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Megastudy, founded in 2000, has enjoyed its top position in the Korean supplementary education market. Despite the company's short history, it outcompetes many other competitors primarily due to its emphasis on recruiting and providing courses by famous lecturers. Ju-eun Sohn, the CEO of Megastudy, was once a so-called 'star' lecturer in the privileged area of Gangnam, Seoul. Before the launch of Megastudy, students had no choice but to take classes in expensive private institutions if they wanted to learn from 'star' lectures. Sohn believed that if students could take classes from these lectures via the Internet, they could save times and money (Megastudy). From this idea Megastudy was born.
Since the company tried to scout and draw in famous teachers from across the country, Megastudy it is some referred to as the 'black hole' of the Korean education market. Using this strategy to attract students has been a great success and in a short time, the company became a giant in the Korean education market. Megastudy also diversifies its business with off-line institutions (Megastudy). The presence of Megastudy is so strong that the CEO is said to have greater influence on students' education than the Ministry of Education.
However, recently affected by the Korean government's anti-private institution policies, the company is currently planning to diversify its business globally. Megastudy will launch its first international branch in Guangdong province of China next month, and is expected to advance into the Japanese market in the near future (ChosunBiz).
Education System in Japan
The Education system in Japan is very similar to that of Korea. Japanese students go through 6 years of elementary school, 3 years of middle or junior high school, 3 years of high school and finally 4 years of college education. The first 9 years of education, which are 6 years of elementary and 3 years of middle school education, is compulsory, meaning that it is supported by the government and protected by education law. Unlike most Western countries, school year starts in April and ends in March of the following year. 99.98% of all children in Japan attend the nine years of compulsory education. The number of students in the classroom is gradually decreasing, due to both lower birth rate and improvements in the education system. 70% of teachers cover all subjects, as specialists are rare in elementary level education. Teachers in Japan not only teach children academic knowledge but also take responsibility of social interaction such as manners, how to speak politely and address adults properly, and how to get along with peers.
One notable feature of Japanese education is that nearly 90% of parents send their kids to Juku, or cram schools for additional private education. The main purpose of such private institutions is in order for their children to enter higher ranked middle schools, high schools and eventually universities. Entering prestigious private schools can help guarantee a student's path directly to an affiliated prestigious high school and often to an affiliated university. But in each of these cases an entry exam is required
Japan is an extremely competitive country and the field of education is no exception. Extreme competition in entrance exams resulted in overflowing private institutions and a social phenomenon called 'exam war'. Japanese parents are highly interested in their children's education and will go to great lengths for them to become 'winners' in the competitive society.
Reasons for entering Japanese market
In analyzing the appropriateness of Megastudy's entry into the Japanese market, it is vital to look at the overall culture of the Japanese education system, and also delve into the similarities between the Korean and Japanese education systems. Japanese, like Koreans have relatively high aspirations in academic achievement. This is partly due to the fact that both the Korean and Japanese cultures are strongly based on Confucianism, stressing academic status as a social identifier  (Nakamura, 2003; Stevenson & Barker, 1992). This leads to fierce competition to enter the prestigious Universities such as Tokyo University.
Thus there is high emphasis placed on the University Entrance exam, as this is heavily weighted in determining which Institution one can enter (Latchem et. al., 2008). This is in contrast to the European and North American systems (Nakamura, 2003), and is a defining factor that makes Japan a suitable market for Megastudy to enter.
The demand for supplementary educational services in Japan is so strong that they have become a vital part of the Japanese education system (Latchem et. al. 2008; PDK, 2003; Stevenson & Barker, 1992). What Megastudy is offering is perhaps a cheaper, non-physically constraining shadow education service that will play a similar role as some specialized Juku. Although there are many Juku in Japan, research has shown that they are generally expensive and largely unregulated, having a variety of enrolment periods, session times and in many cases entrance exams (PDK, 1993). The reason that Megastudy can be competitive with the already established Juku is primarily based on its freedom of delivery. With an online medium these restrictions are void, as students can enrol at any time and still have access to all the lectures and information that has been presented, and this can all be viewed at one's own pace. Students can also review lessons at any time or preview lessons before their high school gets the specific materials. E-learning in Korea has been strategically planed and implemented for a number of years, and has developed several efficiencies. Japan on the other hand has not focused on the e-learning industry (Latchem et. al., 2008). Megastudy is the most successful competitor in the Korean market and is an e-learning tool which includes advanced communication tools Japan has yet to fully utilize such as email, chat, whiteboard illustrations as well as lecture videos and aural recordings. This has been has been shown to have the potential to broaden one's social, intellectual, interest and career horizons, as this ability set can be used outside the classroom in various environments (McCarty, 2002).
Japan has a very efficient internet system established with almost 80% of the population using the internet, which is the second largest in Asia (Worldstats). Japan's Internet infrastructure is very well developed and is one of the fastest and most reliable in the world (Latchem et. l., 2008), and is a perfect base from which to operate an e-learning service, as there is no cause for concern over technology infrastructure issues.
