Tuesday, 30 December 2008
Monday, 29 December 2008
Sunday, 28 December 2008
Walter Benjamin's Grave
On the 19th December 2008, The Leeds Arcades Project travelled to Portbou, on the border of France and Spain, to visit Walter's grave
Tuesday, 23 December 2008
Tuesday, 9 December 2008
Exile in Paris
During his seven years of self exile in Paris, Benjamin changed house 18 times. He lived in a sublet with strangers and fellow immigrants, in the fleapits of banlieue, in noisy little draughty rooms, in rooms so noisy he could barely sleep or work. He was so ashamed he would not receive visitors.
Diary from August 7th, 2731, to the day of my death
After Walter's death his friend Scholem would describe him thus:-
"The truth was that when it came to practical things like money and putting food on the table, Benjamin was like a man lost in the desert, a time-traveller who stumbled into the present."
In issue 4 of 'Diary from August 7th, 2731, to the day of my death' this is precisely how Benjamin is seen; wandering aimlessly through a desert, a man out of time.
"The truth was that when it came to practical things like money and putting food on the table, Benjamin was like a man lost in the desert, a time-traveller who stumbled into the present."
In issue 4 of 'Diary from August 7th, 2731, to the day of my death' this is precisely how Benjamin is seen; wandering aimlessly through a desert, a man out of time.
Asja
Asja Lācis was a Bolshevik Latvian actress and theatre director. She became famous for her proletarian theatre for children and agitprop. In 1922 she moved to Germany where she got to know Bertholt Brecht and Erwin Piscator, who she introduced to Vsevolod Meyerhold and Vladimir Mayakovsky. In 1924 she met Walter Benjamin in Capri.
Sunday, 7 December 2008
Alienated from Everything
Warmth is ebbing from the things of the world. The objects of daily use gently but insistently repel us, push us away. Day by day, in attempting to overcome our secret resistances to these objects, we are compelled to perform an immense, peculiar labour. We must compensate for the coldness of things with our own warmth if they are not to freeze us to death, to kill us with their alienation; we must handle their spines with infinite patience and care if we do not want to bleed to death.
Autographs
Anongst the many things Walter collected was Autographs. At one point, whilst hard up, he managed to sell his autograph collection for a substantial sum
Friday, 5 December 2008
Thursday, 4 December 2008
Tuesday, 2 December 2008
Moby Dick
Captured, imprisoned and awaiting trial, the Baader - Meinhof gang all read Moby Dick in their cells. The next day Baader was found dead with a gunshot wound in the back of his head and Ensslin was found hanged in her cell; Raspe died in hospital the next day from a gunshot wound to the head. Irmgard Möller, who had several stab wounds in the chest, survived and was released from prison in 1994.
The official inquiry concluded that this was a collective suicide, but again conspiracy theories abounded. However, none of these theories were ever brought forward by the RAF itself. Some have questioned how Baader managed to obtain a gun in the high-security prison wing specially constructed for the first generation RAF members. Also, only a total commitment to her cause could have allowed Möller to have herself inflicted the four stab wounds found near her heart. However, independent investigations showed that the inmates' lawyers were able to smuggle in weapons and equipment in spite of the high security. Möller claims that it was actually an extrajudicial killing, orchestrated by the German government, in response to Red Army demands that the prisoners be released.
But what is the significance of Moby Dick?
The official inquiry concluded that this was a collective suicide, but again conspiracy theories abounded. However, none of these theories were ever brought forward by the RAF itself. Some have questioned how Baader managed to obtain a gun in the high-security prison wing specially constructed for the first generation RAF members. Also, only a total commitment to her cause could have allowed Möller to have herself inflicted the four stab wounds found near her heart. However, independent investigations showed that the inmates' lawyers were able to smuggle in weapons and equipment in spite of the high security. Möller claims that it was actually an extrajudicial killing, orchestrated by the German government, in response to Red Army demands that the prisoners be released.
But what is the significance of Moby Dick?
Benjamin and the RAF. Part 2
The RAF, (Baader - Meinhoff Gang), freely incorporated quotations from Benjamin in their manifesto and handouts. However they were desperados (despairers) who tore the context out of Benjamins writings to justify their actions.
The Leeds Arcades Economics
One thing the LeedsArcadesProjects is often asked is USING YOUR KNOWLEDGE OF ECONOMICS IDENTIFY AND EXPLAIN THE KEY SOURCES OF COMPETITION IN THE UK HIGHER EDUCATION MARKET FOR INTERNATIONAL STUDENTS.
