option. Nevertheless, it was perceived that the private higher education industry is one that is not heavily regulated. However, the National Accreditation Board has played an active role to get private colleges to conform to their regulations. This has had some positive impact, namely improvements in the redressal system, feedback on students learning experience and a general enhancement of quality and quantity across the industry. Technology on the other hand has been adopted in many facets ofthe education delivery process as well as administrative process ofprivate colleges. However, working students tend to display a greater preference to this aspect ofeducation technology compared to fresh schoolleavers. There are also cases where private colleges claimed to be on-line but their web sites are poorly maintained. Nevertheless, it is perceived that broad technological applications would propel the growth ofprivate colleges and thus improving their prestige. VI

12 Data for this exploratory research was collected from secondary sources and primary sources through in-depth interviews with middle to senior managers from established private colleges in the Klang Valley. Twenty private colleges in the Klang Valley were selected via simple random sampling using Wencom Higher Education Guide. However, only seven private colleges consented to participate. Fourteen middle managers were selected via judgment sampling to be interviewed. The researchers felt that only managers involved in strategy formulation would have a good understanding ofthe external environmental forces affecting their organization. In-depth interview was conducted at designated times with the use of a discussion guide to ensure a comprehensive coverage and smooth progress ifeach session. Findings were analyzed using the mechanical analysis method that allowed contradictions, majority and minority views to be reported. Keywords: marketing environmental forces, private colleges, legal, competition and technology Vll

13 CHAPTER 1 INTRODUCTION 1.1 PREAMBLE Like all other businesses, the private higher education business does not operate in a vacuum. Instead, they operate interactively with the external environmental forces such as demographics, political-legal, economy, technology, social and cultural. As these external forces are dynamic and uncontrollable, their direction ofchange may result in the emergence ofopportunities and threats. Both the opportunities and threats are ofcritical concerns to the education business entity. Opportunities are avenues for growth while threats have the capacity to erode their foothold in the industry. This being the case constant scanning ofthese external environmental forces is essential to keep private colleges abreast oftheir likelihood and direction ofchange. Only then, they would have some platform to make the necessary internal changes to adapt to the external changes to remain. competitive and satisfy the needs oftheir target market. The contemporary scenario ofthe external environment ofthe private higher education industry is characterized by an increasing number of legislation, rapid changes in education based technology and heighten competition by virtue ofthe number ofinstitutions, their offerings and availability ofsubstitutes. This has spurred the researcher into exploring the nature and magnitude of change plaguing these external forces. Such findings would offer valuable insights on

14 these forces that in tum would facilitate strategy formulation in the short and long term and at operational and strategic level. Additionally, this exploratory research would offer critical insights that could lay down the foundation for much research efforts in this area. 1.2 STATEMENT OF PROBLEM The private higher education sector co-exists alongside their public higher education counterpart only to complement the existence of each. Despite oftheir long establishment the private higher education sector were only accorded recognition for their contribution to higher education in the mid-nineties. With a projected enrollment capacity of30% ofstudents pursuing higher education in Malaysia it is obvious that their reason for existence in undeniably important. However the private higher education industry has consistently over the years of their operations witnessed an escalation in the number ofprivate higher educational institutions (private colleges, private universities, private university/colleges and distance learning centers), variety ofprograms, program structures, study qualifications and disciplines. Would these changes stimulate competition? What is the magnitude of competition they pose? How would they implicate the operations and survival ofprivate colleges? 2

15 Similarly a number ofnew acts were enacted in the 1990's to govern the activities ofprivate higher educational institutions. Their enforcement then was questionable up until recently where private colleges are expected to conform to new requirements to match those of international standards. All ofthese happened within a rather short span oftime. How did the private colleges view these enactments? What are the implications on their operations and resources? Consequently, private higher educational institutions particularly private colleges are no exception to technological advances in the field of education. As technological advancement swept through their education delivery process and administration many was caught off-guard. Some were unsure ofhow to respond while others were financially constrained to initiate a transfer and application of new technologies. How extensive was the current application oftechnology for teaching, learning and administrative processes? Would technology transfer implicate the growth ofprivate colleges? As no formal studies have been commissioned in this area in Malaysia this exploratory perspective is timely. This study would engage in offering insights on the nature and magnitude as well as implications on the competition, legal and technological forces ofthe external environment. 3

