The International Schools in the uae

The United Arab Emirates International School is a well established educational trust, which wants to open an international school in Oman, knowing that there is now an opening for international schools in the educational sector. This Research will include important analysis for the United Arab Emirates International School to use in order for them to learn about the international school’s in Oman, like the environment surrounding them which is Political, Economical, Social and Technological factors and also known as the PEST Analysis. Other than that the people that can have an effect and impact on the business will be included as part of the analysis, like customers, suppliers, substitutes, new entrants and competitors and also known as the Porters Five Forces. So by conducting these analysis and learning them the company will then be able to find out their opportunities and threats which are part of the SWOT Analysis including the Strengths and Weaknesses. These analyses will be measured for three different cities and three different regions which are Muscat City in Muscat Region, Sohar City in Batna Region and Buraimi City in Dhahra Region. Then finally we will be able to give the United Arab Emirates International School recommendations.

Definition

PEST analysis is a technique used to identify, assess and evaluate external factors affecting the performance of an organization. A PEST analysis is undertaken to help an organization gain an understanding of the wider business environment and may be carried out as part of an ongoing process of environmental analysis or scanning. The aim is to provide information to assist those responsible for strategy development and decision making. PEST analysis may be used in the context of overall organizational strategy or more specifically to evaluate the feasibility of a new product or service, or expansion into a new market.

(http://goliath.ecnext.com/coms2/gi_0199-5221632/Carrying-out-a-PEST-analysis.html)

Advantages of PEST analysis.

PEST analysis:

* provides an understanding of the wider business environment

* encourages the development of strategic thinking

* may raise awareness of threats to an organization’s ongoing profitability

* can help an organization to anticipate future difficulties and take action to avoid or minimize their effect

* can help an organization to spot business opportunities and exploit them successfully.

It helps the firm in many ways, it’s important that environmental analysis is carried out before entering into the industry. PEST analysis is a helpful method of summarizing the external environment in which a business operates. Nevertheless, it should follow up by considering how a business should act in response to these influences.

(http://goliath.ecnext.com/coms2/gi_0199-5221632/Carrying-out-a-PEST-analysis.html)

Political and legal factors:

Political factors are rules and regulations that are made by the government that has a direct impact on the business. These rules affect the daily running of the business when it comes to policies and regulations. We believe that the school should take into consideration the following political factors:

Employment Laws: Every country has its rules and regulations for a new foreign organization entering the country to establish its business, when talking about rules and regulations for example Omanization the country’s rule is that these foreign companies must recruit Omani citizens as employees to help reduce the unemployment in the country and to gain experience from the foreign employees as well, in addition to that local partnership is one of the rules that a foreign owner must take in consideration which is also called (Foreign Trade Regulations). Speaking of international schools in Oman SABIS of Muscat is one of the schools that are owned by both a foreign and local partners.

Government Stability: Because there is no war in Oman the government is stabled, secure and safe and not much of a change with the government. There are many foreign and local companies opening up in Oman, there are many international schools existing in Oman for example the AMERICAN BRITISH ACADEMY (ABA) if the government was not stabled then these types of schools won’t exist because of the constant changes with the government therefore there will be less or no foreigners living in Oman. It is absolutely safe for any foreign organization to establish its business in Oman.

Economical Factors: All businesses are affected by economical factors nationally and globally. Whether an economy is in a boom, recession or recovery will also affect consumer confidence and behavior. Equally economic factors affect the purchasing power of potential customer, and the state of the internal/external economy in the short and long-term. The unit may need to consider:

Unemployment: Oman has been encouraging Omanisation to reduce the level of unemployment in the country. By the entrance of the International school from the UAE into Oman, it will play a role in reducing the unemployment and providing more jobs for local Omanies.

Disposable income: Oman is facing a boom in the economy due to the surplus they are getting from oil sales. Accordingly consumer spending is high. With higher consumer spending, an increase of demand will show up. This demand will have to be satisfied. For that reason, the International school will have the chance to satisfy this increasing of demand.

Socio-cultural Factors: social factors will include the demographic changes, trends in the way people live and think. Moreover, it also includes the cultural aspects of the macro environment. These factors influence customer needs and the size of potential markets (inside and outside of the International school).

Lifestyle changes: by time the life style in Oman changed and is continuing to change. People have different views over many things such as: Education. Many years ago there were no private schools in the country and girls were made to stay at home and look after their parents. As time passes by, things changed. Omani citizens thinking have changed. They started sending all their kids to school, in order to gain education. In addition, when private schools opened up in Oman, families didn’t mind sending their despite the mixture of both male and female. Moreover, Omani families started going out and eating out more often.

Population: it’s the number of people in the country, when it comes to that the population in Oman is on the rise. Companies and organizations take population in consideration, because it means that people increase and the needs increase too. For example, for schools increase in the population of a country or a city means increase in number of students every year. The Chart below is an example of the rise in population in Oman.

Educational levels: the level of education throughout the years has increased tremendously, and the demand of International schools in some parts of Oman is high, due to the increase of foreigners in the country for work purposes.

Technological factors: technological factors are vital for competitive advantage, and are the major driver of change and efficiency. Technological factors can for example lower barriers to entry and reduce minimum efficient production level. New technology has an impact on changing the way business operates. The Internet has the most effect on the strategy of organizations.

New discoveries and development: the advancement in technology has been beneficial to the International school in the industry. Due to technology the administrative staff can now access to the Internet 24 hours a day comfortably from their homes. Another advantage that technology has given the International school industry is the ability to reduce their costs as new machinery is now available for them to reduce their paper work and also reduce the time wasted. In fact the Internet allows the managers of the International school to use video conferencing to keep up to date with their other branches without to physically go there. This technological revolution means a faster exchange of operating environment.

