Business Economics

MECO 5201
Mid Term Report

Service: Cambridge Education within Private Schools

City: Multan

Submitted to:
Choudhry Tanveer Shehzad

Submitted from:
Syeda Warqa Zaka
MS ACTA - 22230009

1. What factors affect the demand for the product ranked by their importance?
Answer:

The demand for Cambridge Education is impacted by several factors. However, the most
significant one is the cost of service. Multan is the city with an average income of 79,000 PKR1.
And Cambridge education is a relatively costly expense with an average cost of 30,000 PKR per
month for O & A Level education. Due to the limited average salary of a family with an average
size of 7 people2 make them price sensitive towards deciding what type of education to acquire.
So, the price of Cambridge education is high which makes the demand very niche within Multan,
as only people with a higher salary bracket can afford it which is almost 25%1 of the population
(221,000 PKR), as well the additional amount of per paper (which is 28,000 PKR3 per paper and
8 papers were compulsion in O Levels).

The other factor that impacts the demand is the standard of education. Cambridge education is
offered within the private schools. Despite the high cost, the system tends to provide good
quality education with more trained instructors, and extra curricular experience. Moreover, the
Cambridge education system does not focus on the cramming aspect. It focuses more on
understanding and learning aspects. Hence, parents and kids who prefer qualitative learning
rather than quantitative tend to prefer Cambridge education. In Multan, parents who have the
prior knowledge, or experience and interest within the educational field tend to opt for this type
of education, which is also niche. Multan is ranked 20 out of 36 in literacy rate1, with a literacy
rate of 58%, which showcases lack of awareness and intent in the educational field.

Another factor that impacts the demand is the perception regarding the education system which
leads to the future prospects in the professional life. Students who have completed the
Cambridge education are considered more creative with a broader learning perspective, hence
it tends to create a higher benchmark for them while selecting higher education or even in
professional interviews. There is a status quo attached with it. Students in Multan who want to
opt for education in universities abroad or in different metropolitan cities like Lahore, Karachi or
Islamabad tend to opt for it, which is just middle and upper middle class (approx 907k out of
2.16 million4).

The other factors are demand for miscellaneous subjects like business, arts increases the
demand for cambridge education, which is rare in Multan because people are not aware of
different fields other than medical or engineering. Desire for English medium education
increases the demand as well, as matriculation and intermediate are taught in Urdu. In Multan,
the widely spoken language is Saraiki, hence, people are not aware of English that much, hence
avoiding to opt for education in the language they are not aware of.

2. What factors affect the supply of the product ranked by their importance?
Answer:

One of the factors that impact the supply of Cambridge education is the number of credible
instructors. More the educated instructors with respect to the Cambridge curriculum, more the
supply. As mentioned, Multan has a limited literacy rate and with the competition within the city,
hence there is a limited resource that aligns with the curriculum demands, restricting the supply.

Another factor is the consumer demand, more the demand, more the supply would be.
However, the demand for Cambridge education within Multan is not massive, but the investment
from the niche market is enough to cover the cost and achieve the bottom line.

The other factor is the fee of supplying cambridge education (i.e. application fee etc.). Higher
the fee, it acts as a barrier to entry but despite that most of the private schools offering
cambridge education in Multan are the franchises of national schools (Beaconhouse, LGS, The
City School), hence it is a one time cost for them that they already have incurred.

Lastly, more the competition, the cost of education needs to be lessened to fight the competition
hence, less the supply tends to be. Out of the 279 listed high schools in Multan (Public &
Private)5, only 126 private schools provided Cambridge education. Hence, there is less
competition within Multan city, which allows the limited schools to charge the price higher, which
might attract the competition in future if the consumer demand changes.

3. What sort of price discrimination will be suitable for the product?

Answer:

As for the price discrimination from the side of British Council, there is no price discrimination on
the cost of paper, as it remains equal for everyone.

However, the schools that offer that education within Multan, tend to do price discrimination
within the students. The price discrimination is in the form of scholarships, financial aid and loan
grants. While discussing with one of the Director’s of Cambridge school within Multan, he
explained the scholarship criteria. The scholarships within the private schools are provided on
the basis of the class results from the previous year. For example, if the student has gotten one
A in O Levels, they would be given the 4,000 PKR scholarship for A Levels in school fees, and if
they have gotten 8 As entirely, the entire fee (30,000PKR) would be covered in scholarship.

The financial aid was given on the basis of the need of the individual, while still seeing the
background experience and how they have performed on the entry test. If the management
thinks that the student has a potential to work well, they are offered financial aid, maximum to
70%.
Another form of price discrimination I was told was discount on the basis of linkages. If the
student belongs to the family of management, they were given a certain percentage of discount,
which was decided by the management itself.

