economics project group13

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ECONOMICS PROJECT REPORT

PROGRESSIVE STUDY OF AN EDUCATIONALINSTITUTE

MARKET STRUCTURE AND DEMANDFORECASTING

UNDER THE GUIDANCE OF

Prof. Sangeeta D. Mishra

Submitted by :Kedar Joshi FPM9004

Nikhil Bansal ABM05015Pradipta Dasgupta ABM05016

Saini Das FPM9009 Tapas Mohapatra PGP24299 YESSVSDPK Kumar FPM9014

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ACKNOWLEDGEMENT

We express our sincere gratitude to our mentor Dr. S DMishra for her guidance, patience and encouragement throughout the development of the report. We are indebted to her for themotivation and freedom enjoyed throughout.

We would also like to thank Mr. Satyam Sahai , Director Career Launcher, Lucknow for his cooperation and providing us withthe required data to complete our analysis.

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TABLE OF CONTENTS

1. Background and Introduction

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2. Objectives 6

3. Importance of study 7

4. Data Collection 8

5. Analysis and Interpretation of results

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a. Table showing number of students

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b. Table showing fees and revenues

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c. Graph for Market Share in Sales (Students)

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d. Graph for Revenue Share 11

e. Price vs. Demand Curve for institutes

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f. Production stage for CL

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g. Regression graphs 20

6. Summary/Conclusions 25

7. Limitations 26

8. Suggestions 26

9. References 26

10. Questionnaire 27

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BACKGROUND

A lot has happened in India in the short span of twenty to twentyfive years. With more and more of privatization there has begun asudden onslaught of various employment opportunities. More and

more of students are now opting to obtain a degree or diploma inMBA and pick a lucrative job. It is an extremely booming sector asthis degree is one of Indias most respectable and thus most soughtafter. Thus jobs for MBAs in India have now become quite a trend tofollow. It is indeed a yardstick to find out about managerialcapabilities and a green signal to more money spinning jobs in Indiaas well as abroad.

The very fact that there has been a tremendous increase in thenumber of colleges and private institutes teaching MBA shows thatthere is a profitable job market for the aspirants for this subjectincluding jobs for new MBA graduates. The number of applicants forinstitutes like IIMs has also increased a lot. If one gets admission inany one of the premier MBA institutes in India, it is an inevitable factthat they land up getting good jobs and of course bigger paycheques. Thus it is a perfect opportunity of development forstudents hailing from a middle class background. MBA jobs in Indiaprovide gigantic challenges for the generation next as they will notonly be the jobs of the future, they will be the most perfect andmoney-spinning jobs of the future.

The major institutes in India which have created their own brand inthe coaching industry are T.I.M.E, Career Launcher, IMS, PT, CareerForum and Cliff High. These institutes started as local players andthen slowly started creating impact in the market. They have nowbecome national players, though they are strong in the region fromwhere they have started. They are now franchising all across India.

T.I.M.E has more than 60 centres all across India. Similarly, CareerLauncher has close to 60 centres. IMS has 45 centres across India.PT is having close to 40 centres.

This has led to the rapid growth in the number of studentsinterested in the preparation of various entrance examinations.Expected No. of Students appeared for CAT in 2008 300000Students appeared for CAT in 2007 250,000Students appeared for CAT in 2006 190,000

Despite such slim chances, industry players believe more studentswill try to crack CAT as the job situation is not at its best. Theincrease in the number of students taking the CAT exam this yearwill be around 20 per cent over last year when an estimated250,000 students appeared for the exam.

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We believe more students will appear for CAT this year consideringthe slowdown and the fact that job will be at a premium. We hadseen a similar situation in 2001, when there was an almost 100 percent jump in the number of students appearing for CAT, said ShivKumar, director, Career Launcher, an MBA test-preparing institute.

--- Career Launcher

Our focus is on the practices followed at Career Launcher (CL),Lucknow which is a franchisee centre of CL, India Ltd. Our analysiswill include market structure, demand analysis and forecasting andtheory of production for various coaching institutes at Lucknow.

So, we will first look at practices followed at CL, India and then morespecifically at our topic of study CL, Lucknow.

