The standards of the Chinese Education Industry


The Chinese education industry is paid much attention and being supervised by the government. Since the 1980s, China has carried on the reform and open policy. The public education cannot meet the demand of diversified as well as the professional talent. Therefore, there was an upsurge in investment into private education by the private capital.

Minhong Yu (Yu) is one of who enjoy the benefits of the boom of private education. Mr Yu was born poor in a rural family in coastal China. He, relying on his teaching experience and excellent investment consciousness, from the initial training school, has built his education empire - New Oriental Education & Technology Group (New Oriental) On November 16, 1993.

New oriental has been leading the Chinese private education for a long time and has listed in New York Stock Exchange (NYSE). By the end of 2009, the New Oriental had already set up 48 schools, more than 270 learning centres and 6 subsidiary companies in the 40 cities in China. Until then, it has trained more than 7,000,000 students (New oriental, 2010). Obviously, Yu is a great success and has been named Richest Teacher in China.

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The Simple entrepreneurial process (locket, 2010) indicate that a successful entrepreneurial process consist of idea generation, opportunity recognition, and exploitation in enterprise. In one way, combination with opportunity business model and Timmons Model, it help us to understand how Yu developed his business idea to reality and why he can avoid bankruptcy in such high regulated and intensive rival industry. In other way, some important points of the model have been posed in this essay, such as the dynamic process view point. As such, the essay will be organized as follow ;

1) Background of Yu will be given to understand his motivation to launch his business and to look into the relationship between personal experience and entrepreneurial success.

2) Opportunity Business Model (OBM) will be applied to find out how Yu refined his business model by match the idea within the context and grasp the opportunities.

3) Draw from Timmons model and others, efforts are made to discuss how Yu successful manage his venture.

4) Finally, we draw the conclusion and come up four points of the entrepreneurial process, which derive from the discussion and evaluation.

1. Background and Motivation of Mr. Yu and New Oriental

Table 1 Minhong Yu's personal experience (Yu, 2007)

Figure 1 Entrepreneurial Learning Cycle (Lockett, 2010)

The entrepreneurial learning theories (Politis, 2005 and locket, 2010), agrees that entrepreneurs personal experience, background and motivation will motivate and inspire the entrepreneurs to generate the idea, which is an important process in the whole entrepreneurial process. Some scholars state that experience (Evans & Leighton, 1989; Cooper, Gimeno, & Woo, 1997), or educational (Gimeno et al, 1997) can be learned by entrepreneurs and form the prior knowledge (Huber, 1991), thereby affecting the recognition of opportunity (Shane, 2000). From the table1, we can find that Yu has studied foreign languages before and has language training experience. On accounting of this, Yu is familiar with the English training market. Yu said, because of his thorough knowledge of this industry and his reputation and resource, he dared to start the venture. He added that the reason that he was punished by Peking University was because the students liked his teaching style, and followed the classes in the private schools where he was teaching, which affected the interests of Beijing University. Furthermore, Politis (2005) argues, the knowledge derived from past experiences first and foremost has an influence on the strategic choices made by entrepreneurs in their subsequent ventures, which then influence firm performance. Many marketing strategies and management methods are relied upon his earlier experience in the Peking University and private schools, confirmed by Yu. Obviously, Yu s Personal experience has a positive contribute in his entrepreneurial process.

On the other hand, motivation is considered as an essential to business success (Herron and Sapienza, 1992). Gilad and Levine (1986) proposed two types of factors that promote entrepreneurship, driven by external factors, called push and internal factors, pull . Researches by Keeble, Bryson and Wood, (1992) and Orhan and Scott (2001) argued that "pull" factors is the primarily factor for entrepreneurs, rather than "push" factors. From an economic point of view, the surplus of financial rewards between the new venture and the wages of employment may drive people to take the challenge (Praag and Cramer 2001). In this case, Yu s entrepreneurship originated from his American dream . He shared his dream, that studying and living in the United States, with his classmates. However, due to lack of funds, Yu decided to be a teacher in University, take a part-time in private school and continue the GRE, and TOEFL test, with a hope to raise the money and attain the scholarship. Finally, he was punished by the university, neither had enough money and scholarship. Driven by this, he realized that it is time for him to open a school to make more money. He resigned without hesitation, and started the business. Hence, Yu's success is the result of internal and external factors.