Ultimately we can see that Japan has the demand and infrastructure to successfully support e-learning services, and with relatively few competitors in this sector, the potential for successful entry and expanding profit is considerable  .
Japanese Education Industry Analysis
Threat from firm entry
As the e-learning market is expected to continue its current growth in Japan, many new companies are attempting to enter the market. Besides the dominant players such as Megastudy, Vitaedu and Etoos, recently other big corporations such as Daekyo, SK and KT are also looking into entering the e-learning market by buying other e-learning sites or affiliating with other companies. At present the largest potential threat of a new entrant is Etoos.
Etoos was established in 2000 and merged with SK communication in 2005. The company is growing rapidly after the affiliation. Before the affiliation, the average daily sales were only 40,000,000 won but have now grown to over 200,000,000 won (Etoos). Etoos believes that this success was possible because of their marketing through sites like www.cyworld.com. Etoos is currently developing 'exciting homepage', through which members can share information and increase participation opportunity. They think that it will differentiate their service from Megastudy; which is viewed as a 'studying site'. Although Etoos has not announced an official plan for market entry, they have recently voiced concerns related to Japanese education market.
There are several barriers restricting entry into the Japanese market. Firstly, new entrants need at least 0.1 billion yen to open a business. They also must register with the Japanese government and obtain a business visa, which can take up to 3 years (KOTRA). After that, the new entrant can start business, subject to business taxes, sales taxes, residential taxes and consumption taxes.
Therefore, although entry into the Japanese market is relatively easy, there are some restrictions and lengthy procedures that may delay competitors. Furthermore Japan's unique culture may also create problems for potential entrants. Megastudy's major competitor Etoos and other international firms seem as yet not ready to enter the market, which means Megastudy has the potential to build market share and competitive advantage before threats from entry increase.
There are four primary competitors in Japan's e-learning market for students aged from 7 to 18. These competitors are divided into three categories. Type A and B target elementary and middle school students. For type A companies students are voluntarily required to study materials posted on the website and no VOD (Video On Demand) service is provided. Type B companies however provide a two-way studying system through interactive instruments. Finally type C companies are those which target university entrance exam applicants, and these firms generally provide VOD service (KOTRA2).
< Japanese E-learning companies for students > (KOTRA)
- the CATS System
- 200,000 exercise questions
- two-way studying method
TOSHIN N SCHOOL
- VOD service
TYPE A example: [email protected]
This 27-year-established company provides mass study materials for reviewing adjusted to each student's progress of class work in school. A study manager checks each student's self-studying progress. Students can input questions into the so-called CATS SYSTEM, and will be provided with similar questions for further review ([email protected]).
Type A example: MANAVICS
This company provides a studying system which aims to help students better understand the contents of school textbooks. Students can review their weak points by solving questions in the 'question pool', where over two hundred thousand exercise questions are uploaded (MANEVICS).
Type B example: [email protected]
This system provides a man-to-man class with select teachers. Students can take classes from 9am to 1am every day. With a headset and a specially-designed tablet (pictured left), students are able to take an interactive class with their teachers. The total number of enrolled students record 840,000  ([email protected]).C:\DOCUME~1\ê¹€ëª…ì˜¥\LOCALS~1\Temp\UNI00000ee85f17.gif
Type C example: TOSHIN D SCHOOL
In this company which has a similar system with Megastudy, VOD lectures are made in advance. Students can choose classes they want to take and these are available at any given time. Because lectures are presented via VOD they be reviewed, previewed, or paused. Students are required to choose classes consisting of twelve levels to take subsequent lectures (TOSHIN).
Megastudy's primary competitiveness in the Japanese e-learning market is its focus on well-known lecturers through a VOD service. Since the three competing companies for elementary and middle school students do not use VOD service, Megastudy will be differentiated in this market segment. Moreover, in the market for university entrance exam applicants, the most profitable market, there are very few online competitors. This means that Japanese students for university entrance exam are accustomed to taking classes from off-line institutions. As well as competing directly with the other players, Megastudy could think about a method to attract more students to participate in online tuition.
Threats of Substitute Products or Service
The size of the Japanese education market was about 2.624 trillion Yen (2009) with the e-learning market at 116.2 billion Yen, approximately 0.5% of the total education market.(KOTRA2) Three substitutes should be considered when analyzing the Japanese e-learning market. These are public education, private institutions and personal tutoring. However, because of the failure of the Yutori policy, education policy which reduces the hours and the content of the curriculum (Wikipedia), people have little faith in public education. Recently, the number of private institutions has been decreasing as supply is greater than demand for these services. This has led to price decreases while the cost of the private institutions have been increased due to institutions being required to comply with new protection against invasion of privacy and student's safety regulations. Because of these reasons private institutions are avoiding expansion of their institution. As a result, we could say that the threat of substitute of the products or service is moving toward middle from high.
Bargaining Power of Buyers
We can consider the bargaining power of buyers from two perspectives. First we can consider the bargaining power in e-learning market and secondly we can consider the bargaining power in total education market.
If we only consider the bargaining power in e-learning market, we could say it is low. The reason is because there is only a few competitors in the market.
