DEPM 622 The Business of Distance Education

An examination of the highly competitive global business environment for distance education and training. Topics include the supply and demand of education services in emerging and existing markets, the competitive positioning of organizations and increasing reliance on collaborations. Emphasis is on the skills distance education managers need in planning and developing programs, products and services that are targeted to specific markets and cost-effective.
Course Attendance:             Fall Semester 2008 (September - December)
Professor:                                Anne Foster

Final Grade:                             A
Personal Papers:            
      Chile: An analysis of the market opportunities for Distance Education
                                                   Learning in Retirement at UMUC - A Business Proposal

Chile: An analysis of the market opportunities for Distance Education        October 21st 2008

Introduction
The Hispanic population in the United States is currently 14% of the total population (US Census Bureau, 2007). The growth of this ethic group has resulted in a significant increase in business and cultural links between the United States, and Central and South American countries. A country that is doing very well in this region, both from an economic and educational viewpoint, is Chile. Although the overall education performance in Chile still lags the Organisation for Economic Co-operation and Development (OECD) averages, over the past thirty years it has made significant advancements in its education system through competitive market based reforms. This paper seeks to analyze the potential marketplace opportunities for a United States Distance Education vendor in Chile.

Overview of the Chilean Education System
Chile underwent a profound market based reform of their education system in 1980 under Chile’s Military Government. The basis for this reform was “to promote greater efficiency through administrative decentralization, capitation-based financing, labor deregulation, and open competition between public and privately administered schools” (Delannoy, 2000). In 1990, the new democratic government adopted a new strategy aimed at reorienting public investment towards greater quality and equity, but maintained the competitive nature of Chile’s educational system.

The result has been that Chile, while still below the OECD average has the most advanced educational system in Latin America. Chile’s basic education system comprises eight years of primary school (which is compulsory) and four years secondary school. The average number of years of formal education is 9.7 years (OECD, 2008). As per Figure 1, the primary school enrollment has remained relatively constant to population needs with an overall coverage of 97% in 2001. However both the secondary and tertiary enrollment levels have risen steadily since in 1970. In addition, there has been a significant reduction in the percentage of the population who dropped out of school, between 1990 and 1998 the drop-out rate in primary schools reduced from 5% to 1.4% and in secondary schools from 15% to 10% (World Bank, 2001). In 2001, the secondary school enrollment coverage had reached 85% and the tertiary 28.4% (Fuentes, 2001). By 2008, the tertiary enrollment coverage had reached 43% (OECD, 2008).

Competition is encouraged in the Chilean education system with privately administered schools competing with public schools for student enrollments. In addition Industrial groups are given incentives to manage technical/vocational schools (Delannoy, 2000). The open competition between public and private school in the Chilean education system has resulted in an increasing high degree of private sector participation (see figure 2). In 2000, out of a total of 10,235 schools, parents have the option of placing their children in (a) 6,250 public schools managed by their municipal governments (58.9%); (b) 3217 private schools subsidized by the government (30.3%); (c) 1,068 fully private schools (10.0%); (d) 70 private technical-vocational schools run by private businesses or corporations (0.6%) (Fuentes, 2002).

Technological Infrastructure
Chile has one of the most sophisticated telecommunications in Latin America. The telecom sector was completely privatized in 1990, and it remains one of the least regulated in the world. As such, there is a high level of innovation, competition, and investment, with major global telecommunication players like Ericson, Siemens and Northern Telecom supplying the telecommunication infrastructure to the major Chilean telecommunications operators: Telefónica CTC and Entel (Mobile).

The result is that the penetration of the computers and internet is the highest in Latin America (see Table 1 and 2) with 33% of the population having access to a computer (43% having used one) and 19% having access to the Internet (37% having used the Internet).

Chile recently announced it was investing $100 million to upgrade its telecommunication infrastructure in the rural areas. The project aims to connect around 850,000 households, 90,000 small business, and all schools in the country (Telecompaper, 2008).

Current 50% of schools have Internet access (ITU, 2007). According to Sergio Bitar the former Education Minister of Chile (2004), “Chile has made significant improvements in the use of technology in education…..we have trained about 75% of our teachers to use computers and internet in education, and we are implementing a nation-wide computer literacy program, using over 10% of our schools are training centers for the young and adult communities”.  Chilean teachers can visit technology microcenters to share ideas or obtain training on the use of internet and computing technologies (World Bank, 2003).

Regulatory framework
The market approach to education resulted in a very open regulatory framework in education. Private spending on education in 1998 is 44% of the total spent on education in Chile and has increased by more than 50% over the previous decade. This growth in spending has been matched by the Chilean government who consider education a priority and has significantly increased its funding in this sector (see Table 3).


Language
The official language of Chile is Spanish, plus there are a few indigenous languages spoken in rural areas. However a brief scan of Chilean Internet sites indicates that there are a significant number of English as a Second Language Schools.  According to Sergio Bitar, the former Education Minister of Chile (2004), “we are shifting from viewing English as an academic language to looking at it as a working language. We are shifting from the viewing English as a language taught to the elite attending high-schools, to a language that needs to be taught well to all Chilean students. English now has become a major subject of the core curriculum”.

