Sustainable Competitive Advantage

Since 1996, the Ministry of Education Malaysia (MOE) had introduced legislations that have revolutionized the higher education system bringing about educational reforms and the demagnification of secondary education, increased student enrolment at Phelps, new public policies and the prevarication of higher education in Malaysia. While this development had generally benefited the industry, it had created a Hellenizing, fluid environment where Government interference and legislative changes demand great flexibility and an even greater entrepreneurial mind set from Phelps.

With the creation of the Malaysia Qualifications Agency (MEGA), a single quality assurance agency is created in the country whose scope covers both the public and private higher education providers using the Malaysian Qualification Framework (MGM) as a basis. While the MEGA has added value and has contributed to the growth of the Phelps in recent years because it has bolstered confidence in the quality of education, the MEGA has also raised the bar or the Phelps and the Phelps had to readopt to the new legislation to remain valid (Seed Mad Hussein, 2009).

Even more challenging than the quality assurance standards set by the MEGA is the proposed index-rating system for private varsities in 201 1 According to the Higher Education Minister Dates Series Mohammad Chalked Nordic, it would be compulsory for all institutions of higher education to participate in the Rating System for Malaysian Higher Education Institutions (Estate) programmer in 2010. By the year 201 1, prospective students can check on the standing of private universities and university colleges before enrolling.

Poor ratings would guarantee the eventual demise of sub-standard institutions. According to the minister, all this stringent controls are necessary. Quote: ‘We’ve no choice but to concentrate on quality. We want Malaysia to be a hub of higher education. We want fractals mentality students” (The Star, 2009) The Phelps as an industry has been growing at an average annual rate of 5. 5% from 2000 to 2005 and the growth rate projected from 2006 to 2010 is expected to be 6. 7% (The Ninth Malaysian Plan 2006 p. 245). There are many factors driving the industry’s growth.

The demonstration of secondary education by simplifying he grading process thereby making it easier for students to reach the SUM (Sill Planner Malaysia)level, which is the minimum requirement for furthering studies at the higher education level, has increased the number of secondary students eligible for higher education. MAP (Malaysian Association of Private Colleges and Universities) estimated the industry to have generated a total fee income of RMI . 5 billion in 2008 (Oh, 2009), a sizeable business to attract intense competition.

According to Tan and Raman (2009), the intense competition has led to Phelps lacking the competitive edge to close down. They further add that the former director of the Department of Private Education, Dates Hosannas Hashish revealed that 200 private institutions of higher learning had been closed down in 2002. The Aphis can be categorized into three types: universities, university colleges and non-university status Aphis. This study will focus mainly on the university status and university college Phelps with significant investments in activities and within the Klan Valley region. 084 The university status and university college Aphis tended to focus on science and technology while the university status Aphis offered Arts programmer. Further, the university status and university college Phelps operates off purpose- built campuses with full facilities while non-university status Phelps lack proper facilities and normally offer programmer that are easier to deliver and do not require high financial resources. Funding, hence, appears to be a key factor for survival in the industry.

Funding, particularly for the non-university Phelps, comes mainly from student fees and sustained enrolment numbers become the key determinant of survival and market dominance. Indeed many Phelps had gone for public listing for funding: Systematic Education Group (now known as SEG University College) in November 1 994, Stamford College Bertha in May 2005, Anti Universal Holdings Bad in June 1996 and HELP International Corp. Bad in May 2007. Furthermore, funding also comes in the form of corporate investments.

The corporate sector, with vast resources and management experience, is in a much better position to invest, build up and develop the private sector education industry and to achieve the standard and quality required. They are also better equipped to provide the industrial link and experience for both the staff and students of these institutions, helping in the overall development of the student earning experience (Oh, 2009). Some of these corporate-linked university status and university college Phelps include Sunday University, Tailor’s University and KIDS University College, not to mention SEG University College.

The university- status and university college Phelps are expected to be the drivers of growth amongst the Phelps: the university-status and university college Phelps benefiting from their significant financial resources and aggressive activities and the university colleges from their upgrade that allows them to offer 3+0 programmer. Hence, these two categories of Phelps, i. E. The university status and university alleges will be the focus of this study. In recent years was a clear warning that significant funding was no guarantee of success.

Kenya TACT was delimited in May 2006, the Workers Institute of Technology and Goon Institute owned by Asters Resources Bertha in October 2007 while Stamford College became a PIN 7 company in May 2009 from the second board of the KEELS (The Star,2009). This is a clear warning that not all is well despite the industry growth as only the well managed Phelps will survive. Strategic developments like the public listing of HELP University College in the KILL Stock Exchange (Education Guide 2003),

Laureate, Aqua’s purchase of ANTI University and Linking University initiative in exporting education overseas are some examples of the level of competition in the industry. ‘Market leadership’ amongst the Phelps is defined by the researcher not just in terms of outstanding revenue sales or student enrolment but includes their image and branding as perceived by their markets. The question then remains which of these Phelps would survive the competition in the long run? Put simply: What sustainable competitive advantage do the Phelps have to achieve market leadership in the Malaysian education industry?

