383-2nd icber 2011 pg 2082-2105 sustainable competitive

8/6/2019 383-2nd ICBER 2011 PG 2082-2105 Sustainable Competitive

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INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2nd

ICBER 2011) PROCEEDING

2082

SUSTAINABLE COMPETITIVE ADVANTAGE

FOR MARKET LEADERSHIP AMONGST

THE PRIVATE HIGHER EDUCATION INSTITUTES

IN MALAYSIA

Loh Teck Hua

KDU University College

Business School

Section 13 Campus,

76, Jalan Universiti,

46200, Petaling Jaya, Selangor DE

ABSTRACT

One of Malaysias economic goals is to become an education hub for the region. To achieve this, the Malaysiangovernment had liberalised government policies resulting in the proliferation of Private Higher Education

Institutions (PHEIs) including private Universities and University Colleges. As competition intensifies it becomes

increasingly pertinent to ask What sustainable competitive advantage should the Private Higher Education

Institutions (PHEIs) have to achieve market leadership in the Malaysian education industry? For the smaller

PHEIs, it is a question of survival itself. This paper aims to provide a theoretical study of some of the key strategic

activities of the leading PHEIs to answer this question.

The literature review covering both foreign and local sources indicates three key factors of sustainable

competitive advantage, i.e. branding and image, the physical aspects of higher education including location and

facilities, and the mode of delivery. The paper will seek to identify these factors amongst the market leaders to

ascertain the validity of the secondary data via critical analysis of their activities.

The theoretical framework employed for the analysis will be Michael Porters Three Generic Strategies and Five

Competitive Forces. The PHEIs have largely evolved into business entities and this development makes the

framework appropriate for the study.


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List of tables

Table1. Summary of expert views on sustainable competitive advantage 7

Table 2. Analysis of competitive advantages in the context of the five 13competitive forces

Table 3. Competitive advantage: a convergence of views. 15

List of figures

Fig. 1 McGee, Thomas and Wilsons differentiation strategy. 5

Fig. 2 The five competitive forces affecting the PHEIs 8

Fig. 3 The nature of educational offering 16


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INTRODUCTION

Archer and Hutchins (2000) indicated that the reasons for undertaking a degree program were largely

personal and economic: to earn more money and to avoid hard, dirty or dangerous jobs. Higher education allows

personal development and facilitates social-class mobility by helping one move up in the socio-economic ladder.

Prior to 1996 only the public higher educational institutions had the rights to confer degrees. The PrivateHigher Educational Institutions (PHEIs) could only confer certificates and diplomas. Since 1996, the Ministry of

Education Malaysia (MOE) had introduced legislations that have revolutionalized the higher education system

bringing about educational reforms and the democratization of secondary education, increased student enrolment

at PHEIs, new public policies and the privatization of higher education in Malaysia.

While this development had generally benefited the industry, it had created a challenging, fluid

environment where Government interference and legislative changes demand great flexibility and an even greater

entrepreneurial mind set from PHEIs. With the creation of the Malaysia Qualifications Agency (MQA), 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 (MQF) as a basis.While the MQA has added

value and has contributed to the growth of the PHEIs in recent years because it has bolstered confidence in the

quality of education, the MQA has also raised the bar for the PHEIs and the PHEIs had to readapt to the newlegislation to remain valid (Syed Ahmad Hussein, 2009).

Even more challenging than the quality assurance standards set by the MQA is the proposed index-rating

system for private varsities in 2011.According to the Higher Education Minister Datuk Seri Mohamad Khaled

Nordin, it would be compulsory for all institutions of higher education to participate in the Rating System for

Malaysian Higher Education Institutions (Setara) programme in 2010. By the year 2011, 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:

Weve no choice but to concentrate on quality. We want Malaysia to be a hub of higher education. We want first-

class mentality students (The Star, 2009)

The PHEIs 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 industrys growth. The democratisation of secondary education by simplifying the

grading process thereby making it easier for students to reach the SPM (Sijil Pelajaran 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.

MAPCU (Malaysian Association of Private Colleges and Universities) estimated the industry to have

generated a total fee income of RM1.5 billion in 2008 (Oh, 2009), a sizeable business to attract intense

competition.

According to Tan and Raman (2009), the intense competition has led to PHEIs lacking the competitive edge to

close down. They further add that the former director of the Department of Private Education, Datuk Hassan

Hashim revealed that 200 private institutions of higher learning had been closed down in 2002.

The PHEIs can be categorised into three types: universities, university colleges and non-university status PHEIs.

This study will focus mainly on the university status and university college PHEIs with significant investments in

activities and within the Klang Valley region.


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The university status and university college PHEIs tended to focus on science and technology while the non-

university status PHEIs offered Arts programmes. Further, the university status and university college PHEIs

operates off purpose-built campuses with full facilities while non-university status PHEIs lack proper facilities

and normally offer programmes 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 PHEIs,

comes mainly from student fees and sustained enrolment numbers become the key determinant of survival and

market dominance. Indeed many PHEIs had gone for public listing for funding: Systematic Education Group

(now known as SEGi University College) in November 1994, Stamford College Berhad in May 2005, Inti

Universal Holdings Bhd in June 1996 and HELP International Corp Bhd 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 learning experience

(Oh, 2009).

Some of these corporate-linked university status and university college PHEIs include Sunway University,

Taylors University and KDU University College, not to mention SEGi University College. The university-status

and university college PHEIs are expected to be the drivers of growth amongst the PHEIs: the university-status

and university college PHEIs benefiting from their significant financial resources and aggressive activities and theuniversity colleges from their upgrade that allows them to offer 3+0 programmes. Hence, these two categories of

PHEIs, i.e. the university status and university colleges will be the focus of this study.