Always happy to help we've attempted to explain
INTRODUCTION
Reforms in Higher Education (H.E.) world wide are seeing competition assume increasing importance. Economic theories are vital to any analysis of the H.E. market. With universities becoming more like businesses, the economist’s perspective can offer us some key insights into achieving greater market share and profitability.
This report will look at the microenvironment for UK universities, focusing on the University of Bradford (UoB). The UoB has focused on global and local markets and it has an extremely high proportion of international students; 22%, the highest percentage outside of London (UoB, 2008). This report will therefore focus on competitive drivers that affect the market for international students.
Before the UK, H.E. market for international students can be fully understood the global H.E. market needs to be examined and the UK put into this context.
Of key importance to most international students are university rankings. In the 2008 Times Higher Education-QS World University Rankings, the performance of UK universities deteriorated in comparison to the US. Of course the UK is still an extremely popular destination for students. Whilst fees in America are cheaper than in the UK, a master’s degree in the UK can be done in one year. In the US it generally takes two years, doubling the fees paid and the associated living costs.
Competition worldwide is increasing and the UK has some obstacles to overcome if it wants to continue its success. Whilst the macroenvironment is important, this report will focus on the UK microenvironment for international students. Within the microenvironment of UK H.E. there is a great deal of competition.
PORTER’S FIVE FORCES
Porter’s Five Forces framework can be used to help to illustrate competition in the market. Porter’s Forces are: intensity of rivalry, threat of new entrants, power of suppliers, power of buyers and the threat of substitutes. (Porter, 1985)
Figure 1: Porter’s Five Forces Framework for UK H.E. for International Students.
BUYER POWER
Buyer power is a very strong competitive element in the UK H.E. international student market. Clearly the most important factors to international students are the reputation and ranking of universities. Rankings are listings of universities rated by a combination of factors. Ultimately students are thinking of the quality of the course and the amount of value it will add to their own employability. For this reason league tables are of paramount importance. For example, standing in the FT league table of MBA’s, is the key decision making factor for many prospective international MBA students.
Fees and living costs are also of great importance. It is here that the UoB does well in the international market. UoB international fees are fairly competitive nationally. UoB is cheaper than Manchester, Birmingham and Leeds, but more expensive than Hull (for full listings of comparative fees see Appendix).
Living expenses are also important and it is here where the UoB excels, as living expenses in Bradford are seen as being particularly low. The city is multicultural and has a reputation for tolerance for Muslims, which has contributed to its ability to attract students from Arabic countries such as Libya, Iran and Saudi Arabia. As one international student told the author recently; “Bradford is a good place to have a brown face” (El-Zaroug, 2008).
A key factor in buyer power is information access. Thanks to the internet, students as far away as India or Taiwan have access to the same information about UK, and worldwide, universities. With university league tables, prospectuses and also social networking forums discussing universities, all available to the prospective buyer, there is a great deal of information available. The internet and social networking sites are increasingly becoming significant in this respect. Whereas, in the past a university’s failings could be glossed over in their prospectus, now a Taiwanese student need only look on the “Hello U.K.” social networking forum to find out that “Leeds is a much more happening city than Bradford. Bradford is really boring” (Hello UK, 2008), or that “The accommodation the University put us in when we arrived was just awful” (Hello UK, 2008).
SUPPLIER POWER
Universities can increase their bargaining power through academic excellence, market specialism’s, brand excellence, collaborative ventures, extra support or even through their geographic location. Perhaps more immediately they can reduce their fees or offer grants/financial aid.
COMPETITIVE RIVALRY
The UK H.E. sector is a mature market with strong competition, which is likely to increase. Recent Government suggestions may allow F.E. colleges to become H.E. providers (Newman, 2008b). So competition in the market looks likely to increase as a result of government regulation.
If all other factors are equal then such things as the university’s branding or the city’s reputation become more significant. However, recent research by two economists at Lancaster University looked at application figures from 97 UK universities from 2002 to 2007, and found that those institutions that charged more in fees often received more applications, a trend that appears to contradict standard demand theory (Gill, 2008c). It seems that having decided to study in the U.K., branding, fees and geographic location, make little impact on a student’s decision making. “By contrast, students were found to be more influenced by rankings and league tables. The Lancaster study also considered the significance of other variables, including a university's proximity to a Premier League football club, whether it is a member of a mission group, its age, the presence of a medical school and climate variables, but all were found to be statistically insignificant” (Gill, 2008c).