The researcher would level into the key areas in the activities of the selected leading university status and university college Phelps to uncover sustainable competitive advantages using the five competitive forces structure developed by Porter (1985). Theories and propositions The parent theories selected for the research is Porter’s competitive strategy and the five competitive forces (Porter 1985). Porter’s theories were selected because they have “shaped a generation of academic research and business practice” (Harvard Business Review, 2008).

The theories are widely accepted by both academia and by industry leaders worldwide. In the words of the editor of Harvard Business Review, Peter Crotchet up. “It started a revolution in the strategy field”. 2085 Justification for the research Based on the existing literature, Porter’s theories of competitive advantage and the five competitive forces have never been applied to an education industry. Moreover, the three factors of competitive advantage, branding, physical aspects and mode of delivery are areas not well covered vise- -vise the university status and university colleges Phelps.

This view is supported by Kim, Kim, Woolworth and Chaw (2006), when they remarked in their research hat “despite the numerous literatures on choice in international education, little has been written about the influence of brand message on student’s choice of education in Asia”(up). This research is also underlined by the fact that no research has as yet been carried out to assess the strengths of the industry players and, by inference, the industry itself.

LITERATURE REVIEW Parent theories for the research According to Porter (1985), the sustainability of a firm’s competitive advantage is, firstly, dependent on the ability of a firm’s strategies to resist erosion by competitive activities and, secondly, the firm’s ability to anticipate the evolution within the industry which it competes in. By strategies, Porter refers specifically to the three generic strategies of low cost, differentiation and focus which Porter posits could be a source of competitive advantage for the firm.

However, for the strategy to succeed the firm must possess some barriers that make imitation of the strategy by competitors difficult. The evolution within the industry refers to changes or challenges within the industry structure that could render the abovementioned competitive advantage ineffective. In addition, having a competitive strategy per e is insufficient. It must be translated into an above-average performance in the long run – a sustainable competitive advantage. Porter’s three generic strategies. To quote Porter (1 985, p. ): “Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price”. Although a firm can have many strengths and weaknesses compared to its competitors, there are classical two types of competitive advantage that a firm can possess: low cost or differentiation.

Derived from these is a third variation, the focus advantage which has two variants, cost focus and differentiation focus. (Porter, 1985). Cost leadership. To pursue a low cost strategy usually requires the firm to seek economy of scale to bring down costs or through proprietary technology or preferential access to raw materials. In the services sector, it would mean lowest labor and efficient training procedures because of high turnover. Low-cost firms usually sell a standard, informal product or service. (Porter,1 985).

The cost leadership strategy is deemed inappropriate for the education industry as highly qualified educationists, up-to-date modern facilities, technology and attractive premises are the standard hallmarks of a quality institution and these make low cost unachievable at best. To provide a standard, no-frills education will be at the expense of marketability. Rather than target low cost which, in this case, could mean a low cost education, the antithesis of ‘quality education’, Porter’s model includes a differentiation strategy. 2086 Differentiation.

In the differentiation strategy, a firm seeks to be unique along omen dimensions that are valued by its customers and the attributes chosen must be different from that of rivals. Differentiation can be achieved through the firm’s product, the delivery system, the marketing approach as well as a range of other factors. (Porter, 1985). Differentiation by adding value to products and services can provide a more sustainable competitive advantage compared to the cost leadership strategy provided, that is, that competitive advantage is not easily copied by the firm’s competitors. En of the key methods for achieving differentiation is through brand loyalty. Dib and Lowe contend that in the Roth stage of a product’s life cycle the typical marketing strategy adopted would be to encourage strong loyalty and this is supported up by Mood. Nazi Small and Multi ‘s (2003) study of Porter’s generic strategies as adopted by selected multinational companies in Malaysia. Their study included Nestle, Phillip Morris and Combination. In their study Mood. Nazarene Small et al summarize that these multinational firms are not willing to dent their image, i. . Branding, if the process ( low cost operations) cannot be controlled because of competitive cost activities. This suggests the greater importance multinational firms give to the fermentation strategy as opposed to the low cost strategy. Mozzarella and Hosier (1996) too take the differentiation view when they quote Hill (1988) and Murray (1988) in saying that for successful long-term competitiveness customers attach weight to product attributes other than price and that a differentiation strategy is generally essential.

McGee, Thomas and Willow’s (2005) differentiation strategy grid in fig. 2 underscores specific factors which are pertinent to the discussion: Fig. L McGEE, THOMAS AND WILLOW’S DIFFERENTIATION STRATEGY Advantages Superior service Utilizing strong brand names First to offer innovative features Wide distribution coverage Full range of course covered Strategy True differentiation is only achieved by satisfying buyer needs uniquely. Objective is to achieve a price premium that exceeds the cost of differentiation. Differentiation Competencies Strong marketing skills Pricing expertise Strong co-ordination of business functions. Ability to attract creative people. Corporate reputation for quality. Risks Creating differentiation that buyers do not value. Excessive price premiums (or too low) Failure to understand costs of differentiation. Failure to ATA ahead. Wrong customer segmentation. Adapted from McGee et al, 2005.