In recent years was a clear warning that significant funding was no guarantee of success. Kemayan ATC was

delisted in May 2006, the Workers Institute of Technology and Goon Institute owned by Sateras Resources

Berhad in October 2007 while Stamford College became a PN17 company in May 2009 from the second board of

the KLSE (The Star,2009). This is a clear warning that not all is well despite the industrys growth as only the

well managed PHEIs will survive.

Strategic developments like the public listing of HELP University College in the KL Stock Exchange

(Education Guide 2003), Laureate, USAs purchase of INTI University and Limkokwing Universitys initiative in

exporting education overseas are some examples of the level of competition in the industry.

Market leadership amongst the PHEIs 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 PHEIs would survive the competition in the long run? Put simply:

What sustainable competitive advantage do the PHEIs have to achieve market leadership in the Malaysian

education industry?

The researcher would delve into the key areas in the activities of the selected leading university status and

university college PHEIs 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 Porters competitive strategy and the five competitive

forces (Porter 1985). Porters 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 Crowther p6. It

started a revolution in the strategy field.


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Justification for the research

Based on the existing literature, Porters 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 vis--vis the university status and university

colleges PHEIs. This view is supported by Kim, Kim, Holdsworth and Chai (2006),when they remarked in their

research that despite the numerous literatures on choice in international education, little has been written about

the influence of brand message on students choice of education in Asia(p2).

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 firms competitive advantage is, firstly, dependent on theability of a firms strategies to resist erosion by competitive activities and, secondly, the firms 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 se is insufficient. It must be translated into an above-average performance in the long run

a sustainable competitive advantage.

Porters three generic strategies.

To quote Porter (1985, p.3):

Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds

the firms 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 basically

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 low-

cost labor and efficient training procedures because of high turnover. Low-cost firms usually sell a standard, no-

frills product or service. (Porter,1985). 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, Porters model includes a differentiation strategy.


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Differentiation.

In the differentiation strategy, a firm seeks to be unique along some dimensions that are valued by its

customers and the attributes chosen must be different from that of rivals. Differentiation can be achieved through

the firms 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 competitiveadvantage compared to the cost leadership strategy provided, that is, that competitive advantage is not easily

copied by the firms competitors.One of the key methods for achieving differentiation is through brand loyalty.

Dibb and Lowe contend that in the growth stage of a products life cycle the typical marketing strategy adopted

would be to encourage strong loyalty and this is supported up by Mohd. Nazari Ismail and Mulkit s (2003) study

of Porters generic strategies as adopted by selected multinational companies in Malaysia. Their study included

Nestle, Phillip Morris and Ajinomoto. In their study Mohd. Nazarin Ismail et al summarize that these

multinational firms are not willing to dent their image, i.e. 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 differentiation strategy as opposed to the low cost strategy.

Mazzarol and Hosie (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 thanprice and that a differentiation strategy is generally essential.

McGee, Thomas and Wilsons (2005) differentiation strategy grid in fig.2underscores specific factors which

are pertinent to the discussion:

Fig.1 McGEE, THOMAS AND WILSONS DIFFERENTIATION STRATEGY

Risks

Creating differentiation that buyers do not

value.

Excessive price premiums (or too low)

Failure to understand costs of

differentiation.

Failure to stay ahead.

Wrong customer segmentation.

Competencies

Strong marketing skills

Pricing expertise

Strong co-ordination of business functions.

Ability to attract creative people.

Corporate reputation for quality.

Strategy

True differentiation is only achieved by

satisfying buyer needs uniquely. Objective is to achieve a price premium

that exceeds the cost of differentiation.

Advantages

Superior service

Utilizing strong brand names

First to offer innovative features

Wide distribution coverage

Full range of course covered

Differentiation

Adapted from McGee et al, 2005.

Strong brand names, innovative features, strong marketing skills, strong coordination of business functions

are closely related to Porters firms product, the delivery system, the marketing approach. In these respects,

Limkokwing Creative Technology University, Inti-Laureate University, UCSI University, Taylors University and

SEGi University College are in active competition.


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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. Limkokwing Creative Technology University appears to pursue the differentiation focus

although market pressures have dictated that it adds courses that are not focussed strictly on creativity.

Porters five competitive forces

Porter further adds that cost advantage and differentiation in turn stem from industry structure. They result

from a firms 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 researchers view that key to the research is an analysis of

the perceived competitive advantages of the PHEIs, 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. Thesecompetitive advantages will then be assessed against the backdrop of the five competitive forces of industry

structure to gauge their sustainability.

Opposing views to Porters theories

Notwithstanding the above, it must be noted that Porters theories have met with naysayers. The strongest of

them being Hamel and Prahalad (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

of 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 (Hamel and Prahalad, 1994).

The arguments of both Porter and Hamel and Prahalad have been succinctly summarized by Doole and Lowe

(2005) as the two principle views as to how competitive advantage can be achieved the resource view by

Hamel and Prahalad and the competitive forces view by Porter.

Doole and Lowes view the two conflicting theories, i.e., Porters and Hamel and Prahalads, as being

compatible when Doole 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

SLEPTC 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 Khairuddin study, Mohd.Nazari Ismail and Mulkit Singh(2003) noted that 30 percent of the small

and medium enterprises (SMEs) in Malaysia followed Porters differentiation strategy while 26 percent adopted

the cost leadership strategy. The relatively widespread use of Porters generic strategies in the Malaysian context

appears to further justify this researchers use of these parent theories to study the PHEIs competitive advantage in

the education industry.


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Fig. 2 THE FIVE COMPETITIVE FORCES AFFECTING THE PHEIs

.