Career Launcher India Limited (CL)

Career Launcher India Limited (CL) is Asias leading educationservice provider with presence in over 130 locations across India,Middle East and the United States. CL provides test-prep educationto enable school and college students gain admission to professionalcourses. It is also actively involved in the field of mainstreameducation, mainly through its growing network of play schools andsecondary schools.

With its focus on the students needs, its foundation firmly set on its

Core Values, and technology as a key driver, CL strives to enablepeople to realize their potential and make their dreams come true.

Today over 400+ academicians and professionals around the worldwork with CL to counsel and groom over 50,000+ students across130 locations in India, Middle East and the US.

Academic Philosophy

The academic philosophy at CL revolves around its students.Students come to CL with a dream to achieve an academic goal. Thededicated counsellors and faculty at CL only help them realize theirstrengths and weaknesses and chart out a path accordingly to reachtheir objective. The goal-setting process forms the core of academicdelivery in any CL program. The faculty at CL work as facilitatorrather than a teacher. They mentor, guide and assist learning. Thecentral research and development team designs and validates eachprogram with a pilot batch of students before the program islaunched in CL.

The study material is prepared and continually updated in-house at

the Phi Lab applying Instructional Design theories. In a typicalacademic year, highly qualified subject experts put in over 30,000

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hours of work, refer to over 1000 books and more than 70,000pages of content and create distinct copyrighted content for thevarious programs of CL.

CL Lucknow

Mr. Satyam Sahai, director Career Launcher, Lucknow started thisinstitute in 2002 with 60 students. He is also an alumnus of MDI,Gurgaon. CL Lucknow now caters to about 1800 students. It haswon the best Business partner centre for the last three years. Also ithas won the best academic centre for getting 10% of its studentsinto top 15 b schools. He is leading a team of more than tenacademicians apart from the administration and the marketing staff.Mentoring is a process integral to the existence of CL. Experiencedmentors counsel the students at CL, help them set goals, review andtrack progress and guide them accordingly. The mentors at CL arereachable round the clock and are ever ready to help their studentsin every aspect.At CL the mentors believe that students succeed singularly becauseof their own efforts. CL only mentors its students and provides themwith a learning environment to bring out the winner in them. Theinputs from CL remaining the same for each student, successdepends on the aspiration, tenacity and perseverance at theindividual level.Each of the mentors is an enthusiastic contributor towards our corepurpose help students realize their potential and make their

dreams come true. So, all CL-ites are encouraged to be inside theclassroom to mentor, interact and understand our students. Over-achievers in their respective fields, CL-ites are selected following astringent procedure. Once a part of the CL family, you can expectto face a new challenge everyday and have complete freedom tomake your own choice while pursuing this dream called education.

Our expert mentors and faculty are qualified engineers, eminentprofessors, PhDs and management graduates from prestigiousinstitutes such as IITs, IIMs, NITs and other top-notch universities.

They continue to go through rigorous training, brainstorming andanalysis sessions at our training school - the Inner Circle, CP, NewDelhi.

OBJECTIVE OF OUR STUDY

This project aims at analyzing the functioning of CL, Lucknow in pastand present vis--vis to its desired functioning in future.We have tried to achieve following objectives through our study:

1. The brief history of CL, India and more specifically CL,Lucknow.

2. The practices being followed at CL, Lucknow

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3. Changed scenario due to the emergence of new localcompetitors

4. Micro-economic analysis of CL and suggested future courses of action.

Methodology adopted:

To achieve objective 1 and objective 2, we took help of informalinterviews besides the information gathered from various sourcessuch as internet, newspaper, articles etc. It also involves the growthof CL, Lucknow with respect to its competitors. This will also involvea thorough study of the impact of CL, Lucknow in the arena of management entrance examination sector in Lucknow. This willpresent the past and current standing of CL.

To achieve objective 3, we will collect the data of the other playersin the market and study it in the overall perspective. The next stepinvolves trying to explain the data collected and collate on the basisof the various parameters like customer base, customer satisfaction,economic indicators, geographical distribution .The data collectedwill be analyzed using various micro-economic tools likeAdvertisement Elasticity of demand of CL with respect to theindustry and other players. We would also try to explain what arethe most important variables affecting the performance of CL withthe help of Co-efficient of determination. We will try to explain thisusing the indifference curve.

