The Economics of On the internet Training

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It becomes important to raise the question, as more and more universities are opening up to the idea of online proposition: "Can on the internet-training be a sustainable and profitable business? " To answer this inquiry, let us explore the different significant elements of this model which could choose the feasibility and economic sustenance in the e-concept. Some important factors to be considered would be the demand, power to supply, technology and delivery approach. Graduate School of Economics IPB University

The interest in the service is numerous as previously discussed so is definitely the option of market gamers who could cater to this increasing demand. For this reason, the viability in the task sits entirely about the troubles of successfully giving the support and choosing or somewhat designing a suitable business model. It is crucial to analyze these factors to assess the economics of the thought:

-Virtual university versus. conventional university or college (in alteration)

-Marketing commodity vs. promoting expertise

-Technologies: costs and availability

-Procedure for providing quality and differentiation

-Cost analysis: Initial vs. marginal

Online University or. Traditional College

There could be two various versions of an on-line training: an online on the web model plus an current university growing its conventional design to allow for the web based proposition. Both models have distinct business economics. An online version commences from the beginning and has no prior exposure to a normal education design; it prepares curricula either by itself or together with an existing educational organization; additionally, it has very low system expenditures but concurrently no advertising support.

What matters are the quality of content and the process of delivery, although it is relatively easy to start this business. For common units or applications, this is apparently an effective enterprise as being the content material would not really hard or expensive to produce or deliver. However, care needs to be taken to ensure the target segment for the program is carefully identified, as this model is not only competing with traditional models but also with online propositions of existing reputed educational institutions.

On the reverse side are definitely the existing universities that would be stretching out their solutions to e-discovering. These do experience challenging of following an enterprise version which might not be compatible with their pre-existing proposal. There is a probability of cannibalizing their current effective business structure. If to be continued simultaneously, need to be targeting reasonably different markets, both models.

This model has an benefit spanning a new online set-up in terms of already available content material and pre-existing and profitable brand; therefore the establishment could cost reasonably limited. The design is not going to call for big fees as the content articles are accessible, and just has to be digitized; it is also relatively simpler to create demand for the undertaking, riding on the rear of the present standard product. The institution still needs to work towards differentiating the model, not by the content but by the process of delivery.

Marketing Investment versus. Offering Encounter

The establishment might decide to offer 10,000 levels annually or may such as a amount that is certainly lower (i.e. < 200). The question is whether the institution is attempting to focus on the quality of the education and students or is merely happy with building the numbers and playing on cost. Online education does provide an opportunity to reach the masses with very low marginal costs but simultaneously could affect its reputation.

Though it is extremely hard to replicate the environment and experience of a traditional model, an attempt to get the program experience as close to the traditional experience would be considered a good differentiating factor. From the content delivery process reaching the end user, even though this experience would not stem from the content of the program as it is easily replicable. Again, the type of module and the class of customer segment would decide upon the extent of the "experience" required to be instilled in the program.

Technology: Availability and Costs
The complete business idea of online education is dependent on technology. The base of this technology is the internet which is the fastest growing tool in terms of number of users. According to Lance Secretan, "It took 37 years for TV to reach 50 million homes and it took the web 4 years to do the same." Though the base technology (the internet) does not seem to be a constraint, the bandwidth available to support the online education is questionable. Technology such as streaming audio and video requires huge bandwidth which may not be a constraint for institutions but for end users.

In most countries, the internet is at a nascent stage. More importantly the bandwidth to support "virtual reality" is not available. Even in developed countries it would be very expensive to have interactive and synchronous video lectures or sessions.

Though the pace of technological advancements is increasingly fast, and thus the bandwidth problem would soon be resolved, it may still be expensive to have a model that provides a similar learning experience to a traditional model. Therefore, the educational institutions would need to strike a balance between the "experience" and the cost depending on their target market segment(s).

Delivering Quality and Differentiation
In order to differentiate itself from others, it would be essential for an institution to focus on the process of delivering value to the end users. Educational institutions, keeping in mind their target market(s) and the available technology, would have to decide on the extent to which they should replicate or rather extend the strengths and benefits of their existing traditional model, if any, to the online proposition.

Aspects such as how to hold online lectures or how to transfer digitalized case material or even how to structure the program to make it more effective, would need to be evaluated.
If the proposition is to sell the program as a commodity, it would be better to conduct it in an asynchronous fashion, focus on delivering standard requirements, and cut down costs rather than add a new "experience" to it. This excludes premium programs with higher fees. These ones would be targeting people who are willing to pay for the technology needed to get a real experience of learning.

Cost Analysis: Initial vs. Marginal
The costs associated with an online proposition are low when compared to the ones of a traditional model which requires much greater infrastructure. The profits would depend upon the economic rent that could be derived from the services offered. If the institution has sufficiently differentiated itself from its competitors, this economic rent could only be sustained in the long run.

The online model also has very low marginal costs compared to the initial set-up expenses. Unlike a traditional model which is limited by the size of its buildings (physical infrastructure) or the number of its faculty members, the capacity of an online model can be stretched to a great extent. This would help reduce marginal costs until a further increase in users requires significant investments in technology upgrades.