Industry

Competitors

Rivalry Among

Existing Firms

Potential Entrants

Bargaining power of

suppliers

Bargaining power of

buyers

Threat of substitutes

Entry Barriers:

Proprietary product

differences

Brand identity

Capital requirements

Proprietary learning curve

Government policy

Rivalry determinants:

Industry growth

Product differences

Brand identity

Diversity of competitors

Corporate stakesExit barriers

Determinants of supplier power:

Importance of volume to supplier

Impact of inputs on cost or

differentiation.

Threat of forward integration

Determinants of substitution threat:

Relative price performance of

substitutes

Buyer propensity to substitute

Determinants of buyer power

Bargaining leverage and choice

Buyer information

Substitute products

Price sensitivity

Product differences

Brand identityImpact on quality/performance

Potential entrants and entry barriers.

Proprietary product differences.

A university status or university college PHEI has the privilege of developing their own syllabus and

awarding their own degrees over and above the foreign degree programmes which they are currently offering.

This development allows these PHEIs to create proprietary product differences while non university status PHEIs

make do with foreign partner degree programmes which are, by and large, generic and are shopped off the

market. Examples of such proprietary product differences include SEGi University Colleges degree programmes

in environmental technology, construction management and optometry; Nilai University Colleges Bachelor in

Automotive Engineering and UCSI Universitys degree in Traditional Chinese Medicine amongst others.

However, these proprietary product or service differences cannot be patented and can be easily duplicated. In

short, there is no real proprietary product or service differences to prevent entry by new or existing university

status or university college PHEIs

Brand identity.

Heavy brand building activities by well funded university status and university colleges PHEIs like Inti-

Laureate, UCSI, Taylors and Limkokwing Creative Technology University have raised the entry barriers to newentrants. Buyers/consumers choose reputable institutions and reputation is closely associated with brand identity.

The unknown, new entrants will be at a major disadvantage.

Capital requirements.

Unlike the education industry of the 1970s and 1980s, shop house and shopping complex colleges are no

longer encouraged by the government. The top PHEIs today, whether university status or otherwise, are housed in

stand- alone building complexes or located in their own purpose built campuses complete with modern, up-to-date

facilities. Massive capital investments in building fixtures and facilities are a pre-requisite for success in the

industry.


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Government policy.

Ong (2008) noted that as part of the Governments effort to stem the outflow of foreign exchange to the

Organisation for Economic Cooperation and Development Countries (OECD), the Government has liberalising

education. Further, since the economic downturn in 1997, 26 colleges have been granted the approval to conduct

3+1 degree programmes with selected foreign universities and this added to the plethora of options available to

students (Tan, 2002).The competitors are varied representing government-linked, financially robust organizations,

prestigious off-campus universities with global resources to newly awarded university status private colleges

which are often backed by major corporations. Amongst the PHEIs alone there is a proliferation of options for the

students.

The governments policies are generally pro-PHEIs and represent no real barriers to entry despite the setting

up of the MQA (Malaysian Quality Assurance) to monitor the quality and development of the PHEIs.

Threat of substitutes and determinants of substitution threats.

Relative price performance of substitutes.

Pricing is an important factor for the PHEIs as fees are significantly higher compared to public highereducation institutes although much lower than a foreign education in the UK, USA, Australia or New Zealand.

Obviously those who stayed home have pricing as a key consideration. This is also evident in the increasing

number and value of scholarships, loans, grants given out year on year to attract enrolment. Limkokwing Creative

Technology University is by far the most aggressive, advertising RM34 million in scholarships in 2010 followed

by UCSI University at RM5 million. SEGi University College offered RM500 off enrolment fees as an incentive

to potential students.Despite this, however, buyers will make their buying decisions based on customer value, i.e.,

the price will be weighed against the bundle of benefits offered. Price ultimately will not determine market

leadership.

Buyer/customer propensity to substitute.

University-status and university college status PHEIs must create a point of differentiation in order to

successfully compete in this crowded market place.Specialization of their individual curricula is one option but

with educational institutions pursuing their own financial interest and catering to popular needs a dynamic of

convergence and not divergence is the contrary result. All universities will attempt to cover the complete

spectrum of higher education instead of specialising. (King, R. 1995). With PHEIs offering largely generic

programmes, similarly prestigious foreign degrees and similarly competitive facilities, differentiation becomes

blurred. There are many choices in PHEIs, programmes and fee range. Buyer substitution is indeed a real threat

and only the PHEI with the competitive advantage most valued by the buyers can succeed.

Bargaining power ofbuyers/customers and the determinants of buyer/customer power

Buyer/customer information

Advertising spend by the PHEIs to promote their programmes is estimated at RM560 million in 2009 and

with the many education fairs, point-of-sale materials and other recruitment drives factored in, significant monies

have been invested to keep buyers/customers informed. This flood of information increases noise and clutter

and makes buyers/customers purchasing decision difficult and competition even more intense. Ultimately

advertising cut through is critical for a share of buyers mind. This is only possible with a strong, distinctive

advertising or promotional campaign. Limkokwing Creative Technology Universitys marketing communications

with their highly original and distinctive creative ads and communication materials represent an excellent

example of buyer awareness cut through. Sunway University Colleges Tan Sri Jeffrey Cheah distinguished


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speakers series advertising campaign is another attempt at advertising cut-through while at the same time building

brand image for the institution.

Institutional websites are common to all the PHEIs and these represent important sources of information,

direct marketing and interactive activities between the buyer/customer and the PHEIs. The Internet technology

similarly allows potential buyers and customers to shop around and compare between PHEIs giving them the

advantage of choice.

Substitute products

The options available to students are many: excluding public universities there are 559 PHEIs (2000 2005

projected) including private universities, branch campuses of foreign universities, university colleges and other

private colleges. (Adapted from Department of Private Education, Ministry Of Education Malaysia, 2003, p. 3).