(http://www.btinternet.com/~katrina.severn/avce/PESTAnalysis.pdf)

After looking at all four PEST analyses we believe that Sohar is the best place to open an international school due to the increasing of population by both local and foreigners. Also adding to that Oman tend to have a political stability due to the ruling of the Sultan rather the change of government, economical Oman is stable at the moment sine they are at the boom due to the surplus of the oil sales but this does not mean it will remain stable forever things might change if there was a decrease in oil prices. The socio- cultural in Oman is defiantly on the change to the better people are moving forward and want the best for themselves and families.

We have identified earlier PEST analysis which includes the external environment and it was concluded that the environment was in a favorable condition for the UAE International School to enter the Omani market. However, we must consider the internal environment. These factors are within the control of the organizational members, to do so a Porter’s Five Forces analysis must be carried out.

Porter’s Five Forces Analysis:

Porter’s five forces model is a framework that describes how an industry grows, behaves and responds to five primary “external” and “internal” forces. The Porter 5 forces model is a framework for understanding the underlying structure of an industry or business segment, built around the five primary and dominating competitive forces that affect the short, intermediate and long-term effects of an industry’s size, strength, vitality, and profitability. The value of the 5 Forces model and subsequent analyses is to help understand and predict the behavior of the industry, and most importantly, the actions of rival companies.

(http://drivedemand.com/logo.html)

There are five vital forces which have been introduced by Michael Porter for the analysis, these are:

The threat of New Entry: The possibility of new firms entering the industry impacts competition.

The threat of Substitution: as those products that are available in other industries that meet an identical or similar need for the end user.

Supplier Power: An industry that produces goods requires raw materials. The power of the suppliers to drive up the prices of your input.

Buyer Power: The power of buyers describes the impact customers have on an industry.

Competitive Rivalry: the strength of competition in the industry.

Threat of New Entry:

Competition in an industry will be higher if entry into the industry is easy; therefore barriers to entry are there to protect the high levels of profits. Barriers reduce the rate of entry of new firms in order to allow the existing firms to enjoy levels of the profits.

Product Differentiation: since there are very little or no product differentiation in the International Schools industry, new entrants may feel that competition will be strong and profits will be hard to earn.

Capital Costs: Any normal person will find it hard to come up with the costs required to open an International School, as it is hard to find and buy a land large enough to accommodate such requirement. They would also have to pay suppliers for the initial stock, employees, etc. Capital costs are unbelievable high for this type of industry since initially large amount would be needed to buy land, resources, advertisement, etc.

Economic of Scale: this refers to the decline in unit costs of a product or a service that occurs as the absolute volume of production per period of time increases. Economics of scale gives the International School competitive advantage as they can price their fees at a lower price than the others, and a new entrant will find it hard to compete with the low prices. This is because there is no product differentiation so competitors must compete in terms of price.

Threat of substitutes:

Substitutes are goods or services that satisfy the same customer needs. A threat from substitutes exists if alternative products with lower prices and better value satisfy the same need. In the International School Industry the substitutes will be the competitors. The threats of substitutes are determined by factors such as:

Customer Relationship: it is important to build a good relationship with the customers to prevent them from moving on to the substitutes, if a customer were to feel that he/she has a better relationship with a certain school than the others then that customer is more likely to go the particular school than the others.

Supplier Power:

It is important for The UAE International School to obtain the resources that is needed for them to successfully operate the school, therefore it is crucial for them to have a good relationship with their suppliers. Moreover, for the UAE International School to succeed, they must try to reduce the power of their supplier, because the higher the bargaining power the supplier, the higher will be the price of resources.

Buyer Power:

Buyer Power is the power of customers to drive down your prices. If we look in the terms of the UAE International School, the buyers would be the customers that come to them and they have great power over the UAE International School, then the school will be forced to lower their selling price. Two factors of buyer power are included as examples, which are:

Brand identity: Is how the company wants the consumer to perceive the image of their product. The buyer has a power when it comes to brand identity it’s because they choose the brand that satisfies them the most. So if the brand in your company does not satisfy consumers then you’ll either have to lower your prices or lose the consumer. For example, if the UAE International School does not offer branded items to their customers, while Muscat International School offers branded items, then most of the buyers will choose the branded school.

Threat of Backward Integration: This is when the buyer changes from buying your product to buying your competitors product even though they are similar. The reasons of this maybe the price or the quality of the product and so on. So in this case the buyer has power over the supplier. For example, if the buyer compares between two international school like Muscat International and Sabis, they may find that the price differs in both schools, where Muscat International School might be cheaper, so the buyers would definitely go for Muscat International School. So the UAE International School will have to consider the competitors price and try to offer lower or the same price or better quality, and they would also have to consider the needs of the buyers and try to reach their satisfaction.

Competitive Rivalry:

The intensity of the competition between exciting firms in the industry can be analyzed. It is important for the school to know the number of its competitors such as: Azzan Bin Qais Private School, Muscat International School, Sultan Private School, Sabis International School and Sohar International School. Since the products are likely to be the same (homogenous), the UAE International School will have to find a way to offer something different to its competitors. High competition results in prices and margins thus, the profitability of the industry.

Product Differentiation: this is when the customers are made to feel that a brand is different from another even though the product is the same and since all products are provided at the International Schools, competition will be high, because all will be competing with the same products for the same crowd of customers.

Looking at this, we can see that three out of the five forces are favorable towards the UAE International School. In brief the internal environment is in good condition for the school to enter. From the analysis it can clearly be see the fast that there is no product differentiation is a major issue to the industry.

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