4. What are the fixed and variable costs in the production?

Answer:

Fixed Cost:
- Building and its maintenance cost
- Accreditation by british council
- Government contract
- Application fee & the fees for programmes offered
- Training and exam entry fees

The above mentioned costs are the fixed costs because they have been incurred, and even if
the private schools stop supplying the cambridge education, the cost can’t be omitted. For
example, no matter if the number of students keeps on fluctuating every term, the cost of
building and its maintenance would remain the same. Moreover, the legal, application and
contract fees are fixed costs because no matter the number of students, if you want to provide
Cambridge education, it needs to be done.

Variable Cost:
- Staff salary (teaching and non- teaching)
- Purchased books and journals
- Stationary
- Laboratory items
- Utilities
- Equipment & Furniture

The above mentioned costs are the variable costs because that can fluctuate and decrease or
reduce to zero when the cambridge education is not supplied anymore. For example, if the
schools tend to increase their branches within the city, the staff salary would increase. Same is
the case with equipment and furniture, if the supply needs to be increased and other branches
need to be opened, the cost will increase. The paper cost of books and journals also varies as it
depends on the requirement of the curriculum, which keeps changing, if not every year, at least
every five years. Moreover, the stationary, laboratory items and utilities are the variable costs as
it keeps on changing as per the students attending, which keeps on varying every term.

5. How is the competitive environment of the product now as compared to five years back for a
similar product?

Answer:
As per the interview conducted, the instructor of one of the schools explained that five years
ago, even before COVID, the influx of students opting for cambridge education was high.
Despite having ‘saith’ culture in Multan, the society was evolving where the parents wanted to
match the status symbol of having an international certification. Moreover, seeing the
competition in the job market and the fact that most of the jobs were in the cities like Lahore,
Islamabad and Karachi, it felt essential for your kid to have that extra competitive advantage
through Cambridge education. Hence, the demand for the service increased. Our interviewee
even explained that there were even certain examples in which parents made their kids switch
from matriculation to cambridge education. However, the already established institutes had
maintained a brand perception within the minds of consumers, and parents don’t tend to take
risks with an unknown service provider when they have established private schools, with the
investment as large as that. Creating an oligopolistic environment.

However, within the period of COVID that resulted in uncertainty, salary issues, layoffs and
inflation, it resulted in parents dropping out their kids from such expensive institutes and opting
for the local education system i.e. matriculation and intermediate. This resulted in the
competition to weaken as the cambridge schools started to diversify their portfolio and entered
the matriculation system, to cater the broader customer base.

However, in this year, our interviewee explained that the trend towards Cambridge education
has started gaining momentum again because of the evolving society but the competition still
remains the same, as the same players still take the most of the market. However, the existing
competition has started competing with each other more rigorously to gain market share by
focusing on other needs of parents like co-curricular activities, social events, training with
cambridge board and etcetera.

6. What are the three critical factors which can affect your product’s competition in the next five
years?

Answer:

Inflation
One of the key factors that can be highlighted, especially after COVID is inflation. Inflation will
result in higher cost of tuition, transportation cost, costs of books, etc. which will result in people
switching to substitutes, especially the middle class in Multan which is extremely price sensitive.
The decrease in consumer demand will result in existing schools to diversify their portfolio (as
did) and cut on frill costs like events and other co-curricular activities. The reduction in
consumer demand will make the market less attractive for new entrants.

Technology & Online System:

After COVID, we were introduced to the importance of ed-tech. The rise in ed-tech has
sustained even after things are going back to normal. Now resources are readily available in just
one click, where you can get access to vast material and learn at your own pace. Hence, the
competition has and further will increase massively because now the competitors are just not
physically present against you, in the same city. EdTech companies like nearpeer, not only
focuses on the course content but on the skill based learning as well. And these competitors
have the edge of lesser cost, hence more economies of scale.

Education & experience

Within the next five years, as mentioned, in the average family of 7, at least one of the children
would have gone through the experience of higher education and would know what is
demanded in the market and what not. For example, the interviewee gave an example that one
of the sisters was in pre-medical and when she was opting for universities, she realized how
having matriculation and intermediate background gives you an edge over having a cambridge
education and that is why her siblings switched. This will impact consumer demand, hence
fluctuating the competitive environment.

7. Do you find any behavioral influences affecting the delivery, demand, and prices of the
product or service?

Answer:
- Nuclear family, that instead of having 3 to 4 kids, the trend is shifting more towards the
only child. Hence, the only child means parents having more disposable income and
opting for better education for their only child.
- Home tutoring, as now people tend to focus on private tutoring and then appear on
cambridge education on their own.
- Increase in population from nearby rural areas like DG Khan, Muzaffargarh and etc.
where businessmen and agriculturalists are moving towards more societal communities
with better access to education. This will increase the demand, however the restriction
on supply side like workforce, infrastructure constraint remains.
- More trend towards special education needs to cater all
- Exchange programmes, as people now look for exposure for their students. Hence,
activities like these result in schools charging higher prices.