As the university status PHEIs proliferate, choice will continue to increase. It becomes, in short, the buyers

market. The PHEI with the distinctive competitive advantage most valued by buyers will stand a better chance of

being chosen. The question remains: what are the competitive advantages that drive buyers choice?

Product differences (Service product)

Despite the many similarities amongst the PHEIs offerings there are sufficient product differences to

command the buyers interest, not just in terms of courses available but also other factors such as reputation and

affiliations. Inti-Laureate University brings global reputation and an international network of affiliations to the

local education industry which the organization claims 300 just in the USA alone. UCSI provides an enviable

range of science and arts programmes covering medicine to Traditional Chinese Medicine; Limkokwing

University of Creative Technology specialises in creative arts and sciences including architecture and movie

production; and Taylors University boasts the highest student success rate and the highest number of award

winners.

Brand identity

A PHEI with a strong brand identity can limit the power of buyers. Brand identity is closely associated with

reputation and that, in turn, with quality education. Brand identity and reputation can be created via strategic and

effective marketing communications. Short of a firsthand experience of a PHEIs education services, branding

serves as a proxy for decision making by buyers. Amongst the PHEIs Limkokwing Creative Technology

University,Taylors University, Sunway University, HELP University College, SEGi University College and

KDU University College appear to stand out in terms of branding. These institutions were winners in the 2010

Putra Brand Awards, awards which are measured based on consumer preferences and a robust and unbiased

consumer research polling system developed by a profession research organization called the Pulse Group. Touted

as the largest consumer research sampling of its kind in Malaysia involving a total of 6000 consumers, the awards

were stewarded by the MMVB (Malaysias Most Valuable Brands) board of governors and endorsed by the

Malaysia External Trade Development Corporation (MATRADE). (Pulse group.2011)

Furthermore in the governments SETARA 09 rating of Malaysian Universities and University Colleges,

Sunway University and Taylors University were the only two PHEIs in the research to be awarded the tier 5

excellent rating followed by HELP University College, Inti-Laureate University, Limkokwing Creative

Technology University and UCSI university in the tier 4 very good rating. (MQA 2011) Such recognition would

have afforded these institutions with substantial competitive advantage and makes them the PHEIs of choice

amongst buyers/customers.


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Bargaining power of suppliers and determinants of supplier power

Importance of volume to suppliers

The export of education is a major source of income for the UK, USA and Australia and to a lesser degree,

New Zealand. Like any business, volume counts. If enrolment falls and the foreign partner does not achieve their

business objectives the programmes may be withdrawn and transferred to PHEIs with better profit potential or,more often than not, offered to multiple PHEIs without exclusivity to any institution. A Herriot-Watt, UK, a

Northumbria University or a University of Curtin, Australia, twinning degree is available to multiple PHEIs.

In short, size matters. Needless to say, the leaders in the industry would be in a better position to negotiate

and be able to obtain the most prestigious foreign degrees at a better cost and offered to buyers/customers at a

higher price hence achieving cost advantage and better profit margins.

Cost relative to purchases in the industry

The accreditation fees have increased over the years eating into the PHEIs profit margins and necessitating

fees increases making them increasing less attractive as a source of alternate education. It has been reported that

the British government is proposing a drastic cut in subsidies to the public and private universities in the UK inthe near future (The Star, p56).This development may result in new increases in accreditation fees and may make

the popular 3+0 UK degrees even more expensive for the PHEIs to offer. The PHEI solution appears to be in their

own local degrees which are permissible upon achieving university or university college status. The cost can be

more affordable and the profits greater but the prestige of a foreign degree is irreplaceable.

Threat of forward integration

To date, there had been no forward integration amongst the major PHEIs. In the education industry where

activities are self-contained the issue does not arise. Student recruitment agencies are more common for overseas

markets and foreign students are not part of the current research.

Industry competitors and rivalry amongst existing firms

Industry growth

As mentioned in the introduction, the private higher education 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%

(Adapted From The Ninth Malaysian Plan 2006 p. 245). MAPCU (Malaysian Association of Private Colleges and

Universities) estimated the industry to have generated a total fee income of RM1.5 billion in 2008 (Oh, 2009), not

including other related incomes. The size and growth of the industry will stimulate intense rivalry not to mention

attracting new entrants.

Brand identity

Brand identity is often a result of positioning, advertising and promotional activities. The bigger university

and university college PHEIs with more financial resources to carry out such activities usually command greater

buyer identification. Nevertheless, there are only a handful of university and university college PHEIs that have

strong brand presence based on advertising. They are Limkokwing Creative Technology University,Taylors

University, Sunway University, HELP University College, SEGi University College and KDU University College

as attested by their Putra Brand Awards 2010 selection.(Pulse group.2011).


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Diversity of competitors

While there is a general lack of diversity and specialization in programmes except for Limkokwing Creative

Technology University, UCSI University and technology-focused UCTI-APIIT University College, there is,

however, diversity in the PHEIs differing corporate visions and marketing strategies. Laureate, USAs purchase

of INTI University has added new dimensions to the competition bringing new, advanced management and

marketing skills to the organization.

Limkokwing Creative Technology University with its many off-campus branches in the UK, amongst other

foreign countries, has not only taken on the new role of exporter of higher education in line with the Ninth

Malaysia Plan, 2006, but has also added prestige and marketing value to that institution.

Corporate stakes

Capital investment being a key success factor in the education industry it is then not surprising that corporate

funding and ownership is common amongst the PHEIs. Corporate involvement also has the added advantage of

industrial links that provide the necessary internship training to enhance the marketability of the graduates and

increase their job placement opportunities. These are major considerations when choosing a PHEI to further ones

studies. Sunway University, KDU University College and SEGI University College are owned by renown andsuccessful property magnates with the resources to develop and promote their PHEIs. They would be formidable

competitors in the provision of the physical aspects of education such as premises, excellent location and facilities

to compete with the other PHEIs.

