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Through the case study of New Oriental Education and Technology Group which including internal and external analysis, this assignment tries to discover the contribution of entrepreneurship on the New Oriental's development and demonstrates an understanding of entrepreneurial practices in their operation.
Section 1 - New Oriental Education & Technology Group
New Oriental Education & Technology Group Inc. (Simplified Chinese æ-°ä¸œæ-¹æ•™è‚²ç§‘æŠ€é›†å›¢, NYSE: EDU), more commonly New Oriental (Simplified Chinese æ-°ä¸œæ-¹) is a provider of private educational services in China. The headquarters of New Oriental are located in the Haidian district, Beijing. It is currently the largest comprehensive educational company in China. The business of New Oriental includes pre-school education, general courses for students of various age levels, online education, overseas study consulting, and textbook publishing. New Oriental was the first Chinese educational institution to enter the New York Stock Exchange in the United States in 2006. New Oriental had built 53 short-time language educational schools, 47 book stores, and 500 learning centers in 48 cities in China in May 2011. According to statistics, there were about 15,000,000 students who had studied in New Oriental by 2011. And the company values 64.23 billion RMB by the evaluation.
1.2 - Mission, Aims & Objectives
New Oriental provides a comprehensive range of educational services and products to address the needs of students of all ages. At each step in students' education, New Oriental is there as a teacher and advisor - whether the task is preparing for the Chinese high school or college entrance exams, getting ready to take the international exams for overseas universities, or learning the skills most valued by today's employers. And it doesn't stop there - they reach adult students with our Adult Practical English and ELITE English programs, occupational test preparation, online education, career education, and popular educational publications. New Oriental offers a diversified portfolio of educational programs, services and products to meet the needs of students in each stage of life.
1.3 Internal analysis by SWOT
New Oriental Education & Technology Group has very steady growth year after year. Its sustainable competitive advantages:
-Extensive Nationwide Network
-Best Proprietary Content
-Proprietary Computerized Assessment Testing
-One-to-one Customer service and Study Consulting
Its aggressive extend strategy is very successful. The most amazing thing for EDU is the company doesn't have any long term debt, and the working capital is outstanding, because current assets are much higher than current liability. The company's headquarters is located in Beijing where the capital of China is. Students can enroll for classes by different ways, they can go to learning center, or they can just choose classes on the internet. The statistics show that there are about 75% students who are currently studying abroad in America and Canada had attended EDU before, and other lots of facts show students' succeed after they received education from EDU. All of the factors make students who have dream to study abroad put New Oriental Education as their first choice. Day after day, the EDU's brand name has been known by almost every people in China, and also brand loyalty had being established among its customers. In order to attract great teachers to join and contribute to organization, EDU sign agreements to pay very high compensation. This leads to more and more teachers choose to work for EDU, who have professional skills and abundant experiences. The chart indicted that there is at least 10% growth in English training market and after school tutoring market. At this tendency, we could see the future for EDU is pretty bright and contain huge potential.
EDU have huge students' bases, but the capacity cannot load all of the students. Lots of students complain that it's hard to enroll class at their perfect timing and location. How about if EDU continue its capital bases? Seems it is not good idea. EDU's base is manage and operating company, if EDU keep extending its capital its profit margin may decrease due to the increase in operating expenses. Also, new oriental's business is more or less related to seasonal, the most profit season is 3rd quarter of the year (from May to August). For other seasons, the business far away behind than 3rd quarter, but the operating expanses in these 3 quarters are usually high.
What was a worse, third party have in the past brought intellectual property infringement claims against EDU based on the content of the books. For example, in January 2001, the Graduate Management Admission Council (GMAC), and Educational Testing Service (ETS), filed three separate lawsuits against New Oriental in the Beijing No. 1 Intermediate People's Court, alleging that they had violated the copyrights and trademarks relating to the GMAT test owned by GMAC and relating to the GRE and TOEFL tests owned by ETS by duplicating, selling and distributing their test materials without their authorization. But a final judgment issued by the Beijing Higher People's Court in December 2004 announces that EDU had not misused the trademarks of GMAC or ETS. However, although the company follows the PRC intellectual property law and respect the copyright in reasonable use, they cannot assure that every teacher or other personnel will strictly comply with these policies. This event has negative impact on the public figure and inevitable could result in increased expenses, loss in revenues.
