By Maryanna Abdo and Ashwin Assomull –
Whether private or public, for-profit or non-profit, universities around the world are under pressure to manage costs and increase revenues. In the face of cuts to public funding and increased competition, most universities are reviewing their approaches to research budgets, scholarships, and faculty appointments.
However, too often, universities focus purely on cost savings – typically by investing in major overhauls such as streamlining back-office systems, re-negotiating contracts, or upgrading technology. However, what many seem to neglect are strategies to increase their ‘top line’.
Perhaps the single most important strategic issue for universities currently aiming to increase top line revenues is internationalisation. This is not only an area where universities can increase enrolments and revenues; internationalisation can also positively affect institutional reputation, influence, and ranking – valuable factors in long-term institutional health and growth. In what follows we explore the internationalisation opportunity and address specific and practical ways that universities can take advantage of globalisation in education.
Western degrees still dominate
The first observation is that at present Western, Anglophone universities are the option of choice for most internationally mobile students, and can therefore take most advantage of this opportunity. Many students are seeking English-language degrees to access education relevant to international business and government. Western-style education is often also valued by both students and their future employers because it is seen to offer the critical thinking and problem-solving skills that are so valuable in today’s global economy. Even in the United Arab Emirates (UAE), which is a major site of branch campuses for Western institutions (with 35 branches as of January 2014) the most popular degrees are from private Western universities, which have grown at 18% in enrolments p.a. between 2009-2012.
In 2012, fee-paying international students comprised 2% of students enrolled in the US, 14% in the UK, and 19% in Australia.1 Together these three nations are the world’s largest destination countries for internationally mobile students. The US has roughly 30% of this market, the UK 17%, and Australia 15%.2 Canada is increasing its efforts to recruit transnational students, with 11% enrolment growth from 2007-2011.3 Other English-speaking markets, such as GCC countries, Singapore, and Malaysia, also have strategies to develop as education hubs. However, there is little threat that the key destination countries will be unseated given their strong market position.
Asia offers significant opportunities for international student recruitment
Our second observation is that universities should start by looking to Asia as the engine of their internationalisation strategy. While students from all over the world are increasingly mobile, the top destination countries currently receive most of their students from Asia. Nearly half of US international students, a quarter of UK international students and more than 60% of Australian international students are from Asian countries. Between 2005 and 2011, overseas enrolments of students from China, India, South Korea and Malaysia increased by 9% year-on-year.4
Moreover, the opportunity should continue to grow, at least in the short-term. According to Parthenon’s analysis of the market opportunity, Chinese student flows overseas are expected to grow at ~13-15% p.a. until 2018.5 This growth is driven by the increasing affordability of higher education for Chinese students due to their country’s rising affluence and economic growth. Chinese students choose to study overseas because of better quality education in foreign universities (just two domestic universities are currently in the global top 200). Furthermore, seats in Chinese universities are limited, with four applicants for every Bachelor’s place, intensifying undergraduate competition.
Young, aspirational, and internationally mobile, Asian students are likely to continue to lead their international peers in their desire to study abroad. This trend is also supported by rising affluence levels across Asia, smaller family size (correlated to higher spending on education per child), and a shortfall of university seats. For example, at current rates of college capacity growth India will have more college-uneducated adults in 2020 than it does today; domestic higher education growth has not kept pace with aspirations and population growth.
Engaging with study abroad agents is key to driving international enrolments
A third point about internationalisation is that study abroad agents play a vital role in student decision-making about international study, and successful universities will have a clearly defined strategy for engaging such agents. Particularly in Asian countries, study abroad agents are an important part of the higher education landscape, supporting families in the university selection and application process. Recent Parthenon research indicates that 50% of Chinese students pursuing international education use agents in their study abroad decision-making process. This figure has remained stable over the last few years.
Our surveys also reveal that for both students and parents, agents are among the main information sources and influencers. Because agent counsellors are incentivised on the basis of their success in placing students, the more familiar they are with university brands, the more effective they can be in identifying appropriate options for the students that they advise.
One of the challenges that universities face is the need to deliver ongoing and frequent training to the counsellors that advise students and parents. These counsellors are typically in their mid-20s, and the vast majority will not have visited the destination countries (let alone the universities) that they will be describing to families. Moreover, turnover is high, with 40% of counsellors at any one time having less than one year of experience. This means that counsellors require continuous training to build familiarity with university brands. They also value support at fairs and exhibitions as well as access to good marketing materials to advise students. The most effective universities will also visit agents in their network regularly to build familiarity and rapport, refresh training, and provide information on the university offering.
Developing partnerships with pathway providers can support internationalisation
The fourth key area for internationalisation is the opportunity to engage with Pathways providers. These make up a vital part of the internationalisation landscape, providing one-year ‘bridging programmes’ for international students enrolling overseas. Pathway programmes are offered at the destination country campus, often within university buildings and sometimes sharing faculty. They support international students to access the foundational knowledge and skills required to begin their first year at the destination university. For universities, pathways providers are partners who can help them secure a guaranteed number of qualified students from target geographies and ensure that they are prepared to a standard that supports them to be successful when enrolled.
What about branch campuses?
Finally, branch campuses are an increasingly important area for internationalisation. Many institutions are setting up branches abroad. For example, NYU Shanghai opened in August 2013, Duke is opening a joint venture campus with Wuhan University in Kunshan, China, and Yale-N.U.S. College in Singapore opened in July 2013. Foreign branch campuses allow universities access to a wider segment of students who may not be able to afford to go abroad but value a foreign degree. These branch campuses will have lower tuition fees than the home campus, but will typically still have higher fees than local institutions. Successful branch campuses tend to offer employability-related courses and result in higher salaries post-graduation (relative to local competitor offerings).
Internationalisation can confer significant financial benefits to universities by driving enrolments and revenues. Furthermore, international students tend to bring in higher marginal profits per individual relative to domestic students. However, there are a number of other benefits related to internationalisation like enhanced institutional reputation, improved ranking, and a more diversified student body that should also be considered.
Institutions that invest resources behind creating a clearly defined strategy will be able to escape the cycle of cutting back-end costs and instead focus on re-investing top line revenues in areas that allow them to achieve their core mission.
Maryanna Abdo is Director of Emerging Markets Education at The Parthenon Group.
Ashwin Assomull is a Partner in the International Education Practice at The Parthenon Group.
The Parthenon Group is the leading advisor to the education sector globally, having completed over 900 education sector projects across more than 70 countries in the last 10 years.
- Parthenon analysis of multiple data sources including OECD, AEI, HESA and IIE.
- Parthenon analysis of multiple data sources including OECD, AEI, HESA and IIE.
- Growth projections were modelled based on study abroad penetration in comparison countries, analysis of growth drivers, and analysis of historic growth.