Exit barriers

Exit barriers are high for those PHEIs that have invested significant sums of money into purpose-built

campuses and first class facilities. The competition to survive will be intense. The stronger PHEI may absorb the

weaker ones to form an oligopoly where the scenario could be one of a battle amongst titans. Inti-Laureate appear

to have taken this route by absorbing Metropolitan University College and UCTIs merger with APIIT.

Summary analysis of the five competitive forces in the Malaysian context

According to Porter an assessment of a firms competitive advantage must take the industrys structure into

account. The analysis indicates that the only true barriers to new entrants are a strong brand identity and capital

investments. Sufficient capital investments is required to build branding through heavy advertising and

promotional activities although such activities can only be successful if they are backed by a differentiated brand

positioning and an effective advertising and promotional campaign. Such activities can provide a strong

communication and information platform for buyers/customers and hence influence their decision making. This

will reduce the threat of substitutes; offset the lack of product and service differences and diversity; and reduce the

power of the buyers/customers. As a consequence of this, a strong PHEI with the financial and enrolment clout

would have a strong negotiation power over suppliers.Despite the intense competition and rivalry, the PHEI

would have achieved a significant competitive advantage over its competitors.To reconcile the discussion thus far:

Table 2. Analysis of competitive advantages in the context of the five competitive forces

Expert views of competitive

advantages

Five competitive forces analysis

Product and services

differentiation/

Superior product benefit.

No barrier to new entrants. Product and services differences

surmountable.

Threats of substitutes.

Subject to the bargaining power of buyer and suppliers.

Industry rivalry will render any product or service differences

marginal.


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Market focus and innovation Small segments vulnerable to the bargaining power of

suppliers.

Courses, career information,

physical aspects and facilities.Physical aspects minimise threats of potential entrants,

substitutes, the bargaining power of buyers/customers and rivalry.

Positioning of the organization

within its environment to defend itself.Minimises threats of potential entrants, substitutes, the

bargaining power of buyers/customers and rivalry.

Distinctive competencies of thefirm: Superior contacts, superior

knowledge of business and customers,

offensive attitudes.

Minimises threats of potential entrants, substitutes, thebargaining power of buyers/customers and suppliers and fend off

rivals..

Imagery and effective

communication.Minimises threats of potential entrants, substitutes, the

bargaining power of buyers/customers and rivalry.

Legal advantage Government policy is pro-industry. No barrier to new entrants

and rivalry.

Scale advantages Reduces the bargaining power of buyers/customers,

suppliers and the threat of substitutes.

The table above appears to indicate that the competitive advantages that satisfy the five forces of competition

analysis are courses, career information, physical aspects and facilities, positioning of the organization within its

environment to defend itself, distinctive competencies of the firm, imagery and effective communication and scale

advantages. However, positioning of the organization within its environment to defend itself is generic and

encompasses elements of physical aspects and facilities, distinctive competencies of the firm, imagery and

effective communication and scale advantages. Hence, the following convergence of views is perceivable:

Brand identity and image.

Capital investments to support the physical aspects of education and the facilities; and the brand

communications.

Core competencies of the firm be it in an organizations collective learning or its superior knowledge of

its business.

Scale advantages.

Buyers purchasing behaviour

Available consumer research findings regarding the buyers purchasing behaviour appear to support these

conclusions. Research findings collected from 616 business students in New Zealand by Joseph and Joseph (1997)

indicated that amongst the top three factor criteria considered the most important attributes looked for in institutes

of higher education are academic reputation and physical aspects. Joseph and Joseph (1997) in the same research

noted that physical aspects are the tangible aspects of the education service.Webb, Coccari, Lado, Allen and

Reicherts study (1998) indicated that of the ten criteria used by students when selecting a college the top three

included academic reputation of institution and marketability of the degree conferred; and reputation and branding

are closely related.Wagner and Fard (2009), in their separate research also found that physical aspects andfacilities as well as institutional information (advertising, websites, fairs, etc) have significant relationships with

the students intention to study at a PHEI.

Similarly, in Baharuns research A study of market segmentation in tertiary education for local public

higher education institutes (2002) the two specific university selection attributes identified were quality and

brand image. In that study, Baharun noted that:

The image represents the Local Higher Learning Institutes (LHLI) in the customers mind and gives him or her a

pre-taste of the university.. (2002 p40)


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Reiterating the importance of image, Baharuns research paper Identifying Needs and Wants of University

Students in Malaysia highlighted several aspects relating to students choice of tertiary education institutions in

Malaysia, one of which is image.It is noteworthy that in all the previous researches (Joseph and Joseph and Webb

et al), academic reputation was highlighted. Reputation is closely related to image and in this sense all the

researchers agree with the importance of image as a factor in college selection.

Further Baharun also identified conducive facilities and resources as amongst the attributes consideredimportant by students and explains that a failure to react to these attributes or issues will result in losing

sustainable competitive advantage. Ancheh, Krishnan and Nurtjahjas findings (2007) based on 17 universities

and 64 colleges list the recognition and reputation of the institutions and campus environment, atmosphere and

facilties as important criteria for the selection of private universities and colleges in Malaysia. Ancheh et als

comments on lower costs are pertinent to the study. Nooraini Sheriffs (2007) research on information sources

influencing students choice of private colleges in Malaysia, on the other hand, drew the following findings: 1)

Influence from friends and family, 2) The NAB (National Accreditation Board or LAN) today upgraded to MQA

(Malaysian Quality Assurance) and the Ministry of Education, 3)Course counsellors and advertisements, 4)

Personal inspection of the PHEI, i.e. experiential sources such as college facilities, design, faade and layout.