Cultural Issues
Two preeminent cultural researchers, Geert Hofstede, and Edward Hall have studied national culture across a number of cultural dimensions. Table 4 provides a summary of their key cultural findings between the United States and Chile. An overall review of these findings highlights two main conclusions; (1) each country has a unique set of cultural values, (2) the cultural values of the United States differ quite substantially from Chile and Latin American, countries.

Chilean’s with a very high Uncertainty Avoidance index are very risk adverse and do not readily accept change. “In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. The ultimate goal of this population is to control everything in order to eliminate or avoid the unexpected” (Hofstede, 1999, p. 42).

Comparing American and Chilean students using Geert Hofstede’s cultural dimensions:

a.       Americans with a low acceptance of hierarchical power will accept their professor based upon his or her competence – they will feel comfortable questioning and challenging the professor. Chilean’s with a medium acceptance of hierarchical power will respect the professor as the authority and will tend not challenge him or her. “The relationship between teachers and pupils is still based on hierarchy, which leaves little room for pupil participation and initiative” (Aylwin, M, 2008).

b.      In America being tough, aggressive and assertive is an admired quality. So a student being very assertive in making their point, or being demanding on the professor for a better grade , or the professor being demanding on students are all well accepted. Chilean’s with a lower masculinity culture will be more tolerant and respectful of the professor, and the professor will be more tolerant and patient with students.

c.       Americans with weak uncertainty avoidance (high risk tolerance) will feel comfortable studying alone or working in a group with somebody they don’t know. Chilean’s prefer to work in groups with their friends.  


Using Edward Hall’s communication attributes:

a.       North Americans like a lot of detail to ensure they understand the subject matter, while Latin Americans are much more comfortable with understanding the concepts.

b.      North Americans want to understand things fast – precisely what they have to know to pass the course (message speed fast, information compartmentalized). Latin Americans will more likely read the full text before worrying about what they have to learn (message speed slow, information flow diffused).

c.       North Americans have a drive to focus on one task, complete it quickly and move on to the next (monochromatic). Latin Americans are comfortable in doing multiple tasks and have less of a drive to finish them.

The merging of these two widely conflicting cultures into a single course clearly would provide major challenge for instructional designers and instructors. However, a small number of researchers have began to suggest techniques of how instructional designers can accommodate the needs of culturally diverse learners (Macfadyen et al.,2004).

Most pressing needs for education and training in this country
There are two pressing needs for education in Chile

1)      There is a significant inequality between schools. The OECD found that the gap in performance between performances of schools is the widest in Latin America and is closely correlated to the socio-economic background (Economist, 2007).  Chile has made significant inroads into addressing income disparity, its strong economic growth, and well directed social programs, have combined to reduce the poverty rate in half, between 1987-1998. However while the lowest decile of mean incomes rose by 15% over this period, the highest decile rose 31% further raising the disparity between the two groups to 34 times (World Bank, 2001). This income disparity especially in rural areas where the citizens have limited choices is the major factor in educational disparities.

2)      13% of the population aged 25 to 64 has attained tertiary education which is similar to countries like Italy and Portugal but below the OECD average of 27%. In addition while the tertiary education entry rate is the best in Latin America at 43%, it remains below the OECD average of 56% (OECD, 2008).  The gains from university education is substantial in Chile, the income difference between households where the head of the house has university education is almost twice that of those where the head has no education at all (World Bank, 2001).

An analysis of the financial opportunity for potential suppliers
In addressing the two major educational needs of Chile, the financial opportunities of addressing the educational disparities are limited. Although this is a worthwhile humanitarian cause, the fact that the main factor of educational disparity is income disparity the solution needs to be addressed by focused social programs led by the Chilean government, International Non-Government Organizations like the World Bank, UNESCO, and other non-profit global humanitarian organizations.

However addressing the need to increase tertiary education could be a significant financial opportunity for a distance education supplier. Through leveraging economies of scale Global Distance Education suppliers could leverage their curriculum, technological infrastructure, and DE expertise, to develop a cost effective university program in Chile. These programs could be developed to meet the educational needs and financial capabilities of upper and middle income Chileans especially those that are currently receiving private school education.

Chile as an appropriate trading partner with the U.S.
Chile has an extremely good trading relationship with the United States. In 2003, the United States and Chile signed a Free Trade Agreement that eliminated bilateral tariffs, lowered trade barriers, and promoted economic integration. The result has been a significant increase (almost double) in trade between the nations over the past five years (Figure3).

The fact that Chile has a very open and competitive educational system makes this sector an especially attractive country for a US supplier. The highest percentage of Chilean’s students who currently study abroad go to the United States (20.6%), followed by Spain (17.8%), Germany (8.2%) and France (7.9%). One can thus make the assumption that given the strong interest in studying in the United States by students who can afford to go abroad to study, that receiving a university education from a United States university via Distance Education would be a valuable option for those who cannot afford to study abroad.