To achieve objective 4, we will use the methods pertaining toforecasting. This will be done using the past performance of theorganization.

IMPORTANCE OF OUR STUDY

The Market size is growing at a decent rate but at the same time italso becomes price sensitive. Awareness in the rural belt has alsogrown up. The major push in the growth is provided by theinclination of the neighbourhood rural belt. The large chunk of students have realised that CAT is above their level and hence theyare keen for the preparation for MAT. MAT segment has seen a hugegrowth in the recent past. MAT segment is likely to grow in future asthe difficulty level of CAT is increasing.

In Lucknow, the main competitors are Time, IMS, & ICC. There aresome new faces which have come up like AMS, P.T. and CF. So, themarket is facing fierce price versus quality war. On one handbranded institute like IMS have reduced their standard price byapproximately 40% and got the good number of students and on the

other hand institute like Career Launcher are still increasing priceand even they got the good number of students. The local and small

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MICROECONOMIC ANALYSIS OF DATA

Data of various coaching institutes in Lucknow for CATpreparation:Table showing the number of students and the volumemarket share of the big firms in the last three years.

Number of Students2006 2007 2008

Number %volume

Number %volume

Number %volume

CL 800 24.62 1200 25.81 1400 24.56 TIME 1000 30.77 1200 25.81 1300 22.81IMS 350 10.77 900 19.35 1800 31.58ICC 600 18.46 400 8.60 350 6.14AMS 300 9.23 350 7.53 300 5.26

CF 200 6.15 250 5.38 200 3.51PT 0.00 350 7.53 350 6.14

Total 3250 100.00 4650 100.00 5700 100.00Revenue

2006 2007 2008 Revenue % Revenue % Revenue %CL 16,000,0

0030.36 25,200,0

0035.34 33,600,0

0039.39

TIME 18,000,000

34.16 24,000,000

33.66 22,100,000

25.91

IMS 5,600,000

10.63 7,200,000

10.10 16,200,000

18.99

ICC 8,400,000

15.94 5,200,000

7.29 4,200,000

4.92

AMS 3,300,000

6.26 3,500,000

4.91 2,700,000

3.17

CF 1,400,000

2.66 2,000,000

2.81 1,600,000

1.88

PT 0.00 4,200,000

5.89 4,900,000

5.74

Total 52,700,000 100.00 71,300,0 00 100.00 85,300,0 00 100.00

Table showing the revenue and the revenue market share of the big firms in the last three years.

Data for fees and number of students for CL for the lastthree years

Fees Number of Students2006 2007 2008 2006 2007 2008

CL 20000 21000 24000 800 1200 1400 TIME 18000 20000 17000 1000 1200 1300IMS 16000 8000 9000 350 900 1800ICC 14000 13000 12000 600 400 350

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AMS 11000 10000 9000 300 350 300CF 7000 8000 8000 200 250 200PT 12000 14000 350 350

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Market share in number of students in last three years:

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Market share in sales revenue in the last three years:

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Price Vs Demand(Demand in X-Axis and Price in Y-Axis):

From the graph its evident that CL is having an increasing demandcurve which suggests that with even increased price the demand forits product is increasing. This is due to the fact that CL has been aplayer in this market since long and has employed a goodadvertising strategy to attract the customers. This shows a directcorrelation between CLs advertising strategy and its revenue. Alsofrom the survey data it seems that the students studying there arehappy with the infrastructure and the faculty. So this can be one of the reasons why CL is having an increasing demand with evenincreased price.

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Initially TIME also had an increasing demand curve which suggeststhat with even increased price the demand for its product increasedand this could be due to its business strategy. However, later withincrease in price the demand for its product decreased whichsuggests that the competition due to other players increased and

they either decreased there prices or provided better qualityproducts. This shows that consumer is price sensitive as far theproduct of TIME is concerned.

From the graph its evident that ICC is having an increasing demandcurve but the demand is increasing at a decreasing rate. So it canbe inferred that if ICC continues to increase its price the demandmay start decreasing. So ICC should try to increase the quality of itsproduct as well to sustain in the market.

