The Economics of Online Education

De BISAWiki

As more and more universities are opening up to the idea of online proposition, it becomes important to raise the question: "Can on-line-education and learning be a profitable and sustainable enterprise? " To reply to this inquiry, let us explore the many crucial areas of this design which would determine the feasibility and economic sustenance of the e-thought. Some important guidelines to be considered are the demand, ability to supply, delivery and technology procedure. Click here

The need for the services are numerous as previously discussed and thus will be the accessibility to market gamers who could cater to this developing need. Consequently, the viability in the proposal sits exclusively in the problems of successfully delivering the services and choosing or quite designing a proper business design. It is essential to analyze the following factors to assess the economics of your strategy:

-Virtual school or. traditional college (in transformation)

-Marketing investment versus. offering experience

-Modern technology: costs and availability

-Procedure of delivering differentiation and quality

-Charge examination: Original vs. marginal

Digital College versus. Conventional College

There can be two diverse versions of an online schooling: an online on the web version and an existing university or college increasing its classic design to fit the online undertaking. The two designs include various economics. An online version begins from scratch and it has no preceding exposure to a conventional education and learning design; it readies curricula both itself or along with an existing instructional institution; furthermore, it has reduced infrastructure expenditures but concurrently no branding support.

It is relatively easy to start this business, but what matters are the quality of content and the process of delivery. For common modules or applications, this seems to be an excellent enterprise because the content would not really hard or expensive to develop or distribute. 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 will be the current colleges that will be stretching out their providers to e-understanding. These do experience difficult of taking on a company version which will not be suitable for their current proposal. You will find a risk of cannibalizing their present effective enterprise model. Both models, if to be continued simultaneously, need to be targeting reasonably different markets.

This design has an side spanning a new online setup regarding previously accessible content and present and effective brand; therefore the organization could demand reasonably limited. The design fails to require large charges as the content articles are accessible, and merely needs to be digitized; it is also reasonably much easier to produce requirement for the proposition, driving on the back of the current classic design. However, the institution still needs to work towards differentiating the model, not by the content but by the process of delivery.

Marketing Investment or. Promoting Encounter

The institution could very well decide to sell 10,000 levels each year or may similar to a quantity that is certainly far 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 experience and environment 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. "It took 37 years for TV to reach 50 million homes and it took the web 4 years to do the same., according to Lance Secretan" 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.