Competitiveness among UK universities can also be influenced by relationships with agencies in home countries. Universities tend to have certain close relationships with agencies, for example, the UoB’s School of Management has a close relationship with D&S Recruitment agents in Taiwan. The agent helps to recruit students for a certain fee. The more close relationships with recruitment agents the university has, the more successful the recruitment will be in that market.
Distance learning and affiliations with partner institutions are other ways that H.E. providers can recruit students who may not wish to leave their country of residence.
SUBSTITUTES
Worldwide competition is increasing from countries such as China, India, Germany, France, the Middle East and Australia. France, for example has highly government subsidized H.E., which makes its fees very competitive. Countries such as China are gaining expertise in H.E. from other countries, in order to improve their own provision.
One of the key factors of H.E. is reputation. Whilst the UK is a key destination for international students, its reputation could be improved. In countries such as China and India the UK is increasingly seen as money grabbing: “As I go to marketing events around the world, I’m constantly told that all the British want is to get as many students and as much money as possible. They think that once we have them here we disappear and don’t support them enough” (Halliwell, 2008). If we do not improve our reputation, students will increasingly turn to other substitutes.
New Visa regulations will not help this image. A new point’s based system comes into effect from March 2009 which requires students to commit to one particular university during the application process. There is also increased charging for visa extensions which will increase the high cost of coming to the UK. As more countries improve their own H.E. provision these obstacles will become more significant deterrents. The new visa extension which allows graduates to stay and work for two years offsets this a little.
For international students remaining at home may become a more attractive prospect, especially during the worldwide economic downturn. Living and travel costs are also hugely significant as studying at home must be cheaper.
POTENTIAL ENTRANTS
Potential entrants to this market are new universities. The Government has recently launched “University Challenge”, a scheme to create twenty new H.E. centres within the next six years. There are currently twenty seven areas in England bidding for funding to launch the centers (Lipsett and Curtis, 2008).
There are factors within H.E. which will hamper new entrants, such as the huge outlay and economies of scale necessary to run such a large organisation.
F.E. colleges upgrading to H.E. status are a potential entrant to this market. In Bradford, Bradford College is already the largest provider of H.E. outside the formal H.E. sector, offering degrees certified by Leeds Metropolitan University. It is hoping to soon achieve degree awarding powers of its own.
So, with competition very high and likely to increase, both nationally and internationally, UK universities need to find new ways to increase their market share and profitability. In the next section, this report will look at some economic theories and concepts, and apply these to the UK HE market for international students.
B) PROVIDE A CONSIDERED REVIEW OF HOW THESE SOURCES OF COMPETITION MIGHT BE TACKLED FROM AN ECONOMIC PERSPECTIVE.
PERFECT COMPETITION OR MONOPOLY?
The UK H.E. market for international students is closer to perfect competition than to a monopoly. Perfect competition is a hypothetical scenario in which competition is strong, each firm in the market acts as a price taker, and there is perfect information. A monopoly is defined as a market situation where there is a dominant firm who controls more than 25 per cent of the market. This is clearly not the case within H.E.
Within the international market fee prices vary, so it cannot be said that universities are price takers, and competition over fees is vigorous.
Normally under perfect competition all products are homogeneous. This is not the case with universities, which have different geographic locations and different courses, with varying rankings and reputations. Despite this, we can say that universities are approaching perfect competition as there is perfect information, particularly with the widespread use of the internet and online social networking.
In perfect competition there should be few entry and exit barriers, however in H.E. factors such as degree awarding powers and economies of scale do act as barriers to market entry. Whilst it is not easy to get degree awarding powers, it is becoming increasingly possible with F.E. colleges and some private companies having being awarded them. Exit barriers are high in H.E. as disposing of the physical site and the vast numbers of staff employed would be very costly.
There are some ways in which it can be argued that the UoB is a monopoly; it could be said that there is no serious competition for local students. However in the international student market the UoB is far from a monopoly. Competitors and substitute products within this market are high and are almost certain to increase, so we would definitely have to say that this marketplace is approaching perfect competition.
There are some ways in which it can be argued that the UoB is an oligopoly; in that it competes with a few other UK institutions in certain markets; such as students from South Asia and Muslim countries. Birmingham and London, being other key competitors within these markets.