The success of New Oriental business depends primarily on the number of student enrolments in our courses and the amount of course fees that our students are willing to pay. EDU really needs to increase its business level in 1st 2nd and 4th quarters, but this goal is very hard to achieve, because all students are in the regular seasons in primary school, middle school and high school etc. This problem is really hard to solve. Thus, their ability to continue to attract students to enrol in courses without a significant decrease in course fees is critical to the continued success and growth of their business. This in turn will depend on several factors, including the ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, expand geographic reach, and manage potential growth while maintaining the consistency of teaching quality. If we are able to continue to attract a significant amount of students to enrol in our courses, maintaining profitability seems guarantee.
As part of EDU business strategy, they have pursued and intend to continue selective strategic acquisitions of businesses that complement existing business. These strategic acquisitions are expected to allow EDU to extend the New Oriental brand to the large nonâˆ’English test preparation market. However, violent acquisitions and any future acquisitions expose EDU to potential risks, including business culture, risks associated with the diversion of resources from existing businesses, difficulty in successfully integrating the acquired businesses, loss in goodwill by inability to generate sufficient revenue to offset the costs and expenses of acquisitions.
On the other hand, from the inside of company, New Oriental school had being employed a number of new teachers recently, most of their ages are very young, there are even some just graduated from college. People start to worry about EDU's teaching performance level. The general questions are do they have ability to catch up new concept of teaching, do they equally skillful even in different location, do they have the same feeling on responsibility as a elder teachers do. The tests' content is changing overtime, can EDU offer much closer learning materials to students. From the outside of the company, more and more competitors entered this market in China. For instance, EDU face nationwide competition for their IELTS preparation courses from Global IELTS School, which offers IELTS preparation courses in many cities in China. They face regional competition for English for children program from several competitors that focus on children's English language training in specific regions, including English First. They face competition for "Elite English" program primarily from Wall Street Institute and English First, both of which offer English language training courses for adults in many cities. Wall Street Institute began providing highâˆ’end English language training courses to adults in major cities several years before EDU entered this market and enjoys a firstâˆ’mover advantage.
1.5 External analysis
From China's economic reform since 1978, Chinese government has recognized the importance of private schools, which can provide people more chances of education. Consequently, Chinese government enacted specific laws and regulations, such as '2004 Regulation for Implementing the Principles of stimulating Private Education', 'Law of the People's Republic of China on the Promotion of Privately-run Schools 2002' and 'The Principles of Stimulating Private Education 2002' to promote the private education (People's Daily & Chinese Government Official Web). With government's support, China's private education especially various training schools achieved great development in the past twenty years. According the statistics from Ministry of Education of China, there were more than 8,895,000 people participated into different kinds of training schools in 2005. In addition, Chinese government also encouraged Chinese local schools to cooperate with foreign educational organizations and to employ foreign teachers. As a result, 'Regulations of the Peoples Republic of China on Sino-Foreign Cooperative Education 2003' was made to protect and standardize such type of education.
Since China's economic reform, opening the door to the world was approved as a government policy and China has become increasingly incorporated into the international economy (Stockman, 2000). Today, China has the fourth largest economy in the world when measured by nominal GDP. The general economic output of China is $2.68 trillion US Dollars (National Bureau of Statistics of China). Just like Figure 2.1 shows that since the economic reform in the late 1970s, China's economy has successfully sustained a continuously high rate of annual growth. During the 1980s, this reform led to average annual 9.8% in agricultural and industrial output. China's economy regained momentum in the early 1990s. China's GDP maintained a 10% growth rate from 1990 to 1995 (Sachs & Woo, 2000). The economy slowed down in the late 1990s, influenced by the Asian Financial Crisis (1998-1999), with annual GDP growth of 7.8% for 1998, and 7.1% in 1999. China's GDP accelerated again from the start of new century with a growth rate of 9.1% in 2003. 9.5% for 2004, 9.8% in 2005 and 10.7% in 2006 (National Bureau of Statistics of China).
Figure 1 China's GDP Growth 1952-2005 (National Bureau of Statistics of China)
Great economic growth also means an earth shaking change to people's lives. As Figure 2.2 shows, China's per capital income increased dramatically in the past twenty years, especially in the urban areas. With a fast-growing purchasing power, many people paid more attention to the education market, especially the English training market.