Influence from friends and family a function of WOM (word of mouth) is usually related to reputation and,

hence, branding and image as is quality as measured through MQA recognition. Personal inspection points tothe importance of the physical aspects of education.

Summary analysis of buyers/customers purchasing behaviour findings

It is noteworthy that all the researchers above have academic reputation, physical aspects, institutional

information and advertisements and brand image as common higher education selection criteria. These factors

can be grouped into the same two broad categories of branding identity and capital requirements.

Competitive advantages: a convergence of views

Table 3 below sums up the areas of convergence based on comparing the discussions above.

Table 3. Competitive advantage: A convergence of views

Experts' view of competitive advantage/Competitive

advantage in the context of the five competitive forces Buyers/customers' purchasing behaviour

1. Brand identity and image. 1. Brand image and reputation.

2. Capital requirements/physical aspects and

facilities. 2. Campus layout, location and facilities.

3. Core competencies. 3. Product-service differences.

4. Scale advantages.

The areas of obvious commonality are the importance given to brand identity and image which is a function

of brand communications. The second significant area of convergence is capital requirements which is necessary

to acquire the physical aspects and facilities provided by the institutions of higher learning as well as the

investments on communications and information provision. Capital is also important in obtaining scale

advantages by building more branch campuses in and outside the country. Product-service differences while

dismissed earlier as fairly generic, should not be discounted altogether as it is the core of the education service

product the programmes and the quality of delivery. It represents the core competencies of the organization.

Having analyzed the competitive advantages of the education institution in isolation it is now pertinent to

discuss them with direct reference to the university status and university college PHEIs. To better understand their


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existing competitive advantages Kotler and Foxs (1995) three levels of the service-product offering model

(education offering) will be used for the purpose.

The competitive advantage of the PHEIs: an analysis of the education offering:

THE NATURE OF THE EDUCATIONAL OFFERING

Figure 3 Three levels of anoffer

Core service:

Information/

Knowledge

Packaging: Campus/environment,

facilities.

Features:

Courses/curriculum

extra-curricular

activities

Branding:

Reputation,

image

Quality:

Prestigious degrees,

Qualified lecturers.

Styling:

Lecture methods/

Mode of delivery.

Financial terms:

Fees, scholarships

Guarantee:

Job placements

Follow-up service:

Customer service& care

Accessibility: campus location

Augmented

product

Core product

Tangible

product

(Kotler, 1995)

Core offer

The core offer represents the programs benefits from the students perspective or an institutions

marketability upon graduation. This varies from institution to institution: a foreign degree program would

doubtless be seen as better in terms of quality, prestige and marketability when compared with local degrees

which are also offered by university status PHEIs like UCSI University and Taylors University. The country of

origin of the foreign degree is also a key factor for student consideration be they British, American, Australian,

New Zealand or Canadian. However, almost all the PHEIs discussed offer the complete gamut of countries and

these do not constitute any significant or sustainable competitive advantage. Dual degree programs, i.e. two

degrees awarded for the same course, one from the foreign university partner and the other from the local

university, as offered by Limkokwing University of Creative Technology, Taylors University and Nilai

University College would, by the same logic, double the graduates marketability and may constitute a product

service difference although this will proliferate over time.


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Tangible offer

Branding

The brand is a name, term, symbol, or design, or some combination, that identifies them with the institution

and differentiates them from competitors offerings. Brand names simplify the search for goods and services,

guarantee a specific level of quality and if the firm succeeds in fostering a degree of customer loyalty to the brand,it can charge a premium price for the product or service (Dibb and Lowe, 1997).

Branding helps in the reduction of uncertainty in consumer purchases, the reduction of social and

psychological risks associated with use or ownership of the wrong product (Berthon, Hulbert and Pitt, 1997). And,

according to Aaker and Biel (1993) advertising is the main marketing activity that implants ideas about a brands

uniqueness or positioning in consumers minds. Tucciarone (2008)s research found that one of the influencers of

student preferences was the advertisements of the institution. The advertisement influences from the component of

liking an ad and can create a positive feeling for a brand.According to Goi and Goi (2009), branding is powerful

in providing competitive advantages and quoting Stensaker (2005) they posit that one of the benefits of branding

for higher education institutes is providing information and image. Koku (1997) too states that the phenomenon of

rebranding often occurs in the service industry, and is specifically crucial for universities and colleges.According

to Dibb et al, a brand helps buyers evaluate the quality of a product or service, especially when they are unable tojudge its characteristics. It helps makes repeat purchase easier. Branding also helps foster brand loyalty and leads

to referrals. (Dibb et al, 1997) Branding helps students choose a specific university or college despite the many

competitive options available, often even at a higher cost and at times disregarding the shortcomings of facilities

or services.

Branding can add value to the institutions offer and more satisfaction for the consumer (Kotler et al, 1995).

Students take pride in noting that they are graduates from well-known and established institutions and this

represents a key selling point in a job interview. The INTI- Laureate brand name brings the full force of the

global education network of Laureate, USA, to support INTI Universitys advertising campaigns. Limkokwing

University of Creative Technology rides on the renown and highly recognisable personality of the founder and

owner of Tan Sri Professor Emeritus Lim Kok Wing as its brand ambassador.

Academic reputation is an aspect of the brand name as it represents the institutions identity on the same

footing as its name. It is an attribute of branding just as Oxford University and Harvard are names that spell

academic reputation. Branding is often achieved through imagery and effective communication, a competitive

advantage singled out by Davidson (1987).