Figure 2. Revenue in Perfect Competition, for the Firm
Figure 2 illustrates the case of perfect competition for the firm, demonstrating how the Average Revenue (AR) is equal to the Marginal Revenue (MR) which is again equal to the price charged, P. This figure is fixed, whereas the Marginal Cost (MC) increases with quantity. If we find where MR = MC, we find the profit maximizing quantity, Q. As we will see in the next section, the Marginal Cost in UK H.E. is generally very low with an increase in student numbers being easily swallowed up in the static fixed costs, and making very little impression on the variable costs. This will be important when we come to look at English support for students with lower IELTS levels. AR = MR = P is basically the amount of the international students fee. Generally, every international student pays the same amount, so each new student brings in MR equal to their fees. (Of course, there is some variation here and there are differences in U.G. and P.G. fees).
SUPPLY AND DEMAND THEORY
DEMAND
Figure 3. Demand lines for UK H.E. Market for International Students
In supply and demand theory the demand curve can shift to the right due to demand increases from factors such as; increased income, increases in substitutes’ prices, increases in the number of consumers, or consumer preferences. In order to get the demand curve to shift to the right (D1), the UK could lower international students’ fees relative to other countries, attempt to improve its global reputation or develop new markets. Previously in UK H.E. demand has been increased by finding new markets such as women entering education, diversification into business training, part-time study, or various new international markets.
By lowering the IELTS scores at which students are admitted, a whole new market of international students could be accessed. Currently the IELTS minimum scores required for entry by academic institutions vary, from country to country and from institution to institution. In the UK the level tends to be around 6 – 6.5. Figure 4 shows the IELTS entry requirements for some UK universities:
University Minimum IELTS score
Liverpool 7.5
Cambridge 7.0
Birmingham 6.0
Bradford 6.0 (For most courses.6.5 for Management and Peace Studies)
Essex 5.5
Figure 4. UK University IELTS Admission Scores
The entry factor of English language ability raises one possibility for the UoB to increase its market share. It could open up new markets by reducing its IELTS admissions rates. The trade off for this would be that money would need to be invested in extra support. The reducing of IELTS scores would allow the admittance of a whole new demographic group that would otherwise not be admitted. Indeed, if this was done nationally, the UK H.E. demand line would shift dramatically to the right (D1 in Figure 3).
The School of Engineering in the UoB is considering lowering IELTS entry scores to 5.5, and requiring students with that level to attend an ‘English for Engineering’ module, to be run by the University Language Centre (ULC). This would allow Engineering to access a vast number of potential students at very little cost. They would pull in all those extra International Students fees and the only cost to them would be the hiring in of ULC staff. Head of the ULC, Dr Tim Green has said; “It will definitely bring in more than it will cost. But there are substantial hidden costs; pastoral support, additional English support beyond the timetabled course, extra resources, counseling for students who feel they cannot master their studies. I also think there would be a high drop out rate” (Green, 2008).
Generally, a university has static fixed costs, so the average fixed cost always declines as output is increased. The marginal product cost is therefore small and declining, as extra students can be accommodated without much extra staff and resource input. This means that admitting more students will mean that the Marginal Cost (M.C.) for each new student costs less; further achieving economies of scale. However, it can be argued that below a certain IELTS level score, the extra support needed for students to succeed will actually cause the Marginal Cost to increase.
The demand line, D2 in Figure 3, shows a demand curve where demand has reduced. This could happen if, for example, the UK became a less attractive destination, perhaps as a result of the new visa regulations outlined earlier. Other factors which could also cause the demand curve to shift left could be greater competition from the US or emerging economies. For example, if all China’s newly rich suddenly feel the credit crunch they might stay home to do their MBA’s, so that D moves to D2.
With the decline in many countries, including the UK, in people of University age, which is expected to impact in the next few years, there will be a natural decline in demand. The UoB has focused on local and global markets. This means that because of the ethnic make up of Bradford, the local market will not be as badly hit by this demographic downturn. Also many of the international markets the UoB has focused on will not suffer from the age related downturn quite as dramatically as others.
SUPPLY
Supply also has a big effect on competition in the market place. If the number of suppliers increases, the supply curve moves to the right. The government’s new “University Challenge” initiative will increase supply (S moves to S1), as will F.E. colleges becoming H.E. providers.
Figure 5. Supply lines for UK H.E. Market for International Students
A drop in supply (S moving to S2) seems very unlikely in the UK H.E. sector. The costs associated with leaving the market are huge, and the sector is clearly still economically viable.
EQUILIBRIUM
Demand and supply factors affect the market equilibrium so that there might be a surplus or a shortage if there is discrepancy between the two. The nature of H.E. means that, for the most part, increased demand can be easily accommodated. As Begg and Ward state; “The cost of lecturing to 50 students is the same as 250 students” (Begg and Ward, 2008, p.50). So, for H.E., if fixed costs are predominant, with variable costs minimal and extra demand can be accommodated within the fixed costs, then the possibilities for profitability, if demand can be increased, are substantial and disequilibrium seems unlikely.