No country can afford to neglect education. Chinese people have the social climate respect for teachers and education for thousands of years. Currently, Chinese government also has a high regard to different levels of education. According to the UNESCO, the public expenditure on education kept increasing since 1978 and there was 13.0% Chinese government spending goes to education in 2005 (Figure 2.3). On the other hand, past twenty years also witness the great increase of consumer expenditure on education. According to the 2006 Blue Book of China's Culture (Chinese Academy of Social Science), over fifty percent of Chinese family expenditure were on education in 2005. Education expenditure of Chinese consumers reached 476 billion RMB and ranked the fourth in all the purposes (Global Market Information Database & Euro monitor International, 2005). All these social factors may have a direct influence on the development of China's English training market.
Figure 3 China's Public Expenditure on Education and Distribution per Level (UNESCO)
In general, technological development brings a great changed promoted the English training industry. Firstly, the cost of training is reduced effectively; consequently more people could go to training schools. For instance, by using Internet and computer, people would not have to sit in the classrooms. It becomes possible to have a high quality training course even at home. In addition, it should be noted that the usage of technology is playing a more and more important role in both teaching and learning English. Interactive computer network allows students to test the result of learning without the risk of being punished for any mistake. Learning does not have to be a pressure. Computer-assisted language learning can reduce the anxiety of students and turns out to be a positive side of learning (Gates & Myhrvold & Rinearson, 1997). In fact, the research concerned with multimedia in English training is becoming a trend during these years. For example, University of Warwick provides a MA course of English Language Teaching and Multimedia from 1999 (University of Warwick). All these developments of technology should not be neglected in the examination of China's English training industry.
Section 2. What contribution to the entrepreneurial nature of New Oriental Education & Technology Group does make and how would this fit with traditional notions of entrepreneurship?
Through the analysis of this firm, we can move on to what contribution to the entrepreneurial nature of New Oriental Education & Technology Group does to make a difference. Oriental founder of one of the real fund founder Xu Xiaoping personal microblogging wrote, "Angel investors is cast, than the mode, the direction is important. He said that to see the project very important mode, and look at the entrepreneur and his team attracted me "statement, I'm impressed with the experience, passion touched me."
In Xu Xiaoping, entrepreneurial talent for the workplace, like the Olympic sports talents are fatal temptation brilliant expected. Entrepreneur success, there are three basic conditions can be estimated: intelligence, ability, charm.
He expounded to entrepreneurs intelligent charm Sanli - intelligence, including but not limited to formal education; capacity, practical skills, experience and know how; charm, to convince, the ability of the impact and inspiring others. "Three forces" of entrepreneurs can be strong or weak and uneven, but there must be a single or average score. Entrepreneurship competition is not the mode of competition, but smart charm Sanli competition.
Xu Xiaoping microblogging perspectives original:
Angel investment is invested. Important than the mode, direction. Because even the best mode, once the public operators, it will attract competition, the more the better mode competitors. Competition in the same mode rely on? Depend on people, ah! So, when I look at the project, very important mode (at the same time I do not understand this), but only whether the entrepreneur and his team attracted me with the statement, impressed with the experience, passion touched me.
Entrepreneurial talent for the workplace, like the Olympic sports talents are fatal temptation, brilliant expected. But as the Olympics, eventually boarded the podium and even into the Olympic field can be few - but as the Olympic Games, Liu Xiang Sun Chang, when they began to exercise training, who can say that they will be able to break the world record - but even went to the Olympic entrepreneurial success, there are some basic conditions can be estimated: intelligence, ability to charm.
Entrepreneurial success, is that entrepreneurs "intelligent charm Sanli - intelligence, including, but not limited to formal education; capacity, practical skills, experience and know how; charm, to convince, the ability of the impact and inspiring others. "Three forces" of entrepreneurs can be strong or weak and uneven, but there must be a single or average score. Secondly, see mode to see the project to see three of the most important. Entrepreneurial competition, not the mode of competition, but the smart charm Sanli competition.
In the modern world people can no longer expect large enterprises to guarantee them jobs for life. Individuals are increasingly expected to seek out their own opportunities, actively create value and behave ethically, rather than faithfully follow rules and routines set by others. In particular, today's young people need to learn to be enterprising, both when working for others and when setting up their own businesses. The success of New Oriental Education & Technology Group shows being enterprising involves taking responsibility for decision making, becoming increasingly self reliant, pioneering, adventurous, daring, dynamic, progressive, opportunist, ambitious and holding your values, as well as being able to initiate ideas and see them through into action.