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Production Stage for CL:

Each firm goes through three different stages of production. Firststage is of increasing returns where the profits increase at anincreasing rate with addition of inputs. At the second stage theprofits increase but at a decreasing rate which is called the stage of decreasing returns. In the final stage the profits decrease withincrease in the inputs which is called the stage of negative returns.After analyzing the data we have drawn the conclusion that CL isgoing through the stage of increasing returns of production. Its

increasing the inputs in the form of faculty and infrastructure and atthe same time the revenue and profits are also increasing. So it willbe advisable for CL to continue increasing the inputs as it will lead toincrease in profit.

Market Structures Analysis:

A Brief description about the various market structures: The different types of market structures are:

i) Perfect competition

ii) Monopoly

iii) Imperfect competition

a. Monopolistic competition

b. Oligopoly

Key Features of each market structure:Perfect competition:

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- Many firms Lots of firms are competing for consumerpurchases

- Homogenous products

- Low-entry barrier- High information availability for both consumers and

producers.

Monopoly:- No close substitutes of products

- Firms are price makers

Monopolistic competition:

- Many producers and many consumers in the given market

- Consumers perceive that there are non-price differencesamong the competitors product.

- There are few barriers to entry or exit

- Producers have a degree of control over price.

Oligopoly:

- Small number of sellers

- Each firm is aware of the action of the other

- The decisions of one firm influence and are influenced bythe decision of the others.

The market in which Career Launcher, Lucknow operates:

The CAT coaching market is a fast growing market. This has been amanifestation of the huge hype associated with MBA as a career.

The popularity of the exam has sky-rocketed with each year seeinga jump in the number of candidates appearing for the exam by

around 65 percent. This has resulted in increased demand for thecoaching centres for CAT.

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The market in Lucknow for the coaching centre itself has seen asignificant rise in the number of students enrolling for the courses.

Number of players in the market: The total number of players in themarket is approximately twelve. The main competitors in the marketare:

- IMS

- Time

- ICC

- AMS

- CF

- PT

*the total student enrolled include students enrolling only to the 6institutes.

The total enrolment in courses saw a jump of around 31 percentfrom 2006-2007.

The pie chart below shows the chunk of market Career Launcher,

Lucknow enjoys in 2007.

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The price structure of the market in the last three years can beobtained from the table below:

Fees2006 2007 2008

CL 20000 21000 24000 TIME 18000 20000 17000IMS 16000 8000 9000ICC 14000 13000 12000AMS 11000 10000 9000CF 7000 8000 8000PT 12000 14000

Market Structure from the Economics point of view:

The market structure for CAT coaching centres in Lucknow can be

classified as monopolistic competition on the borders of oligopoly.

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The features of the market which categorize the market asmonopolistic competition are as follows:

1) Large number of firms and large number of buyers : TheCAT tuition market has shown tremendous growth in the lastdecade. There are lot of players in the market and theconsumer base is also increasing. As a result we can considerit to be a monopolistic competition market.

2) Consumer perceives there are non price differencesamong the competitors products:

This can be inferred from the data available in the table 1 and

table 2 (below). The tables clearly depicts that even thoughthere is quite a significant amount of difference between thefees charged by the various players in the market the demandfor there products have not diminished and there is sustaineddemand.

If we take the example of CL, then it is seen that even if feesincreased from Rs/-20000 to Rs/-21000 in year 2007. Thenumber of students also increased. And CL maintained almostthe same market share in both the years. CL creates productdifferentiation by adding other value adds to the main productlike:

Career Guidance provided to students enrollingfor the courses

Online assistance provided by CL for doubtsclearance on various topics covered in class.

However, given the inherent nature of the monopolistic

market, the other players and the new entrants are picking upthe differentiating factors and this will in long term reduce theadvantage that players like CL enjoys due to productdifference and will eventually lead to reduction in price andprofit.