16 1.3 OBJECTIVES The study aims to: determine the nature and magnitude ofcompetition plaguing private colleges today ascertain the current regulatory forces which constraints, directs and influences the operations ofprivate colleges develop insights on contemporary technological developments pertinent to the delivery ofprivate higher education (private colleges) service, 1.4 SIGNIFICANCE OF STUDY The study would provide insights on the state ofcompetition surrounding private colleges within the private higher education industry Based on this study, the nature and extent ofmarketing opportunities and threats posed by these marketing environmental forces would be ascertained. This would facilitate marketing strategy formulation and modification by private colleges. 4

17 1.4.3 The findings would gauge the necessityofmarketing controls to help monitor the development ofthese forces and ascertain their direction ofchange in the near and far future. This in tum would merit the preparation of contingency plans for private colleges The identification ofcurrent changes and trends in the environmental forces would enable the prediction offuture changes thus enabling private colleges to ascertain their impact on marketing programs deployed. This in tum would affect their organizations profitability. 1.5 SCOPE OF STUDY This exploratory research would confine data collection from two key sources, namely; secondary sources and primary sources (through an in-depth interview offourteen management personnel ofprivate colleges in the Klang Valley to solicit their views pertaining to the dynamism ofthese environmental forces) The key marketing environmental forces affecting private colleges such as competitors, legislation, technology, their aspects and implications would be included in this research. 5

18 1.5.3 For triangulation purposes the perspective ofother foreign higher education providers in Malaysia such as Financial Times Knowledge and Nottingham Trent University would be solicited. For this purpose two representatives form the said institutions would be interviewed. 1.6 DEFINITION OF TERMS Marketing environmental forces: key external marketing environmental forces in the private higher education industry such as competitor, legislation and technology Private colleges: institutions ofhigher learning that are privately funded (shareholders funds, students fees and other business activities). Awards qualification at certificate, diploma and degrees through collaborative venture with institutions locally or abroad Private higher educational institutions: consists ofprivate colleges, private universities and university colleges, foreign university branch campus and distance learning centers Management: middle to higher (senior) management who are responsible for strategizing on behalfofprivate colleges. 6

19 1.7 LIMITATIONS OF STUDY The researcher recognizes that there are many external environmental factors affecting private colleges and alike. However only selected factors were chosen based on their significance to the private higher education industry The findings from this study cannot be generalized to higher educational institutions in total. Reason being the characteristics underpinning the private higher education system is different from the public higher education system Time and cost constraints have prohibited the use ofa bigger sample from more private college and the inclusion of private universities, private colleges/universities and distance learning centers. 7

20 CHAPTER TWO LITERATURE REVIEW 2.1 CONTEMPORARY STATUS OF PRIVATE HIGHER EDUCATION IN MALAYSIA. In Malaysia the system ofhigher education comprises ofthe public and private higher education (Tan, 2002). A key characteristic separates the private higher educational institutions from its public counterpart. The private higher educational institutions are privately funded for profit. No funds, grants or endowments are channeled to them by the government or private organizations. Henceforth their primary source ofrevenue stems from shareholders funds, student's fees and business activities related to the education business. Nevertheless despite oftheir financial independence private higher educational institutions are strongly encouraged to adopt the curriculum prescribed by the Ministry of Education (Soon, 1998/1999). The 1990's represented an era ofrapid development for the Malaysian private higher education industry. This was evident with the growth in number of institutions, variety ofcourses offered and course structure adhered. According to Hassan (2003) as cited by Rohana, to date there are approximately 706 registered private higher educational institutions in Malaysia. There are also an estimated 40,000 students and 50,000 teaching staffs attached to private higher educational 8