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Table 2 Development of New Oriental (New Oriental, 2010)

Entrepreneurs growth and business growth are closely related (Timmons and Spinnelli, 2009). New oriental has experienced four-phrase development, as Yu concluded. From a rented teaching room to an education group, Yu said that he has learnt a lot from his experience, such as the marketing tactic, venture capital, even the alliance with ETS (Yu, 2007). As concluded, Yu s personal experience, background and education has the positive impact on his success. He never stops to use his own knowledge to contribute to his venture. However, in the next part, the BOM will be applied to find out how Yu s ideas match the opportunities of microenvironment.

2. Opportunity Business Model

Combine his idea and the business opportunity, Mr. Yu is triumphant, in both wealth and reputation. At this stage, we want to look into how Yu evaluate his business ideas in the different context. To analyze his success, we can find that there are a lot of connection between the dimensions and drivers in the OBM.

First of all, we can find that his idea is linking with the demand of the market, or social trends. He understood the problem that encountered by his target customers and pointed out the efficiency of usage and quality of vocabulary is more important than the quantity in attending ETS tests. To support his idea, Yu has built up his core competency that his supporting material, such as his GRE Vocabulary and others, which can only obtain in New Oriental and help student to spend less time and do a better job.

Secondly, besides New Oriental, there were many training schools in Beijing. Yu bore in mind that if he wanted to success in this industry, he not only needed teaching experience, but operation knowledge. So after his resignation, he chose to work in other schools and tried to get a thorough knowledge, even did the copy job. Through this, he found some problems within this industry, such as gaps between outcome and expectation, and consumer rights etc. However, he also is benefited from this, like free-lecture marketing tactic, operational skill, students respect etc. In the other hand, follow the movement of private education is a key factor in Yu s life. Year of 1996 is the milestone, when the private education starts to enter the maturity phase. Exactly before 1996, Mr. Yu has started to look for partners, and recruit many key partners, such as Xiaoping Xu. After,1997, New Oriental not only achieve to Corporatization and later Group operation, but has successfully listed in NYSE, this is a time for capital boom and after this New Oriental can have enough money to expand both in horizontal and vertical to build the education empire(Yu,2006).

Third, legislation is a risk for most of the time in Yu s life, but he can use his personality and resource to help him reducing the risk, and thus create opportunities. In the initial, Yu s persistence, coupled with the Guarantee of Peking University, help himself get the temporarily certification. For the ETS dispute (see appendix1), Yu also admitted that and positively work with ETS directly afterward. Publishing official guide is an advantage and core competency for New Oriental.

Fourthly, technique can build as advantage. As a successful strategy, development of core teaching resources is coping by the other competitors now. Nevertheless, none of them can replace New Oriental. It not only has professional Research & Development team, but also alliance with supplies, such as exclusive license from ETS. This is the main advantage in teaching technique. At the same time, the information technology is developing very quickly. In 2000, new oriental has set up his online learning website, Furthermore, in 2004, Yu admitted to build the information system within organization to help him control the more than 180 training centres and rapid expansion (New Oriental, 2010).

From the discussion, Yu s business model keeps improving. He grasps the opportunities to help him move forward each time. However, he did not know when the opportunities are available, there is one reason is that he is innovative. He can make his idea as innovative as possible and form his advantages to compete with others for the opportunity. This is why he can win. Therefore, in the next part, we will briefly discuss how he managed to implement his idea to form his advantages, by using Timmons Model.