Number of Students2006 2007 2008

CL 800 1200 1400

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TIME 1000 1200 1300IMS 350 900 1800ICC 600 400 350AMS 300 350 300

CF 200 250 200PT 350 350

3) There are few barriers to entry: The entry barriers arequite low. As we can also see that PT which entered themarket in 2007, got share of the market pie and is able to holdup to the share in the next year. Apart from this there is aproliferation of CAT institute in the city.

4) Producers have a degree of control over price: This isperhaps the most significant factor which classifies CATcouching market in Lucknow as a monopolistic competition.

The price control by the firms is clearly evident from the tablesprovided.

Monopolistic Competition on the Border lines of Oligopoly:

The features described above categorize the market asmonopolistic competition; however from market analysis andsurvey it is also evident that we cannot categorize the market aspurely monopolistic competition as it shows properties which aresimilar to Oligopoly. We can say that the market evolved frombeing a oligopoly initially when there used to be only few firms inthe market to a structure where there are multiple firmsoperating. The market can be more appropriately categorized as

an overlap of Oligopoly and monopolistic competition.

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The features which tend to categorize the market as Oligopolyare:

1) Small number of firms : All though there is an increasingnumber of firms which are entering the market at a fast pace.And the CAT coaching market has seen exponential growthbut the market is predominantly dominated by a few bigbrands. If we consider the market as only consisting of thesebig brands we can see trends of oligopoly market in the CATtuition market.

2) Each firm is aware of the action of the other: This isagain true in the CAT tuition market as the different instituteshave high awareness about the actions of other institutes. Thisis mainly true if we consider the market as composing of themajor institutes only. The major brands in the market like CL,IMS, Time etc. are generally aware of the action taken byother major brands. However, if we consider the small playersthen this no longer hold true. Since there is a lack of awareness about the small firms to the big players.

3) The decision of one firms do impact the decisions of other

firms in quite a significant way. Let say for example the feesreduction of one firm does effect the decision of the hiking ornot hiking the fees of the other industry. This is mainly true forthe big brands in the market.

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Regression Analysis of CLs student data:

On doing regression analysis based on the number of students andfaculty we tried to co-relate the change the number of studentsenrolling to the institute to the number of faculty staff involved. We

tried to treat faculty as a parameter which would affect the studentinflow to the institute.

We wanted to forecast the number of students based on the numberof faculty that we are planning to employ.On trend analysis we found it fits the following equation best:

Y=-10.28x 2 + 277.7x 328.5

Y represents the number of students for a particular year.N represents the number of students enrolled.

The R 2 value that we got for this is 0.965 which is a very high valueand represents a good match.

So, in the above case we saw that the the polynomial function in twodegree best fitted the trend. However on further analysis we alsofound that the power function also comes out to be a very good fitfor predicting the number of students based on the increase innumber of faculty.

The forecasted value for the number of students based on the aboveapproximation and function is 1523. We have taken the number of faculty for the year 2009 as 12.

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We have used the following data points for the above analysis.

Year FacultyStudents

2004 3 450

2005 5 7002006 5 8002007 7 12002008 10 14002009 12 1523

We also found that the above function for the number of student canalso be approximated in a good way by using the power function.

The trend analysis of the same gave us the following power function

approximation. Y= 154.8x 0.988

Where y represents number of students and x represents number of faculty included to boost the demand. The data points used and theforecasted value for the number of students for the year 2009 isgiven below. We have considered the number of faculty for the year2009 as 12.

Year FacultyStudents

2004 3 4502005 5 7002006 5 8002007 7 12002008 10 14002009 12 1800

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The following graph shows the curve fit for a power function:

RESULTS ON DEMAND FORECATING

The number of students forecasted for year 2009 is higher for thepower function although the best fit equation seems to be thepolynomial function based on the R 2 value.

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Consumer Behaviour Analysis:

The table below shows the data for the survey done to sense theconsumer behaviour. The survey mainly included students from CL.