The competitive environment for education within Chile
Chilean universities are widely recognized as being among the best in Latin America (Hudson, 1994).  There are forty-two universities in Chile, the largest university being the state-run University of Chile with over 26,000 students. The key private universities are the Pontifical Catholic University with 21,121 students, and the University of Concepcion, the Catholic University of Valparaiso, Federico Santa Maria Technical University and the Southern University of Chile each with 10,000 to 15,000 students. There is heavy competition between universities; government funding to higher education is in part allocated on per-student subsidies to institutions able to attract students who score the highest on a multiple choice examination modeled on the Scholastic Aptitude Test in the United States (Hudson, 1994).

Distance education is starting to be available in Chile, although it is in its early infancy, but one can take a Master in Distance Education ( Magíster en Educación a Distancia)at the Universidad Tecnológia Metropolitana de Santiago (UTEM). There are also a number of distance education partnership programs between the World Bank, Stanford University and a number of Chile’s Universities: Pontificia Universidad Católica de Chile in Santiago, Universidad Católica de Temuco, and Universidad Católica de la Santísima Concepción (Stanford Report, 2007).

The competitive environment in the Chilean education environment provides an excellent environment for new entrants. However the cultural resistance to change would suggest that foreign competitors should enter through a partnership with one or more of the existing universities. The ideal partner would be with one of the major private universities.

Issues and challenges that might affect Distance Education suppliers.
While the market opportunity for a Distance Education supplier in Chile looks promising there are a number of issues and challenges that need to be addressed before making a significant investment. These include:

1)      Find a (some) suitable University Partner(s) in Chile who can lever Distance Education capability in a Chilean environment.

2)      Determine the market segment of Chilean students who would both be comfortable with learning online, have the financial means to pay for this education, and have access to an Internet environment

3)      Determine the most appropriate curriculum to meet the needs of Chilean students and be a business success. This would also include the language of instruction: English, Spanish or both.

4)      Redesign the instructional course design to make it more suitable to Chilean culture: more hierarchical teaching, less constructivist.

5)        Ensure the Learning Management System was compatible with low speed dial-up transmission.

 
References
Aylwin, M. (2008). Combating discrimination in Chile. Education Today, UNESCO’s Education newsletter. Retrieved October 18th at http://www.unesco.org/education/education_today/chile.html
Bitar, S. (2004). Speech at the Asia-Pacific Economic Cooperation Seminar: The interaction between language, mathematics, science & ICT, April 27th 2004. Retrieved October 18th 2008 from http://www.apec.org/apec/news___media/2004_speeches/270404_minsbitarintlseminar.html
Economist (2007). Playground harmony: A political deal to improve schools. Retrieved October 19th 2008 from http://www.economist.com/displayStory.cfm?story_id=10286281
Fuentes, R. (2000). The Chilean Education System. Presented as Chile’s Ministry of EducationAgenda II Forum Hemisférico: “La calidad de la Educación” Retrieved October 15th 2008 from http://www.inep.gov.br/internacional/forum2/apresentacoes/14-06/5.ppt
Hofestede, G. (1999). The universal and the specific in 21st-century global management.Organizational Dynamics. 28 (1), p 34-45.
Hofstede, G. (1993). Cultural constraints in management theories. Academy of Management Executive, Vol. 7 No. 1, p.81-94.
Hudson, R. (1994). Chile: A Country Study. Washington: GPO for the Library of Congress.
International Telecommunications Union (ITU). (2007). The Global Information Society: a Statistical View. Retrieved October 18th 2008 from: http://www.itu.int/ITU-D/ict/material/LCW190_en.pdf
Macfadyen, L.P.,Roche, J.,Doff, S. (2004). Communicating across cultures in cyberspace. Berlin: LIT Verlag MÜster
OECD (2008). Education at a Glance. Retrieved October 18th at http://www.oecd.org/dataoecd/23/46/41284038.pdf
Telecompaper, (2008). Chile to invest US$100 on rural telecom infrastructure. Retrieved October 18th from http://www.telecompaper.com/news/article.aspx?cid=640188
Tipple, R. ( 2008). Student learning effectiveness within a multi-cultural online learning environment. Proceedings of the 4th Annual United States-China Forum on Distance Education June 29 – July 2nd 
World Bank (2003). Lifelong learning in the Global Knowledge Economy. Washington DC: World Bank publication.
World Bank (2001). Chile Poverty and Income Distribution in a High Growth Economy. Washington DC. World Bank publication Report No. 22037-CH

Learning in Retirement at UMUC - Business Proposal    November 25th 2008

Purpose
This paper presents a preliminary business analysis of the Senior Adult market and an assessment of the benefits and costs to UMUC in actively addressing this growing market. The analysis has been developed for UMUC’s President, Dr. Susan Aldridge, and her cabinet in order to secure their agreement to invest in the development of a comprehensive “Learning in Retirement” business plan.


Executive Summary
Retirees are becoming increasing interested in life long learning, according to the United States Department of Statistics well over 500,000 seniors are enrolled nationally in colleges and universities. UMUC has the capability and the mandate but has not met the needs of this potential cohort of senior adults. At present UMUC students over 50 comprise of 6.59% of all enrollments, whereas the US population has approximately 12% over 65 growing to 20% in 2030.


This analysis proposes to lever UMUC’s online capabilities, student support services, and learning centers to address the senior adult market segment. The proposal recommends that UMUC form an alliance with AARP, and lever its established partnerships with local community colleges, the federal government and the military in a two pronged approach to address this market segment: (1) offer a senior adult discount on all UMUC for-credit courses; (2) organize and coordinated a volunteer based Learning in Retirement program.