ELASTICITY
Elasticity is a central concept in the theory of supply and demand. Elasticity refers to how supply and demand respond to changes in various factors. If the price is changed, how likely is the demand to change? In a market with perfect competition it is expected that there will be perfect elasticity. Since most of Porter’s Five Forces, are strong in H.E. for international students, then competition is high, meaning that we are approaching perfect competition and perfect elasticity. International students undoubtedly partly make their decisions based on fees and living expenses. This means that H.E. for international students is price sensitive and therefore elastic. However, we saw earlier that new research has cast doubt on the extent to which international students make decisions based on fees (Gill, 2008c). As previously stated, this is contrary to standard demand theory.
CONCLUSION
This report has examined the main competitive drivers within the UK H.E. market place for international students. It looks as if supply will increase in the next ten years or so, as new universities and F.E. colleges become serious competitors. Internationally competition will also become much more ferocious. It seems likely that the global economic downturn will affect the market for international students, as many may stay home to study.
The UoB has been seen to be in a fairly competitive position with cheap living expenses, a tolerant reputation, low fees and some high ranking courses. The UoB still needs to find new international markets and has already done some good work in building partnerships and forging international links. The admission of students at a lower IELTS level would be a new market which could increase our student numbers. Extra demand in English language support would need to be met, as much as possible, by current fixed costs, but it seems likely that extra outlay would be minimal and would be easily met by the extra Marginal Revenue (where MR = AR = P; Figure 2) from each new student.
Since the H.E. market is close to prefect competition, then as the forces from Porters Five Forces increase, it looks as if H.E. will be unable to generate large rates of return for any one University. If the UoB can open up a relatively new market, such as one based on a lower IELTS level, then, provided not too many others follow (and remember Essex is already there: see Figure 4), the UoB may become a monopoly within that market, allowing it to potentially generate substantial rates of return.
Always happy to help we've attempted to explain
INTRODUCTION
Reforms in Higher Education (H.E.) world wide are seeing competition assume increasing importance. Economic theories are vital to any analysis of the H.E. market. With universities becoming more like businesses, the economist’s perspective can offer us some key insights into achieving greater market share and profitability.
This report will look at the microenvironment for UK universities, focusing on the University of Bradford (UoB). The UoB has focused on global and local markets and it has an extremely high proportion of international students; 22%, the highest percentage outside of London (UoB, 2008). This report will therefore focus on competitive drivers that affect the market for international students.
Before the UK, H.E. market for international students can be fully understood the global H.E. market needs to be examined and the UK put into this context.
Of key importance to most international students are university rankings. In the 2008 Times Higher Education-QS World University Rankings, the performance of UK universities deteriorated in comparison to the US. Of course the UK is still an extremely popular destination for students. Whilst fees in America are cheaper than in the UK, a master’s degree in the UK can be done in one year. In the US it generally takes two years, doubling the fees paid and the associated living costs.
Competition worldwide is increasing and the UK has some obstacles to overcome if it wants to continue its success. Whilst the macroenvironment is important, this report will focus on the UK microenvironment for international students. Within the microenvironment of UK H.E. there is a great deal of competition.
PORTER’S FIVE FORCES
Porter’s Five Forces framework can be used to help to illustrate competition in the market. Porter’s Forces are: intensity of rivalry, threat of new entrants, power of suppliers, power of buyers and the threat of substitutes. (Porter, 1985)
Figure 1: Porter’s Five Forces Framework for UK H.E. for International Students.
BUYER POWER
Buyer power is a very strong competitive element in the UK H.E. international student market. Clearly the most important factors to international students are the reputation and ranking of universities. Rankings are listings of universities rated by a combination of factors. Ultimately students are thinking of the quality of the course and the amount of value it will add to their own employability. For this reason league tables are of paramount importance. For example, standing in the FT league table of MBA’s, is the key decision making factor for many prospective international MBA students.
Fees and living costs are also of great importance. It is here that the UoB does well in the international market. UoB international fees are fairly competitive nationally. UoB is cheaper than Manchester, Birmingham and Leeds, but more expensive than Hull (for full listings of comparative fees see Appendix).