Limkokwing University of Creative Technologys marketing communications stand out not only in terms of

their highly creative content that utilises futuristic graphics, distinctive advertising layouts and the iconization of

its brand ambassador and spokesperson Tan Sri Professor Emeritus Lim Kok Wing but also their offensive

attitudes, competitive toughness and a determination to win, another source of competitive advantage according

to Davidson (1987, p.56). Limkokwing University of Creative Technology employs person marketing and brand

endorsement ideas using the high profile personality of its owner Tan Sri Professor Emeritus Lim Kok Wing asthe vehicle to promote and brand the institution. His many philanthropic campaigns for the Palestinians, the

peace awards he received and his strong link to the government were prominently advertised. Accolades from the

government that Limkokwing Creative Technology University encapsulates the meaning of innovation in line

with the governments 2010 economic theme growth through innovation were featured full page across all the

major dailies in the country. This strong branding strategy is consistent with the institutes academic

specialization and positioning and is expected to strengthen the brand equity of the institute. Their winning of the

gold prize, the highest award in the Putra Brand Awards 2010 education and learning category attests to their

success in this area .(Pulse group 2010)

Inti-Laureate University benefits from the marketing expertise of Laureate, USA. Their increasing efforts

in advertising and branding activities challenge those of Limkokwing University of Creative Technology. From


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press advertising, billboards to all promotional materials, the distinctive Laureate star was used as a mnemonic

device to establish brand recognition and association with Laureate, the American owner of the institute, and by

implication the American quality and resources available to their students.

In terms of branding and image Taylors University, Sunway University, KDU University College, HELP

University College and SEGi University College too stood out from the rest. Taylors University, Sunway

University both received gold awards in the Putra Brand Awards 2010 as well while KDU University College,

HELP University College received silvers. Distinct positioning and brand imagery aside, the important role

played by heavy advertising expenditure to establish consumer recall cannot be ignored. In this context, SEGi

University College would achieve branding and image simply through frequency of their advertisements. They

won the bronze award in the same award ceremony.

Nevertheless, it must be noted that the branding and imagery presented by Limkokwing Creative

Technology University and Inti-Laureate are sources of sustainable competitive advantage as they are not easily

duplicated by competitors. The first is backed by a strong and reputable personality in the creative field and the

other by association with an iconic American institution. Taylors University emphasises their many record

academic successes and by inference, their quality teaching, and while this offers strong branding it does not

constitute a sustainable competitive advantage if it rests on service quality which is variable and not its

organizational competencies and culture.

The quality

Quality represents the perceived level of performance of a service. Berry and Parasuraman (1992) argue that

the strategic success of a service organization depends on the ability of service providers to enhance their images

by consistently meeting or exceeding customers service expectations. Where the students have not yet enrolled

into an institution and have no direct experience of the quality as defined above, tangible quality would mean

the awards won, academic performance, MQA recognition, affiliations to reputable foreign universities, a strong

R&D culture and the physical aspects such as campus buildings and facilities. In this context, Taylors

Universitys frequently advertised academic achievements through its multiple award winning students over the

years including awards for being voted Most popular private college/university in 2009, the 2010 Putra Awards

gold for the education and learning category which was voted online by 6000 consumers nationwide, would begood examples. Or Limkokwing University of Creative Technologys high profile export of education to over 10

countries in the world including London would qualify as symbols of quality education. The Inti-Laureate

American education association and its global networks with a choice of 300 universities in USA and Canada

alone would also translate into quality in the minds of consumers.

While quality can be subject to multiple interpretations and may not constitute a clear competitive

advantage, international and global networks, i.e., a basis for collective organizational learning, such as those

offered by Limkokwing University of Creative Technology and Inti-Laureate can be sources of sustainable

competitive advantage as they represent core competencies within their organizations that are hard to duplicate.

Quality has always been cited as an important competitive advantage in the education industry. However, quality

means different things to different people and according to the context (Lovelock and Wirtz, 2007).

In view of the above, quality as a determinant of competitive advantage is a rather abstract concept and opens

itself to broad interpretations. Hence, the exclusion of quality from the research forms part of the delimitations for

the study.

The packaging

According to Kotler et al,(1995) the college campuss environment serves as the packaging of the academic

product. The architecture, topography, and landscaping of the campus should support the educational function of

the university. This packaging represents the most obviously tangible aspect of the education service. Students


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in large part choose their institutions of learning based to a great extent on appearances the size and impression

of the physical environment of learning. This statement is supported by Hawkins and Frohoff (2008) when they

quoted Hayes (2008) in describing how physical facilities can translate into perceptions of quality and that the

appearance of the lab sporting the latest technological advances may make a statement thats hard to counter

through other facts even when an older lab may boast a Nobel laureate on the faculty (p3).

With the upgrade to university and university colleges, the PHEIs had invested significant monies to create

an impressive exterior to attract students. SEGi University Colleges RM150 million purpose-built main campus

in Kota Damansara has more affinity to the architecture of Europe than Malaysia, the purpose of which is, no

doubt, to create the appearance of a foreign university and by extension symbolize the quality it represents.

Nilai University Colleges 105-acre award winning campus recreates a self-contained township surrounded by

rolling hills and pleasant greenery far away from the distractions of the city.

Quoting Architect Bruce Carmichael, Kotler (1995) indicated that physical resources play a far more

important role in recruiting students, and especially retaining students, than is generally recognized.

Atmospherics are also consciously and skilfully built in the design of buildings to create or reinforce specific

effects on students such as feelings of well-being, safety, intimacy, or awe. The Limkokwing University of

Creative Technology is one good example where the faade of the main campus resembles a gigantic and

colourful work of art.

Taylors Universitys new imposing RM450 million 27-acre purpose built lakeside campus captures a

relaxed, peaceful atmosphere that is highly conducive to the pursuit of higher education.