Strong brand names, innovative features, strong marketing skills, strong coordination of business functions are closely related to Porter’s “firm’s product, the delivery system, the marketing approach”. In these respects, Linking Creative Technology University, Anti-Laureate University, CUSS University, Tailor’s University and SEG University College are in active competition. 2087 Focus. The cost leadership and differentiation strategies seek competitive advantage in a broad range of industry segments, while focus strategies aim at cost advantage (cost focus) or differentiation (differentiation focus) in a narrow segment.

Both variants of the focus strategy depend on segments with buyers/ customers with unusual needs or the production and delivery system required to serve these buyers/customers differ from those in the other industry segments. Linking Creative Technology University appears to PUrsUe the differentiation focus although market pressures have dictated that it adds courses that are not focused strictly on ‘creativity. Porter’s five competitive forces Porter further adds that cost advantage and differentiation in turn stem from industry Truckee.

They result from a firm’s ability to cope with the five competitive forces better than its rivals. These five forces are: 1)The entry of new competitors, 2)The threat of substitutes, 3)The bargaining power of buyers, 4)The bargaining power of suppliers and 5) The rivalry amongst existing competitor Based upon the above arguments, it is the present researcher’s view that key to the research is an analysis of the perceived competitive advantages of the Phelps, the intention of which is to evaluate them within the framework of the three generic strategies, i. E. , which of the three strategies were adopted, if at all.

These competitive advantages will then be assessed against the backdrop of the five competitive forces of industry structure to gauge their sustainability. Opposing views to Porter’s theories Notwithstanding the above, it must be noted that Porter’s theories have met with naysayer. The strongest of them being Hammed and Parallax (1994) who posit that to build leadership, a company must be capable of reinventing its industry and to rebuild leadership, a company must be capable of regenerating its core strategies and that it must have the capacity to become different.

They further add that there is a need not only to keep score f existing advantages – what they are and who has them – but to discover the ‘engine’ that propels the process of advantage creation. The tools of industry and competitor analysis, i. E. As suggested by Porter, are much better suited to the first task than the second task (Hammed and Parallax, 1994). The arguments of both Porter and Hammed and Parallax have been succinctly summarized by Dole and Lowe (2005) as the ‘two principle views as to how competitive advantage can be achieved – ‘the resource view’ by Hammed and Parallax and the ‘competitive forces view’ by Porter.

Dole and Low’s view the two conflicting theories, i. . , Porters and Hammed and Parallax’s, as being compatible when Dole and Lowe concede that while organizational learning or ‘the collective learning organization’ are commendable theories, market intelligence, an analysis of how the market is affected by the SLEPT factors (social/cultural, legal, economic, political, technological, and competitive) and knowledge of other environmental and industry factors remain the basis for developing competitive advantage.

Quoting Shrouding’ study, Mood. Nazi Small and Multi Sings(2003) noted that 30 percent of the small and medium enterprises (Seems) in Malaysia followed Porter’s fermentation strategy while 26 percent adopted the cost leadership strategy. The relatively widespread use of Porter’s generic strategies in the Malaysian context appears to further justify this researcher’s use of these parent theories to study the Aphis competitive advantage in the education industry. 088 Sources of sustainable competitive advantage Various researchers have proposed their respective interpretations of what signifies sustainable competitive advantage in the education industry. The following are examples: 1) The competitive forces view (Porter, 1985) believes the success of an organization’s competitive strategy depends on the positioning of the organization within its environment, particularly its industry and its ability to defend itself against competitive forces, or influence them in its favor. ) The resource based view (Hammed and Parallax, 1994) believes that the firm will perform well if it is able to develop distinctive competencies which allow it to outperform its competitors. 3) By identifying specific ways in which an organization can differentiate its products or services and promoting those differences that will appeal mostly to its target market (Bahrain, 2002). 4)

Organizations should be driven by market focus and innovation, are flexible and responsive to changing markets/circumstances and international in perspective (Bahrain, 2002). 5) Courses, career information, physical aspects and facilities are critical issues that must be kept in mind when educational institutes are trying to create sustainable competitive advantages in marketing strategies Joseph & Joseph, 2000) 6) Davidson (1987) identified eight sources of competitive advantage and for a winning strategy at least one competitive advantage is needed.

For above average growth and profits, however, more are usually deed:i) A superior product benefit, ii) A perceived advantage perhaps created through imagery and effective communication, iii) Low cost operations, iv) Legal advantage, because of patents, copyrights or a protected position, v) Superior contacts, vi) Superior knowledge of customers, markets, science or technology, vii) Scale advantages, viii) Offensive attitudes, competitive toughness and a determination to win.