Living expenses are also important and it is here where the UoB excels, as living expenses in Bradford are seen as being particularly low. The city is multicultural and has a reputation for tolerance for Muslims, which has contributed to its ability to attract students from Arabic countries such as Libya, Iran and Saudi Arabia. As one international student told the author recently; “Bradford is a good place to have a brown face” (El-Zaroug, 2008).
A key factor in buyer power is information access. Thanks to the internet, students as far away as India or Taiwan have access to the same information about UK, and worldwide, universities. With university league tables, prospectuses and also social networking forums discussing universities, all available to the prospective buyer, there is a great deal of information available. The internet and social networking sites are increasingly becoming significant in this respect. Whereas, in the past a university’s failings could be glossed over in their prospectus, now a Taiwanese student need only look on the “Hello U.K.” social networking forum to find out that “Leeds is a much more happening city than Bradford. Bradford is really boring” (Hello UK, 2008), or that “The accommodation the University put us in when we arrived was just awful” (Hello UK, 2008).
SUPPLIER POWER
Universities can increase their bargaining power through academic excellence, market specialism’s, brand excellence, collaborative ventures, extra support or even through their geographic location. Perhaps more immediately they can reduce their fees or offer grants/financial aid.
COMPETITIVE RIVALRY
The UK H.E. sector is a mature market with strong competition, which is likely to increase. Recent Government suggestions may allow F.E. colleges to become H.E. providers (Newman, 2008b). So competition in the market looks likely to increase as a result of government regulation.
If all other factors are equal then such things as the university’s branding or the city’s reputation become more significant. However, recent research by two economists at Lancaster University looked at application figures from 97 UK universities from 2002 to 2007, and found that those institutions that charged more in fees often received more applications, a trend that appears to contradict standard demand theory (Gill, 2008c). It seems that having decided to study in the U.K., branding, fees and geographic location, make little impact on a student’s decision making. “By contrast, students were found to be more influenced by rankings and league tables. The Lancaster study also considered the significance of other variables, including a university's proximity to a Premier League football club, whether it is a member of a mission group, its age, the presence of a medical school and climate variables, but all were found to be statistically insignificant” (Gill, 2008c).
Competitiveness among UK universities can also be influenced by relationships with agencies in home countries. Universities tend to have certain close relationships with agencies, for example, the UoB’s School of Management has a close relationship with D&S Recruitment agents in Taiwan. The agent helps to recruit students for a certain fee. The more close relationships with recruitment agents the university has, the more successful the recruitment will be in that market.
Distance learning and affiliations with partner institutions are other ways that H.E. providers can recruit students who may not wish to leave their country of residence.
SUBSTITUTES
Worldwide competition is increasing from countries such as China, India, Germany, France, the Middle East and Australia. France, for example has highly government subsidized H.E., which makes its fees very competitive. Countries such as China are gaining expertise in H.E. from other countries, in order to improve their own provision.
One of the key factors of H.E. is reputation. Whilst the UK is a key destination for international students, its reputation could be improved. In countries such as China and India the UK is increasingly seen as money grabbing: “As I go to marketing events around the world, I’m constantly told that all the British want is to get as many students and as much money as possible. They think that once we have them here we disappear and don’t support them enough” (Halliwell, 2008). If we do not improve our reputation, students will increasingly turn to other substitutes.
New Visa regulations will not help this image. A new point’s based system comes into effect from March 2009 which requires students to commit to one particular university during the application process. There is also increased charging for visa extensions which will increase the high cost of coming to the UK. As more countries improve their own H.E. provision these obstacles will become more significant deterrents. The new visa extension which allows graduates to stay and work for two years offsets this a little.
For international students remaining at home may become a more attractive prospect, especially during the worldwide economic downturn. Living and travel costs are also hugely significant as studying at home must be cheaper.
POTENTIAL ENTRANTS
Potential entrants to this market are new universities. The Government has recently launched “University Challenge”, a scheme to create twenty new H.E. centres within the next six years. There are currently twenty seven areas in England bidding for funding to launch the centers (Lipsett and Curtis, 2008).
There are factors within H.E. which will hamper new entrants, such as the huge outlay and economies of scale necessary to run such a large organisation.
F.E. colleges upgrading to H.E. status are a potential entrant to this market. In Bradford, Bradford College is already the largest provider of H.E. outside the formal H.E. sector, offering degrees certified by Leeds Metropolitan University. It is hoping to soon achieve degree awarding powers of its own.
So, with competition very high and likely to increase, both nationally and internationally, UK universities need to find new ways to increase their market share and profitability. In the next section, this report will look at some economic theories and concepts, and apply these to the UK HE market for international students.
