Education industry analysis is the evaluation of the education industry through the study of industry history, financial data, customer demographics, and industry trends. Such analysis techniques are employed by businesses and individual investors seeking to enter or increase their presence in the education market. This type of industry analysis helps them properly assess risk and estimate potential profits. The use of education industry analysis also increases the likelihood of success for such investments or business endeavors.
People conducting any form of business analysis must know the history of the industry they seek to enter. Some industries fade away as technology improves or demand for the goods produced by the industry decreases. To find the history of an industry, an individual identifies the oldest company in the industry and evaluates how the company's product and revenues have changed over time. Industries with long histories indicate the existence of a consistent customer base that allows companies to survive the boom and bust cycles that every economy experiences over time.
Education industry analysis delineates that education as an occupation and an industry persists throughout history despite economic hardships and technological advancements. For example, in a recession, school aged children still need teachers, and manufacturers of learning software are capable of making their products compatible with the latest technology.
The underlying motivation for any company or investor of capital is profit. Industry analytics reveal that the net returns of any business are contingent on the amount of competition, customers, and the bargaining power of suppliers and employees. A business conducting education industry analysis evaluates the impact these factors have on the education industry specifically.
An investor can identify key competitors through industry trade publications, financial magazines or online financial sites that have timely and trustworthy information. Competition in the education industry varies depending on what segment of the market a company is in. Private schools compete with other private schools as well as state-sponsored schools for students. Manufacturers of educational products compete with other producers.
Customers are price sensitive and weigh the pros and cons of enrolling their child in public schools versus paying the tuition prices of private schools. Users of education industry analysis conduct focus groups using parents and students to gain insight into things that parents value and expect in the child's education or educational toy. Often, the focus groups reveal that the facilities and academic reputation of a school are an integral part of the decision-making process. As a result, such schools have high maintenance costs and teacher salaries. Manufacturers of learning software must also spend large amounts of capital on research and development in order to ensure that their product is effective and will compel parents to make a purchase. If there is no product differentiation, the choice is based solely on price in the companies are limited in how much they can charge.
Conductors of educational industry analysis must determine the impact of employees, software makers or suppliers have on the company's net profit. They look at current employee salaries, past contract terms and whether the employees are represented by unions. Employees and suppliers of educational information or parts needed in learning software have high amounts of bargaining power according to education industry analysis.
For example, teachers are often represented by unions that negotiate salaries and working terms. Schools must reach an accord with such unions in order to operate. Manufacturers of toys and learning software often rely on component parts from outside suppliers. If such suppliers do not find pricing or contract terms favorable, they can refuse orders and disrupt the production process.