QuestionsHighlyAgree

Agree

Neutral

Disagree

HighlyDisagree

Total

Are you satisfied withthe duration of thecourse? 15 57 13 6 3 94Do you think the feecharged is worth thecourse? 3 28 49 10 4 94Do you feel careerlauncher is number 1for CAT preparation? 17 52 21 3 1 94Is the course contentrelevant and effective? 10 33 40 11 0 94

Would you suggestCareer Launcher toothers? 18 50 18 8 0 94Do you feel enoughtime is being spent onclasses? 16 41 21 12 4 94Do you feel the numberof mock tests and simcats are enough? 10 33 39 8 4 94Is the courseexpensive? 23 32 23 10 6 94Based on the feecharged, do you feelcareer launcherprovides properinfrastructure? 6 34 39 10 5 94If there is a fee hike,would you still remainwith career launcher? 7 24 43 14 6 94Do you feel the facultyis up to the mark and isworth the fees paid? 6 43 33 11 1 94

Description of the table: The number under the columns depicts the number of respondentgiving a particular response for a particular question e.g. 15 peoplemarked Highly Agreed on the first question.

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From the above three graphs and from the table given we can seethat although the fees of CL is high as compared to the otherinstitutes still the students (consumers) feel it is worth it and theyassociate high value with the course structure and content.A high percentage of students also rate CL as the number 1

institute. This places CL in a very good position in the market as itenjoys a differentiation from the other big players in the market andthus can keep a price premium without loosing market share.

SUMMARY

From the above analysis it can be said that consumers consider theinvestment in CL as an optimal investment. Even when given anoption of a decrease in fees by other institutes consumers are stilleager to invest in CL. Students rate CL very high and differentiatebrand CL as a premium brand.Hence, we conclude that even with the so called advent of morecompetitive price players in the market and existing playersemploying different strategies CL is a very important brand to theconsumers because of the non-price differentiators.

The steady increase in the fees and student volume also depicts thatCL has maintained the premium price factor in the market withmultiple players. The monopolistic market place enables CL to setprices and develop its strategies accordingly.

The key to increase in the productivity and profitability for eachplayer in the market is due to the Product Differentiation which is

a manifestation of monopolistic competition market.

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LIMITATIONS

1. The data obtained for the survey is limited, we only got datafor the last six years and the data was also not verycomprehensive.

2. The sample size is not very large hence the results obtainedmight not conform to the actual results.

3. The actual data for various institutes was not availablebecause of the privacy policies followed by the institutes. Thiswas a limitation for the analysis as the data gathered mightnot depict the right picture.

4. Only one CAT coaching institute was taken up for theconsumer survey. This might have its own limitation inrevealing the actual consumer pattern as biases can beinvolved in this case.

5. A lot of analysis was done based on ceteris paribus. But in realmarket scenario there are multiple factors which influence thefinal outcome.

SUGGESTIONS

The study mainly aims at understanding the consumer behaviourand the current market strength of CL. Due to a number of limitations (as mentioned above) the scope of this is study is limited.Hence a better understanding of consumer attributes would includemeaningful insight about the customer characteristics of the entire

market rather than students of the same institute.

In order to achieve the abovementioned objectives and expand thescope of the study in the future, following steps are recommended

1. Expand the scope of the study by taking into account theincome effect on the consumer preferences.

2. Try to identify specific parameters which help CL differentiateitself as number one player in the market.

3. Increase the sample size for a better picture of the consumerbehaviour.

4. Increase the number of institutes to better understand themarket structure.

REFERENCES

www.economictimes.comhttp://en.wikipedia.org/www.investopedia.comEconomics book, LipseyCareer Launcher, Lucknow

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http://www.economictimes.com/http://en.wikipedia.org/http://www.investopedia.com/http://en.wikipedia.org/http://www.investopedia.com/http://www.economictimes.com/


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Extracted portion of Questionnaire:

QuestionsHighlyAgree

Agree

Neutral

Disagree

HighlyDisagree

Are you satisfied with theduration of the course?Do you think the fee chargedis worth the course?Do you feel career launcher isnumber 1 for CATpreparation?Is the course content relevantand effective?Would you suggest CareerLauncher to others?Do you feel enough time isbeing spent on classes?Do you feel the number of mock tests and sim cats areenough?Is the course expensive?Based on the fee charged, doyou feel career launcherprovides properinfrastructure?If there is a fee hike, wouldyou still remain with careerlauncher?Do you feel the faculty is up

to the mark and is worth thefees paid?

economics project group13

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