The initial analysis is that this proposal provides an additional revenue stream with low start-up costs, and enhances UMUC’s reputation in Maryland and across the nation as setting the standard of excellence in education for all adults.

University of Maryland University College:
Current Business

University of Maryland University College (UMUC) is “the second-largest four year public university in the United States, and the largest public provider of higher education to working professionals and the U.S. Military” (UMUC, 2008, p. 11).


Founded in 1949, “the mission of University of Maryland University College is to offer top quality educational opportunities to adult students in Maryland, the nation, and the world, setting the global standard of excellence in adult education” (UMUC website). Since its inception, UMUC consistently recognize the value of distance education to serve the needs of adult students and was one of the first educational institutions in the United States to recognize the opportunities that advancements in telecommunications and computing technologies presented to the distance education user. In 1994, the first online undergraduate and graduate courses were offered on a proprietary learning management system. By 2007, UMUC offered more than 120 online undergraduate and graduate certificate and degree programs serving almost 90,000 students

As well as UMUC’s award-winning online education programs students may complete their coursework in traditional classrooms at more than 150 locations, including 20 on-site locations throughout Maryland, Washington, D.C. and Virginia.

Strengths, Weakness, Opportunities & ThreatsStrengths

UMUC’s strengths stem from three major attributes: (1) a clear focus on adult education; (2) being the leading public funded distance education university in the United States; (3) being a member of a highly regarded University of Maryland educational system.  

The focus on adult learning over the past sixty years has resulted in UMUC acquiring a deep understanding of the adult students’ needs of trying to balance multiple priorities: career, family, community and school. These are reflecting in the 24/7 support structure, curriculum, emphasis on asynchronous distance education, and most importantly, faculty with a high degree of practitioner skills.

As the leading public funded university in distance education, UMUC has developed an extensive knowledge of distance education teaching pedagogy, student support system, and the technology infrastructure necessary to conduct a world-class distance education program. Faculty are well trained in the use of teaching and facilitating using distance education technologies. A 24/7 student support system has been established to help students with a wide variety of academic issues (writing center, library & research advice, mentors, student clubs) and administrative concerns (financial aid, billing, semester course selection). In addition, UMUC has developed a learning management system (LMS) called WebTycho, which can accommodate over 100,000 students from any corner of the world, and a technology support team which helps students with their technology issues on a 24/7 basis.

UMUC being part of the University System of Maryland has an excellent reputation for providing a highly-regarded academic programs, and its size of over 90,000 students means that it can provide a very cost competitive program through levering its economies of scale advantages.

Weaknesses

            As a State run public institution UMUC has to abide by State policies and regulations. These regulations include capping of student fees, controlled State funding and limited access to external financial sources, internal “profits” returned to the State system, curriculum governance, and  human resource hiring, firing and compensation policies. These restrictions limit UMUC’s financial strength, and its flexibility and ability to make rapid decisions, and thus limit its speed in aggressively going after new market opportunities and to compete effectively with nimble for-profit education institutions.

             “Maryland state appropriations account for less than 10 percent of UMUC’s stateside budget” (UMUC Strategic Plan, 2008, p.17) resulting in UMUC being highly dependent upon tuition-based revenues. State freezes on in-state undergraduate tuition rates have further restricted UMUC’s revenue base. Thus with the current revenue based being fixed, and expenses increasing (due to inflation and the need to invest in academic programs, and technology), the only way UMUC can continue to generate income to fulfill its mission is through growth.

            WebTycho, which has been a technological comparative advantage to UMUC, is getting old and other commercial learning management systems are now available offering increased features and capability. Over the next few years there will be a need to provide significant financial resources to either upgrade the current system or shift to a new system all together.

Opportunities

As the leading public distance education institution, UMUC has three major opportunities for growth:

1.      Lever UMUC’s international presence in 47 US military installations in Europe and Asia, to provide academic programs to the local population.

2.      Aggressively expand UMUC’s distance education presence to beyond the State of Maryland, DC and Virginia.

3.      Expand enrollments by adding a different market segment, retirees, within the existing market population.  

While all three of these opportunities are potentially attractive segments to explore, international and national expansion provide many more challenges than adding a new and growing market segment within its existing geographical market.

International expansion requires overcoming numerous obstacles including foreign government policies and regulations, different accreditation standards, student cultural and social issues, language barriers, teaching pedagogical differences, exchange rate fluctuations and other economic considerations.

Expanding in the United States is difficult as State policies prevent publically funded State universities to aggressively market or be physically located in another State. While alliances with community colleges can and are being explored, UMUC are in heavy competition with the local State universities who have the physical presence to market their programs.

By addressing the senior adult market, UMUC can lever all of its competitive advantages: expertise in adult education, extensive support and technology infrastructure, alliances with all local community colleges, intimate knowledge of the geographical market, local presence, and university reputation. These competitive advantages offer UMUC with the easiest, least cost, method for enrollment growth.

 Threats

Distance education is becoming an increasingly competitive market. The competitive threat comes from two sources: the for-profit distance education environment; conventional campus-based universities offering distance education programs.