21 institutions in 1998 (Ministry of Education, 2001). In addition, private colleges too offer different categories of study namely: a) Internal award at certificate and diploma levels. The local private colleges would develop the curriculum and forward them for approval to the Ministry of Education/National Accreditation Board. b) Provides tuition for external professional examination. Key emphasis is to conduct the respective professional programs and prepare students for the respective external examination such as MACPA (Malaysia), ACCA (U.K.), ICSA (U.K.), CIM (U.K.) and TOEFL (U.S.A.). c) Bachelors, Masters and Doctorate ofphilosophy awards. Conducts courses leading to the abovementioned degrees via collaborative efforts with local and foreign universities. Common modes ofpartnership are Split Degree Arrangements (Twinning, Credit Transfer and Advance Standing Program), Entire Degree Arrangement (External Program, Distance Learning and Franchised: 3+0,4+0) Shamsul (2001), Kamaruzzaman and Kelch (1999). To complement this wide range of study qualifications, private colleges conducts studies in numerous disciplines such as accounting, business and commerce, economics, technical/vocational, engineering, creative studies, performing arts, law, medicine tourism, IT/Multimedia and computer studies, fashion design, architectural and building studies and secretarial science. In short, the presence of hundreds ofprivate higher educational institutions, offering a variety ofprogram 9

22 structures, in a multitude of disciplines has undoubtedly contributed to heighten competition within the industry. 2.2 IMPORTANCE OF PRIVATE HIGHER EDUCATION IN MALAYSIA The erection and development ofprivate higher educational institutions has gained good support from the Malaysian government. Their presence has enabled the vacuum left by the public institutions ofhigher learning to be filled-up (see Table 2.1). Table 2.1 i) Public higher educational institution ii) Private higher educational institution 143, ,381 Source: Ministry ofeducation, Education Quarterly, Sept/Oct, 2000 Other reasons supporting their presence in the Malaysian higher education system are: a) To complement the effort ofthe public sector in churning out highly skilled and trained professionals. This would aid the nation's effort to develop knowledge-based workers deemed critical for the attainment ofvision b) To contribute towards the development ofthe Malaysian economy. It is hoped that as the private higher education sector evolves and excels, it would be able to woo foreign students, thus contributing to the economy via foreign 10

23 exchange. According to Hassan as cited by Izwar (2003) the number of foreign students, have shown a marked increase of 23,400 in 2002 to 36,466 in 2003 (an increase of 77.73%). Among the countries with significant student enrollment are China (11,050), Indonesia (7,503), India (1,409), Thailand (1,369) and Singapore (1,296). c) To minimize the outflow of foreign exchange resulting from a large number of Malaysian students pursuing higher education abroad. It is estimated that there are about 60,000 Malaysians studying abroad and this has resulted in an outflow of funds amounting to RM2.5 - RM3 billion annually ( d) To promote Malaysia as a center. for educational excellence in this region, at par with Singapore and Australia. With the manpower, physical and financial resources available, this intention can certainly materialize. 2.3 KEY FORCES OF AN ORGANIZATION'S EXTERNAL MARKETING ENVIRONMENT. The marketing environment comprises of a complex set of interacting forces,and influences outside the organization. These forces can have a dramatic impact on the success of marketing activities and henceforth determines an organization's future (Adcock, Bradfield, Halborg and Ross, 1995). Being external to organizations these forces are uncontrollable. As such managers have little or virtually no control over them. Nevertheless, they can be 'managed' by anticipating their future direction for change and planning based on them

24 (Bennett, 1988). This is critical because an organization's response and sensitivity to the environment is one ofthe general determinants of its success or failure. Thus, it is essential that all activities of an organization be guided by the sensitivity to the wider environment as they collectively shape its markets, resources, competitive climate as well as poses challenges and opportunities. Conversely, the inability of organizations to identify and respond promptly to these environmental changes would put them at risk. As a result they would be dictated by these circumstances and thus would succumb to the status ofmarket followers instead oftaking an active role as a leader and influencing events (Lancaster and Reynolds, 1995). Czinkota and Kotabe, (2001), Kotler (2000) and Wright (1999) have separated the external marketing environment into the micro and macro environmental forces. Micro environmental forces include all factors which impacts directly on a firm and its activities in relation to a particular market/s in which it operates. It includes suppliers, distributors, consumers, competitors and interest groups. Organizations must pursue a serious attempt to understand the interaction and behavior ofthese groups because they can deploy their marketing activities to build loyalty, develop preference from suppliers/distributors and influence competitor as well as customers. On the same note with the establishment oftheir corporate image they can also influence the perception ofinterests groups. 12