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3. Implementation-Timmons Model

After finding the opportunity, the entrepreneurs need to exploit their idea within enterprise, for each department, such as marketing, human resource Research and development and so on. However, in another vision, Timmons Model (2007, Lockett, 2010) suggests that opportunity will change over time and it is necessary for entrepreneurs to constantly adjust, balance, and integrate among three elements- opportunities , resources , and team". These three are the key common element in each development stage of the organization. after all, in this section, the integration of resources and team will be given to explain how Mr. Yu integrate his resources and team to meet the changing opportunity, as well as the successful marketing strategy to coping with market challenge.

3.1 his resources

At the beginning, Yu used his social relationship to get the certification. In the early days, Yu operated New Oriental by his own, although there are some part-time teachers. Even then, Yu made full use of his teaching resources, both his teaching style and material, like GRE Vocabulary . Besides, he receives the reputation of low cost and big class teaching style. Until 1995 he realise to make New Oriental operated by team, and successfully invite some key partners, All of who are his past classmates or friends. For the financing, Mr Yu has knowledge of prepaid fees and bridging financing. Attracting by the Stock market bubble, New Oriental listed in 2006 and make it to expand as quickly as possible.

3.2 team

In Timmons model, team is consisting of leader and other members. So we need to evaluate the Entrepreneurial attributes, the quality of team and how he or they networking.

First of all, as Timmons suggests that there are several common characteristics for entrepreneurs. In this case, Yu s personality, as well as his capacity, plays an important role when he started up. His determination to earning money for going abroad makes him open the New Oriental. His humour helps him to be optimism and look forward to future. In the other hand, he has the interpersonal skill that he can convince Xiaoping Xu and other classmates to give up their career in America and join him. There is one thing happened during the reform of New Oriental. The corporatization means the relationship between Yu and his partners became the superior-subordinate relationship, and the reward system is changing. This led to uneven distribution of benefits and destroyed the partnership. Even Min Hu resigned and started his own training company. However, Yu s persistence, conflict management skill, and trust by other partners are the drivers to solve the problems and move forward.

In the other side, although there are some conflicts within Yu s team, the teamwork has been improving. Yu said, after years development, they have cultivated the New Oriental culture. Adhering to the spirit of cooperation, Yu is able to lead the returned talents, who has trained abroad and had different knowledge and communicate with the new generation of teachers and students. This is because the same value, The Relentless Pursuit of Success , and the same target and commitment to develop New Oriental to benefit them. Additionally, the role of Yu is worth to notice. He has obviously leadership and personal charm. He also understand his another function is support other members. He said, only by doing so, the team members can enjoy the achievement of the success and have the sense of belonging. In this kind of environment, Yu and his teammates are equal, like brothers and sisters.

3.3 marketing strategy

From other view, we can look into how Mr Yu markets his idea to match the market demand. At first, Yu had understood the value of marketing and started post advertisement, held the free lectures, executed the free trail, and published his books. These are important and become the features from other competitors. Not only keeping delivery values to customer, Yu with his team also promote emotion marketing. This tactic let the students receive an understanding of New Oriental and get inspired to grow up with it. It becomes a great success and Yu have built his image, as Teacher Yu among the students.

As a result, Yu did have the ability to organize his resource to form his advantages and coach a team to execute his idea effectively and efficiently. He also can understand how to make these to become balance by using the culture, or emotion marketing.

4. Conclusion

The above analysis and evaluation help us to understand Yu s entrepreneurial process, how he generated the ideas, identified opportunities, and how he achieved his plan. There are four main points that we need to admit. As known, this process is a cycle (Lockett,2010,Burns 2007) that continuously drives business to innovation, like gear. Yu s business has four-stage development is a good example, which make Yu need to innovate constantly. Secondly, we should understand the process is not developing by necessary sequence or being structured. The GRE Vocabulary was prepared before Yu start his business. In other words, it is hard to define when Yu start entrepreneurship and unbelievable that Yu did not have a systematic plan. He just did best for what he needs to do. Thirdly, we also agree that the personal attributes are the important within the process (Burns 2007). You can find that his ambition, spirit and his behaviors and words are very popular in New Oriental. Finally, we found that most of Yu s work and other materials are taking personal factors as the most important. Although other factors, like team or socio-culture factor are mentioned, personal factor are important, because it is the core of the process. Without him, the venture will not be work.