B) PROVIDE A CONSIDERED REVIEW OF HOW THESE SOURCES OF COMPETITION MIGHT BE TACKLED FROM AN ECONOMIC PERSPECTIVE.
PERFECT COMPETITION OR MONOPOLY?
The UK H.E. market for international students is closer to perfect competition than to a monopoly. Perfect competition is a hypothetical scenario in which competition is strong, each firm in the market acts as a price taker, and there is perfect information. A monopoly is defined as a market situation where there is a dominant firm who controls more than 25 per cent of the market. This is clearly not the case within H.E.
Within the international market fee prices vary, so it cannot be said that universities are price takers, and competition over fees is vigorous.
Normally under perfect competition all products are homogeneous. This is not the case with universities, which have different geographic locations and different courses, with varying rankings and reputations. Despite this, we can say that universities are approaching perfect competition as there is perfect information, particularly with the widespread use of the internet and online social networking.
In perfect competition there should be few entry and exit barriers, however in H.E. factors such as degree awarding powers and economies of scale do act as barriers to market entry. Whilst it is not easy to get degree awarding powers, it is becoming increasingly possible with F.E. colleges and some private companies having being awarded them. Exit barriers are high in H.E. as disposing of the physical site and the vast numbers of staff employed would be very costly.
There are some ways in which it can be argued that the UoB is a monopoly; it could be said that there is no serious competition for local students. However in the international student market the UoB is far from a monopoly. Competitors and substitute products within this market are high and are almost certain to increase, so we would definitely have to say that this marketplace is approaching perfect competition.
There are some ways in which it can be argued that the UoB is an oligopoly; in that it competes with a few other UK institutions in certain markets; such as students from South Asia and Muslim countries. Birmingham and London, being other key competitors within these markets.
Figure 2. Revenue in Perfect Competition, for the Firm
Figure 2 illustrates the case of perfect competition for the firm, demonstrating how the Average Revenue (AR) is equal to the Marginal Revenue (MR) which is again equal to the price charged, P. This figure is fixed, whereas the Marginal Cost (MC) increases with quantity. If we find where MR = MC, we find the profit maximizing quantity, Q. As we will see in the next section, the Marginal Cost in UK H.E. is generally very low with an increase in student numbers being easily swallowed up in the static fixed costs, and making very little impression on the variable costs. This will be important when we come to look at English support for students with lower IELTS levels. AR = MR = P is basically the amount of the international students fee. Generally, every international student pays the same amount, so each new student brings in MR equal to their fees. (Of course, there is some variation here and there are differences in U.G. and P.G. fees).
SUPPLY AND DEMAND THEORY
DEMAND
Figure 3. Demand lines for UK H.E. Market for International Students
In supply and demand theory the demand curve can shift to the right due to demand increases from factors such as; increased income, increases in substitutes’ prices, increases in the number of consumers, or consumer preferences. In order to get the demand curve to shift to the right (D1), the UK could lower international students’ fees relative to other countries, attempt to improve its global reputation or develop new markets. Previously in UK H.E. demand has been increased by finding new markets such as women entering education, diversification into business training, part-time study, or various new international markets.
By lowering the IELTS scores at which students are admitted, a whole new market of international students could be accessed. Currently the IELTS minimum scores required for entry by academic institutions vary, from country to country and from institution to institution. In the UK the level tends to be around 6 – 6.5. Figure 4 shows the IELTS entry requirements for some UK universities:
University Minimum IELTS score
Liverpool 7.5
Cambridge 7.0
Birmingham 6.0
Bradford 6.0 (For most courses.6.5 for Management and Peace Studies)
Essex 5.5
Figure 4. UK University IELTS Admission Scores
The entry factor of English language ability raises one possibility for the UoB to increase its market share. It could open up new markets by reducing its IELTS admissions rates. The trade off for this would be that money would need to be invested in extra support. The reducing of IELTS scores would allow the admittance of a whole new demographic group that would otherwise not be admitted. Indeed, if this was done nationally, the UK H.E. demand line would shift dramatically to the right (D1 in Figure 3).
The School of Engineering in the UoB is considering lowering IELTS entry scores to 5.5, and requiring students with that level to attend an ‘English for Engineering’ module, to be run by the University Language Centre (ULC). This would allow Engineering to access a vast number of potential students at very little cost. They would pull in all those extra International Students fees and the only cost to them would be the hiring in of ULC staff. Head of the ULC, Dr Tim Green has said; “It will definitely bring in more than it will cost. But there are substantial hidden costs; pastoral support, additional English support beyond the timetabled course, extra resources, counseling for students who feel they cannot master their studies. I also think there would be a high drop out rate” (Green, 2008).