For-profit universities are dominating the distance education market. For example the University of Phoenix is the largest private academic open-access institution in North America with over 330,000 students. The major reason for this domination is the focus on the adult market and an extremely aggressive marketing program; in 2007 Apollo group (UoP parent company) spent $500 million (Apollo Group Annual Report, 2007) on marketing compared to $20 million at UMUC. The for-profit organizations are unencumbered by many government regulations and are thus more flexible and nimble in reacting to changing student needs and requirements.

Rumble (2004) argues that Distance Teaching Universities (DTUs) are becoming increasingly vulnerable as shifts in the demographic, social, and economic environments have created a much stronger interest in the adult education environment. As a result convention campus-based universities are starting to become Dual Mode Universities (DMU) by offering both on- and off-campus (external or distant) programs. Furthermore Rumble (2004) argues that these dual mode universities have a number of competitive advantages over distance teaching universities. These advantages include offering a wide choice of teaching strategies to meet the multiple needs of students, a wide spectrum of courses, and a perceived higher value of academic standards.

Current Business Summary

            UMUC is a highly successful distance education institution serving adult and military student market. However, its leadership in distance education is under threat, as indicated in the UMUC’s Strategic Plan (UMUC, 2008):

1.      UMUC’s revenue stream is capped and its expenses are increasing, thus to fulfill its mission, UMUC must find alternative revenue streams through growth.

2.      “Adult education market becoming increasing competitive. Competition from for-profit universities and traditional public universities are now moving into the online market (Penn State, University of Massachusetts)” (p.18);

3.      UMUC “must constantly fine-tune our recruiting efforts to appeal to the shifting demographics in higher education” (p.19).

While there are a number of potential opportunities to find alternative revenue stream through address shifting demographics, the senior adult market offers an attractive, low risk, least cost opportunity since it exploits all of UMUC’s current competitive advantages: expertise in adult education, extensive support and technology infrastructure, alliances with all local community colleges, intimate knowledge of the geographical market, local presence, and university reputation.

Development InitiativeMethodology This business initiative has been developed in four stages:

  1. Extensive review and research into the “learning in retirement” market segment.
  2. Consultation and advice from the Academic Director of Gerontology at UMUC
  3. Three focus group sessions with retirees and people who are planning retirement in the next five years.
  Analysis of interviews with key stakeholders and focus group
Academic Director of Gerontology


The Academic Director of Gerontology was very supportive of this initiative, and in fact is just in the process of setting up a task force to study this potential market opportunity. The Director believed there were two different markets that could be addressed:

  1. Early retirees from the Federal Government and the U.S. Military who would like to embark on second career and are seeking retraining.
  2. Older retirees who were looking to pursue studying an area of personal interest.
At this time the Director did not have any substantive information to support this assertion.

 Focus Group Sessions

Three informal focus group sessions were held, one with a group of five people who were retired, two with groups that were planning to retire in the next five years.

In the discussion with the group who were retired, three of the five retirees were taking classes at the local community college. The classes were in American History, creative writing and art appreciation. The retirees were looking for courses that interested them without being too demanding. All of the retirees travelled quite frequently throughout the year, these trips generally involved visiting family, going to their recreational (beach/country) house, and vacation travel. These trips were the major reason why the retirees did not take more classes. On explaining Distance Education, technology, all retirees were quite excited about the fact that they could continue their studies while travelling. Although one retiree was concerned about her limited computing skills and whether or not she would be able to handle the technology.

The discussion with the two groups who were retired provided a broad range of responses. Some individuals had a clear view of what they wanted to do, which included setting up a consultancy company, working on a contract basis and travelling, volunteer work, teaching at university, and one wanted to go back to school to study law. While some individuals indicated that they were tired of working at a hectic pace and wanted to do “nothing”. Although all felt that they needed to try to achieve a balanced life of leisure, and keeping themselves both physically and mentally active. The concept of life long learning seem to resonant with everybody. In discussing whether or not they felt they would be interested in taking Distance Education courses, all, except those who said they wanted to do nothing, said they would. In fact some were quite intrigued by the opportunity.

Description of the business initiative
This business analysis proposes to lever UMUC’s current infrastructure: extensive program and course portfolio, dedicated and committed faculty and staff (support services, technical) who are skilled in adult education and a world-class distance education infrastructure to address the senior adult market segment through the development of a comprehensive senior adult educational program.

The proposal recommends that UMUC form an alliance with AARP, and lever its established partnerships with local community colleges, the federal government and the military in a two pronged approach to address this market:

The proposal is to develop a two-pronged approach to address this market:

1.      Offer a 15% discount on all degree program courses for adults over 55 years old. This offer is proposed to address seniors who are goal-oriented and/or looking for formal retraining to embark on a second career.

2.      Set up a “Learning in Retirement” non-credit program organized and coordinated by UMUC but run by learner volunteers. Course tuition for non-credit volunteer base “Learning in Retirement” courses would be in the $100 range. This proposal is to address seniors who are learning for pleasure.