UCSI University frequently advertises its grandiose KL campus with its North Wing and South Wing

campus which would soon include a proposed UCSI sky scraping tower and hotel block which is aimed at

creating awe amongst potential students. The hotel is an obvious boost to its Faculty of Hotel and Management

division. UCSI University also boasts real operating theatre and hospital facilities in their campus to promote their

medical courses.

HELP University Colleges new campus in Subang Jaya will be a self-contained monolith compared to the

current premises and KDU University Colleges new campus in Glenmarie is planned on a scale resembling a

mini township.

All the university status and university college PHEIs under study have their own purpose-built campus as

part of the MQA requirement. However, in the packaging competition size and appearance seems to matter and

the PHEIs with the financial resources have significant advantage over those that do not have the resources to

dazzle their consumers. Packaging, because of the enormous capital investments required, could represent a

sustainable competitive advantage that could raise entry barriers to smaller institutions and reduce the power of

suppliers and buyers/consumers.

The features

Features are individual components of the offer which could be easily added or subtracted without changing

the services style or quality (Kotler et al). E.g. Range of courses, specialized courses and extracurricular activities.

The use of features has many advantages. The institution can create specific features to target specific segments.

However, range and variety of courses offered are not by themselves sustainable competitive advantages as they

can be duplicated, bettered and improved without much effort and constraints.

The styling

Styling is interpreted by the researcher as the mode of delivery be it in instructional form or technology. In

the competition for student enrollment, the PHEIs had adopted various program styling to appeal to their


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audience. HELP University College promoted their Active Learning teaching format, Limkokwing University of

Creative Technology their skills-driven programs, SEGi University College their experiential education program,

Nilai University College their real world curriculum and INTI University their career-focused programs tailored

to industry needs. While styling can be a source of sustainable competitive advantage as it can represent

distinctive competencies linked to the organizations distinct culture that cannot be easily duplicated and which

allow a PHEI to outperform its competitors, they are seen to be generic claims across the PHEIs. Every PHEI

under the study claims some sort of active learning, skills-driven, experiential or industry based methodology for

teaching. A co-learning curriculum with an IBM or a GE can make the difference. However, these companies only

account for a minor portion of the entire syllabus. Nevertheless, having the most number of top students and

award winners in both national and international competitions can be proof of the success of an organizations

mode of delivery. This can constitute a competitive advantage if based on core competencies which is intrinsic to

the organization and is hard to duplicate. Taylors University is one such organization.

The augmented offer

The augmented offer is the additional services and benefits that go beyond the core offer and the tangible

offer. It adds value thereby enhancing the total package to the consumers. Often, the augmented offer, ifdifferentiated, becomes a source of competitive advantage for the organization that has it. In an education

institution, the augmented offer includes financial terms, accessibility, guarantees and follow-up services.

However, like features, these are not sustainable as they can be modified and improved as the competition

requires.

Summary analysis of the education offerings sustainable competitive advantage.

Differentiation through branding, the physical aspects and the mode of delivery appears to provide a more

sustainable competitive advantage for university status and university college PHEIs competing for market

leadership in the education industry. In these respects, Limkokwing University of Creative Technology, Taylors

University, SEGi University College, Inti-Laureate University, Sunway University and UCSI University are the

front runners in the competition. While only Limkokwing University of Creative Technology, Taylors University,

SEGi University College, and Sunway University were awarded by the Putra Brands Awards for excellence in

branding, all except Limkokwing University of Creative Technology registered significant enrolment numbers for

2009: Taylors University (7480), SEGi University College (4814), Inti-Laureate University(7054), Sunway

University(8959), and UCSI University(7925). (2009 Perangkaan Pengajian Tinggi Malaysia).

CONCLUSION

Faced with the many challenges of governmental control and interference, intense industry competition,

commoditizing of education, rising costs, and more demanding customers, the survival of the PHEIs depends

greatly upon the development of sustainable competitive strategies to remain viable, if not achieve market

leadership.

The literature review assisted by a Porters theories of competitive advantage and the five competitive

forces have uncovered the three factors of sustainable competitive advantage relevant to the PHEIs under study:

Branding, physical aspects and mode of delivery.

These findings were applied to the university status and university college PHEIs under study using

Kotlers education offering model as a framework. Based on the arguments set forth the analysis indicates that of

the university status and university college PHEIs in discussion, the institutions with clear sustainable competitive


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advantage are Limkokwing University of Creative Technology, Taylors University, SEGi University College,

Sunway University, Inti-Laureate University and UCSI University. These institutions exhibit strong branding

(although of the six only Limkokwing University of Creative Technology and Taylors University SEGi

University College, Sunway University were officially recognized by the Putra Brand Awards), outstanding

presence in terms of physical aspects and distinctiveness in mode of delivery. However, while these factors are

singled out for analysis they still constitute only a part of the whole albeit a major part. Competitive advantage

should also be seen holistically with the minor parts such as course structure and flexibility, customer services, job

placements amongst others having their place in the entire machinery of growth.

These institutions being leaders in the industry would serve as role models for their competitors and as

copycats proliferate the bar would be raised further. Ultimately, the only sustainable competitive advantage, in the

words of Shell Petroleum CEO De Geus (1998):

The ability to learn faster than competitors may be the only source of sustainable competitive advantage

ACKNOWLEDGEMENT

I wish to thank KDU University College, especially Dr Todd Nelson from the Business School, for encouraging

me to participate in this international conference and their sponsorship of the entire expenses incurred by this

endeavour. I hope that this would be just the first of many such contributions on my part to KDU University

Colleges objective of reaching greater heights in academic excellence.

My special thanks also go to Dr Ong Seng Fook for his encouragement and guidance in this conference paper,

which is adapted from my Doctor of Philosophy dissertation on a related subject.

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