Generally, a university has static fixed costs, so the average fixed cost always declines as output is increased. The marginal product cost is therefore small and declining, as extra students can be accommodated without much extra staff and resource input. This means that admitting more students will mean that the Marginal Cost (M.C.) for each new student costs less; further achieving economies of scale. However, it can be argued that below a certain IELTS level score, the extra support needed for students to succeed will actually cause the Marginal Cost to increase.
The demand line, D2 in Figure 3, shows a demand curve where demand has reduced. This could happen if, for example, the UK became a less attractive destination, perhaps as a result of the new visa regulations outlined earlier. Other factors which could also cause the demand curve to shift left could be greater competition from the US or emerging economies. For example, if all China’s newly rich suddenly feel the credit crunch they might stay home to do their MBA’s, so that D moves to D2.
With the decline in many countries, including the UK, in people of University age, which is expected to impact in the next few years, there will be a natural decline in demand. The UoB has focused on local and global markets. This means that because of the ethnic make up of Bradford, the local market will not be as badly hit by this demographic downturn. Also many of the international markets the UoB has focused on will not suffer from the age related downturn quite as dramatically as others.
SUPPLY
Supply also has a big effect on competition in the market place. If the number of suppliers increases, the supply curve moves to the right. The government’s new “University Challenge” initiative will increase supply (S moves to S1), as will F.E. colleges becoming H.E. providers.
Figure 5. Supply lines for UK H.E. Market for International Students
A drop in supply (S moving to S2) seems very unlikely in the UK H.E. sector. The costs associated with leaving the market are huge, and the sector is clearly still economically viable.
EQUILIBRIUM
Demand and supply factors affect the market equilibrium so that there might be a surplus or a shortage if there is discrepancy between the two. The nature of H.E. means that, for the most part, increased demand can be easily accommodated. As Begg and Ward state; “The cost of lecturing to 50 students is the same as 250 students” (Begg and Ward, 2008, p.50). So, for H.E., if fixed costs are predominant, with variable costs minimal and extra demand can be accommodated within the fixed costs, then the possibilities for profitability, if demand can be increased, are substantial and disequilibrium seems unlikely.
ELASTICITY
Elasticity is a central concept in the theory of supply and demand. Elasticity refers to how supply and demand respond to changes in various factors. If the price is changed, how likely is the demand to change? In a market with perfect competition it is expected that there will be perfect elasticity. Since most of Porter’s Five Forces, are strong in H.E. for international students, then competition is high, meaning that we are approaching perfect competition and perfect elasticity. International students undoubtedly partly make their decisions based on fees and living expenses. This means that H.E. for international students is price sensitive and therefore elastic. However, we saw earlier that new research has cast doubt on the extent to which international students make decisions based on fees (Gill, 2008c). As previously stated, this is contrary to standard demand theory.
CONCLUSION
This report has examined the main competitive drivers within the UK H.E. market place for international students. It looks as if supply will increase in the next ten years or so, as new universities and F.E. colleges become serious competitors. Internationally competition will also become much more ferocious. It seems likely that the global economic downturn will affect the market for international students, as many may stay home to study.
The UoB has been seen to be in a fairly competitive position with cheap living expenses, a tolerant reputation, low fees and some high ranking courses. The UoB still needs to find new international markets and has already done some good work in building partnerships and forging international links. The admission of students at a lower IELTS level would be a new market which could increase our student numbers. Extra demand in English language support would need to be met, as much as possible, by current fixed costs, but it seems likely that extra outlay would be minimal and would be easily met by the extra Marginal Revenue (where MR = AR = P; Figure 2) from each new student.
Since the H.E. market is close to prefect competition, then as the forces from Porters Five Forces increase, it looks as if H.E. will be unable to generate large rates of return for any one University. If the UoB can open up a relatively new market, such as one based on a lower IELTS level, then, provided not too many others follow (and remember Essex is already there: see Figure 4), the UoB may become a monopoly within that market, allowing it to potentially generate substantial rates of return.
Venice December 2008
Ruskin's beloved Venice is in trouble today:
Sirens sounded across Venice yesterday as flooding submerged 95 per cent of the city and left tourists in St Mark’s Square thigh-deep in water.
The highest water levels in more than 20 years paralysed services. Elderly residents were carried to high ground and some people took to the piazzas in inflatable dinghies.
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