Concept Feasibility Assessment Market Analysis
The shift in demographics within the United State presents a tremendous market opportunity for educational institutions as retirees are becoming increasing interested in life long learning. According to the United States Department of Statistics well over 500,000 seniors are enrolled nationally in colleges and universities. In addition, nearly seventy colleges and universities in the United States have built retirement facilities within, or close to, their campus (Zelinski, 2007). Learning in Retirement programs have been established at leading U.S. universities including Harvard, University of Wisconsin, University of Oregon, University of Massachusetts           Internationally an organization, called the University of the Third Age (U3A), whose aim is the education and stimulation of retired members was established in France in 1980. The organization now has groups in Britain, Australia, New Zealand, the Dominican Republic and a number of other continental European countries. In Britain, the University of the Third Age is essentially a self-help volunteer based model where learning cooperatives draw upon the knowledge, experience and skills of their own members to organize and teach courses. U3A offers the chance to study over 300 different subjects in such fields as art, languages, music, history, life sciences, philosophy, computing, crafts, photography and walking. The university offers both face-to-face and online classes. The British U3A has 673 local organizations and 205,117 students which is administered by 3 full-time and 5 part-time staff (University of Third Age website).
and numerous other smaller colleges.

 The growth in senior adult institutions support a study by Chou (2003) who found that 38% of adults aged between 45 and 60 are interested in formal learning after their retirement. However, according to Kim & Merriam (2004), “previous education level is the best predictor of participation in formal and non-formal educational activities” (p.442). This makes Maryland an excellent state to focus a “Learning in Retirement” program as it has one of the highest education levels in the United States with 31.4% having a Bachelor degree or greater (Table 1). The study by Kim & Merriam (2004) also found that the highest motivation for retirees to participate in educational programs is cognitive interest, followed by social contact.

In a study of the time use patterns of older Canadians, Statistics Canada (2005) found that the amount of time men spent on cognitive leisure (education, reading) increased as they got older (Figure 1). Statistics Canada (2005) also found that the more time Canadian men over 55 spent on cognitive leisure, the more they were healthy and satisfied with life. This is supported by studies by Adair and Mowesian (1993) who found learning enabled 55 years and over individuals to maintain a sense of self-effectiveness, and satisfies their needs related to identity, affiliation, and competence.

Another motivation especially by men is goal-orientation – “pursing education as a means of achieving an object”(Kim & Merriam, 2004, p.443). This is supported by a strong trend to return to the workforce after formal retirement in both full and part time second careers (AARP, 1999, 2002). If a high percentage of today’s Baby Boomers do seek post-retirement careers, there will be a huge increased demand for continuing education (Manheimer,2002).

UMUC’s response to the demographic shift 

At the current time UMUC is missing the shift in demographics trend, while UMUC continues to aggressively recruit adult students, the age demographic of UMUC students in Table 2 indicates that only 6.59% of students in 2007 were 50 and over. This is an increasing concern given the trend in retiree education and the fact that the age of the population in United States, as with most developed countries, is getting older. According to the US Census Bureau (2008), the percentage of American over 65 will increase from 12% in 2008 to 20% in 2030 (Table 3).
           The infrastructure that UMUC has developed over the past sixty years appears to be well suited to accommodate the trend towards life-long learning. Face-to-face Learning Centers can be offered in sites across Maryland focused on the needs of retirees. A key course that would be offered is a computing class to enable seniors to fill comfortable with the internet and provide them the skills to transition to online courses. A model could be the SeniorNet program in San Francisco who provides a similar computing program to help seniors obtain the skills for online courses.

Competitive Environment
 Porter’s five forces Model
A useful model to evaluate the “Learning in Retirement” competitive environment to determine its long-term profitability prospects is using Michael E. Porter’s five forces model.

Threat of New Entrants – Attractive

Providing a comprehensive education program for the senior adult market requires extensive financial resource and high level of expertise and resource in the education market. As such barriers of entry to organization that are not already well established in the education market is high.

 Bargaining Power of Buyers– Neutral to unattractive.

There is a large population of potential students and a relatively limited number of universities focusing on the “Learning in Retirement” market. However this is a “luxury” purchase to seniors who are very sensitive to price.

Threat of Substitution – Very unattractive.

Retirees have many different options in which to substitute their activities and utilize their cognitive skills. The price of university education is relatively high compared with other cognitive activities such as reading, attending public lectures, visiting museums etc.

Bargaining Power of Suppliers – Attractive

UMUC infrastructure is highly backward integrated; as such there are limited suppliers. The key areas being textbooks in which UMUC can lever its economies of scale over suppliers.

Intensity of Rivalry – Attractive

The “Learning in Retirement” market has relatively few competitors in the United States; the main competition being local community colleges.

Overall - Neutral to Attractive

The “Learning in Retirement” market is an attractive market from a competitive viewpoint; however the major concern in profitability is the sensitivity to price. This price sensitivity means that suppliers must be able to offer a low cost product which meets the needs of seniors

Financial Assessment
UMUC’s costs are not publically available however there are two studies that can give a reasonable estimate of the costs. Bates (2005) cost analysis of developing a web-based learning course and delivering the course over an eight year period ranged from $221 with 1,250 students a year to $385 with 30 students per year. If one assumed that the course was already developed the costs range from $217 to $229 (Table 4). These figures seem to be inline with Hülsmann (2006) study of the OMDE 601 who computed that the average cost per student including the course development was $323 with 512 students, and $293 excluding the course development.