Word Count: 2499 (exclude the headings, bibliography and appendix)

5. Appendix

Opportunity Business model (Yu, 2010, conclude by author)


1.1 Proposition: as has discuss above, the core value proposition for new oriental is to help students to cope with the ETS (ETS: Educational Testing Service) tests.

1.2 People: Mr Yu is the leader of company, as well as the key resource, but he understood that he cannot management the school by his own. In 1995, he went abroad to find his past classmates and friends, some of who joint him gradually, such as Xiaoping Xu, Qiang Wang, and Min Hu. Mr Yu understood the returned talents have strong personality, so he decide to allocate them by sectors that everyone need to charge for one sector of education, such as Xu for consultancy, Wang for listening, Hu for IELTS etc. the other significant element is the quality teachers. Yu was respected by student for his humour and inductive teaching style, and he benefited from this. Therefore, he has an exclusive method in selecting teachers. He said, teacher is a main resource of New Oriental, which connect the company with the students . In another end, New Oriental also worked with ETS, was authorized to publish official guide of GRE or TOEFL, like Bigbook . ʦ

1.3 Place: in its initial, New Oriental focused on university students who need to attend TOEFL or GRE test for going abroad. This is probably related to Yu s six year teaching experience and his market insight.

1.4 Process: the selling points are the supporting materials and humours teachers. These are only available in New Oriental. However, to promote his school and build its world of mouth, Yu adopted strategies to give free lectures, trial for 20 free lessons and so on. By this way, the risks for customers are highly reduced and attracted many students at that time, furthermore, use its advantages to build customer loyalty.

1.5 Profit: Initially, when the school just start up, Yu had no money and rights to build a school, so he found a university named Beijing Oriental University to set up an English teaching department, and he agreed to pay 15 per cent of the earnings to the department to the university. With this kind of sharing spirit, he also promised what his partners earn is what they generate by their own sectors to attract them. This format later becomes the stock equity. For the teacher, he also has the motivation system base on high salary.


2.1 Societal: as we mentioned in introduction, there is a boom of going abroad, as well as the demand of English learning. Most of them are students, which Mr Yu known quite well and can communicate free with. Learning English in China, at that time is examination-oriented. Students need to memorize vocabulary, even a whole dictionary and do many practices.

2.2 Commercial: the Chinese government start to reform and agree to investment in private education. At the other head, people started to accept the private education, as it was still high risky. Many English schools were set up at that time, especially work as an alliance with universities.

2.3 Legal: though there is a boom, private education was supervised by the government. During that time, only retirees or associate professor or higher titles can build a school. At the first time, Yu failed to receive the certification from government. But his persistence, coupled with the Guarantee of Peking University, Yu got the temporarily certification. Yu met some other legal issues at the beginning of start-up. Once upon a time, his competitor hurt his two employees, but Yu cannot have rights to protect himself. The other thing is that Intellectual property dispute with ETS. In that context, New Oriental just used the books that they bought from abroad, as supporting materials, which was allowed before. After China participating in WTO, things have changed. However, the dispute was over now and New Oriental has alliance with ETS to develop in China.

2.4 Technological: As a successful strategy, development of core teaching resources is coping by the other competitors now. Nevertheless, none of them can replace New Oriental. Because it not only have professional Research & Development team, but also alliance with supplies, such as exclusive license from ETS. This is main advantage in teaching technique. At the same time, the information technology is developing very quickly. In 2000, new oriental has set up his online learning website, Furthermore, in 2004, Yu admitted to build the information system within organization to help him control the more than 180 training centres and rapid expansion.