However, the bargaining power of the total education market is high. As we mentioned before, the e-learning sector is only 0.5% of the total education market and substitutes are relatively high. Buyers have access to many other companies which maybe problematic for entering firms. Buyers influence which companies are successful and which are not, but in the e-learning sector we will have a higher level of control due to the relatively low number of competitors.
Based on our analysis, we recommend Megastudy to use a Joint Venture as the entry mode. There are three reasons for this choice. The first reason is that Megastudy does not have any experience in the Japanese market. Even though Korean and Japanese education market seem to share similar traits, content is bound to vary and this content knowledge is vital to success. There are many things to consider in the operational field online education such as hiring well-known teachers, marketing channels, quality control and so on. By using a Joint Venture with a well-known Japanese education company, it will be easier to work in the Japanese market and avoid potential problems due to lack of knowledge. This will also make entry and commencement of the business much more efficient.
Secondly, there is too much risk to bear if Megastudy decides to enter by itself (as wholly owned subsidiary). Megastudy is a household name in Korea, well known for their great teachers, well organized pages and high quality lectures. But in order to start all over from a different country where it has no experience would be a very risky move to make. Furthermore the costs of hiring assets, undertaking market research to provide adequate materials and hire well-known lecturers will be extremely costly without the know-how of a local partner.
Thirdly, even though Megastudy needs help in entering the market, it still needs to have some control over processes and management. Megastudy has been operating e-learning service for quite a long time and has a great deal of knowledge and efficiencies regarding how to offer the best learning experience to the students through the internet. These strengths are difficult to export or license, and there is the possibility of imitation or leaking of knowledge to other firms. Megastudy needs a level of control in order to assert these strengths in a new market environment.
Through a joint venture we propose to create a new subsidiary with Eikoh Inc.. Eikoh, established in 1980 is considered the most outstanding education company in Japan. It owns approximately 300 off-line institutions throughout the metropolitan areas of Japan  (EIKOH).
There are many segments in the Japanese market Megastudy has the potential to participate in, however initially we will choose to enter the college entrance exam market, and expand our services to other segments such as lectures for younger students once we are well established. The reason we chose to enter this segment first is because it is the biggest market segment from which we can build our reputation most effectively.
Furthermore, Eikoh does not offer college entrance exam lecture services online, thus Eikoh is likely willing to embark on a joint venture to expand its services and capture a greater market share through online medium  . It may also be able to take advantage of Megastudy's technical knowledge and apply this to other online systems for its numerous other services.
Our strategy will consist of two main phases. First Eikoh-Megastudy  will enter Japanese market providing a Beta service to students already enrolled in Eikoh's jukus. That way, data can be collected and analyzed to determine the successfulness of the service. This data will also allow the firm to identify and fix any potential problems. Additionally, student's opinions can be gathered and services adapted to best meet the needs of the consumers. Secondly, if the firm is successful in the Japanese market entry, it can expand its services. Further initial strategies to help market Megastudy area as follows; first on the promotion level, Megastudy will hold an Info Session regarding recent trends on college entrance exams and how the service provided by Megastudy can help improve student's grades. Megastudy can also utilize Eikoh's distribution channels to help advertise its
products. Also it will provide some sample lectures online and 1:1 consulting service regarding the college entrance exams. Secondly on the product side, Megastudy prides itself on providing lectures from 'star' lecturers. It can also offer a variety of lectures based on different needs of the students. For example it can offer lectures based on specific academic levels or the needs (including text explanations and problem solving skills). Price wise, Eikoh-Megastudy should not aim for price leadership, as it is offering a product that faces relatively little competition. Price should be set slightly above average to illuminate the premium service and star lecturers that will be offered. Providing a package deal that offers discount prices in order to attract new students to the Eikoh-Megastudy subsidiary should also be considered.
Ultimately Japan has a highly competitive education system that derives demand for supplementary education. Technological infrastructure makes Japan one of the most suitable countries for which internet based services can thrive. Thus it is logical to conclude that e-learning education services have the potential to be very successful. Due to the relatively low number of competitors, and Megastudy's expertise in this particular are, we strongly believe entering the Japanese market is a strategically viable and beneficial move for Megastudy to expand its operations and profits.
Entry mode selection (Global Business Today)
-Tight control of operations
-No risk of losing unique strength to a competitor
- Bear full cost and risk
- Slower to implement
- Reduce costs and risk of establishing foreign operations
- May prohibit movement of profits from one country to support operations in another country
- Overcome restrictive investment barriers
- Reduce development costs and risks of establishing foreign enterprise
- lack of control over marketing and strategy
- Inability to realize location and experience curve economies
- Benefits from the partner's knowledge
- Shared costs/risks with partner
- Shared ownership can lead to conflict
- Difficult to find an appropriate partner
A Japanese partner ,Eikoh's total revenue in 2009 (Bloomberg businesweë‹¤)
Education Companies in JASDAQ
TOTAL REVENUE in 2009
(million japanese yen)
Nagase Brothers(TOSHIN N SCHOOL)
TIE(Tokyo Individualized Edu)