The current tuition cost for a three credit undergraduate course is $690, one could offer seniors a 15% discount or $590 and still be profitable. The question is can retirees afford $590 to take a course?

In a review of the current consumer expenditure on education, people between 55 and 64 years spend $662, and this drops to $219 for people over 65 years old (Table 5). While this seems to indicate that a retiree does not have the financial resources to take university courses, the figure for 55-64 year olds is not significantly different than that spent by UMUC’s prime age group the 25-35 year old. In fact 55-64 year old spend more money on entertainment than 25-35 year old, and have significantly more wealth.  In addition these figures are for the average US household, and clearly individuals will prioritize their spending based upon their own needs and interests.

There are two approaches UMUC could take to reducing tuition costs:

1.      Reducing Operating margin,

If one assumes UMUC’s cost of delivering a course that is already developed is $230, one could reduce the tuition cost to $300 and still make a profit, although it would probably not covered administrative and selling cost. UMUC needs to make an in-depth financial analysis of the cost/benefit analysis, and the pricing sensitivity of seniors taking for-credit courses to fully understand this tradeoff.  At this point it is recommended a discount be offered to seniors of 15% which would provide an attraction without significantly impacting UMUC’s financials

2.      Utilize volunteer instructors.

According to Beck (1991), some of the fastest growing “Learning in Retirement” programs utilize volunteer retirees. “The chance to learn with fellow retirees is a key attraction” (p.2). Removing the instruction costs from Hülsmann (2006) study the operating costs without course development would be approximately $10 per student for faculty and technical support. Thus a nominal tuition of $60 - $100 would be both profitable and affordable.

The British U3A organization which is operated essentially by volunteers has 205,117 students and 3 full-time and 5 part-time staff who handled the administration, governance, advertising, the development of new local organizations and fund-raising. In 2007/08 the organization spent £865,980 ($1.3 million) or $6 per student (University of Third Age Annual Report, 2008).

Product, Services,and Functions to be developed
UMUC’s broad array of course curriculum and extensive student support services can support the bulk of the products, services and functions that are required for  a senior adult program. While further research is needed to understand exactly what type of courses seniors would like to take, Manheimer & Moskow-McKenzie (1995 ) found that most senior programs emphasized the liberal arts including history, current events, languages, psychology, art, music, religion, literature, creative writing, and computing. All of these programs are currently offered at UMUC.

The key additional areas that need to be established to address this market are:

  1. A Senior Center managed by a Director and small staff to focus on this initiative. This group would be responsible for:
    1.  Establishing a liaison with all of the area senior centers;
    2.  Establishing alliances with the AARP, and Military & Federal government alumni groups
    3. Advertising
    4. Organizing & coordinating “Learning in Retirement” courses
  2. Developing “Learning in Retirement Courses”
    1. The main courses that need to be developed are introductory courses on computing and the internet.
    2. The bulk of the non-credit “Learning in Retirement” courses can be simply adapted from the current for-credit courses.
Adult students who are taking courses for credit can be served similar to any other student.

Incentive, Motivation and Capability of UMUC to support this business
UMUC’s extensive background in developing and delivering educational programs to adult learners in Maryland, the United States, and the around the world, strongly supports the fact that UMUC has the capability to support this business initiative. In addition, addressing the senior adult market is fully inline with UMUC’s mission to offer top quality educational opportunities to adult students.


As per UMUC’s strategic plan, UMUC needs to find alternative revenue streams mainly through growth, to ensure that it can maintain its commitment to offering a global standard of excellence in adult education. This proposal offers a low risk, low cost approach to finding a new revenue stream by addressing a growing, yet under served, segment of the education market.

The strength of UMUC motivation to address this market segment however, will be the assessment of the financial cost/benefit analysis, and the opportunity costs of pursuing this market versus another opportunity.

The Business Model
New business structure.
           
 
The most effective business structure would be to form an alliance with the American Association of Retired Persons (AARP). AARP is a nonprofit, nonpartisan membership organization for people aged 50 and over;  AARP’s  mission is to enhance the quality of life, and lead positive social change and deliver value to its members through information, advocacy and service. AARP has a membership of 35 million with 860,000 in Maryland (http://www.aarp.org) and has formed alliances with a number of companies in areas such as health care, house & care insurance, home security, and travel companies, but no educational institutions to date. Given the powerful membership base of this organization, an alliance with this institution would be a “win-win” situation, offering benefits to AARP members and UMUC. The already established alliances with Community colleges in Maryland, the Military and Federal Government should be extended to accommodate the senior adult market.


Internally within UMUC, a group should be formed under an Academic Director to spearhead this endeavor. The group should report to the Provost or the Dean of the School of Undergraduate Studies (although since some of the senior adults will be taking Master courses it should have a linkage into the Dean of Graduate Studies). The group’s function would be to initiate the alliances with the external organizations, coordinate with the internal UMUC groups, promote the learning in retirement program, and coordinate the program deliver options.

Major benefits: learning, community, institutional benefits and financial.
The “Learning in retirement” program offers a number of positive attributes for UMUC:

1.      As a State Education Institution, the “Learning in Retirement” centers provide a valuable contribution to the community in serving the needs of seniors. State and philanthropy funding could be attracted to this endeavor.

2.      Enhances UMUC’s reputation as a premier educational adult education institution. In addition it provides another avenue to advertise UMUC’s commitment to adult education.

3.      Senior adults initially starting in the “Learning in Retirement” program may be encouraged to move into the regular for-credit Bachelor, Master and Doctor program, further increasing the financial benefits to the university.

4.      Provides an additional revenue stream through student growth

Design, development and delivery options.            
The design, development and delivery options should lever the existing infrastructure:

1.      Design & Development
       -          Utilize as much as possible the existing UMUC program portfolio
       -          Design & develop new introductory senior focused courses using UMUC’s current processes
2.      Delivery
      -          Offer all courses tailored for seniors in a face-to-face environment in existing UMUC and community college centers in the State of Maryland, DC and Virginia.
      -          Offer high runner senior courses in a blended delivery mode (half face-to-face, half online) which may help with a shift to more online courses
      -          Offer all senior courses on-line.

Conclusion
The analysis above has found that there is a strong market for senior adult education as demonstrated by academic research and growing trends in the establishment of learning in retirement organizations. This market will only become stronger with the retirement of the baby boomer generation; by 2030, twenty percent of the US population will be over 65. The analysis also found that are two markets within the senior adult education sector; (1) seniors who are goal oriented wishing to take for-credit courses to develop knowledge and skills to embark on a second career; (2) seniors who seek knowledge for pleasure wishing to take non-credit courses for cognitive interests and social interaction. Based upon this finding, this analysis recommends a two pronged attack on this market segment be made under a coordinated effort: (1) a senior adult discount on all for-credit courses; (2) a volunteer based Learning in Retirement program potentially geared on the British University of Third Age model. It is further recommended that both of these sub-markets should be addressed through an alliance with AARP, and levering UMUCs established alliances with local community colleges, the federal government and the military.


The major area of concern identified in this market analysis is the financial picture; primarily what is the tuition cost sensitivity for seniors, what is the cost/benefit analysis for UMUC. As such it is recommended that a comprehensive business plan be developed to address the senior adult market, the steps include:
            -          Completing a comprehensive financial cost/benefit analysis to address this market.
            -          Developing an alliance with AARP
            -          Introducing and getting buy-in with UMUC’s already established partners: local community colleges, military and federal government organizations
            -          Estimation of market size and UMUC’s potential share in each of the sub-markets through feedback from partners, educational research and senior adult focus groups.
            -          Establishing focus groups to fully understand senior adult program and course needs.
            -          Prioritizing,  scoping course development needs

This activity will require a full-time Senior Business development manager, with part-time assistance from members in the finance, academic outreach, student affairs and the academic departments. The estimated total period to develop the business plan is 3 months however an interim meeting should be set after one month to review progress and get an interim assessment of the financial cost-benefit analysis and feasibility of developing an alliance with AARP.

References
 AARP. 1999. Baby Boomers Envision Their Retirement: An AARP Segmentation Analysis. Washington, D.C.: AARP.
AARP. 2002. Staying Ahead of the Curve: The AARP Work and Career Study. Retrieved November 22nd from  http://assets.aarp.org/rgcenter/econ/d17772_multiwork.pdf
Adair, S.R., Mowsesian, R. (1993). The meaning of motivations of learning during retirement tradition. Educational Gerontolgy,  19, p. 317-330.
Bates, A.W. (2005). Technology, E-Learning and Distance Education 2nd edition. New York NY: Routledge
Beck, M. (1991). School days for seniors. Newsweek, Vol. 118 (20).
Bureau of Labor Statistics (2006). Consumer Expenditure survey. Retrieved November 22nd 2008 from http://www.bls.gov/cex/#data 
Chou, K-L. (2003). Interest in formal learning among soon-to-be-aged adults in Hong Kong. Educational Gerontology, 29, 723-737.
Hax, A. C., & Majluf, N. S. (1996). The Strategy Concept and Process: APragmatic Approach (2nd ed.) Upper Saddle River, NJ: Prentice Hall.
Hülsmann , T. (2006). Costs without camouflage. In Ulrich Bernath, Eugene Rubin. Reflections on Teaching and Learning in an online Master Program. BIS-Verlag der Carl von Ossietzky Universität Oldenburg
Manheimer, R.J. (2002). Older Adult Education in the United States: Trends and Predictions. North Carolina Center for Creative Retirement. Retrieved November 22nd 2008 from http://www.unca.edu:80/ncccr/Reports/older_adult_education_in_the_US.htm 
Manheimer, R.J., Moskow-McKenzie (1995). Transforming Older Adult Education: An Emerging Paradigm from a Nationwide Study. Educational Gerontology, 21 (6) p613-32.
Porter, M.E. (1985). Competitive Advantage: Creating and sustaining superior performance. New York: The Free Press
Richardson, E.C. (2005). Responding to the Academic Needs of Senior Citizens in the Metropolitan Marketplace. Metropolitan Universities, 16 (4), p. 96 – 111.
Statistics Canada (2005). Aging well: The time use of older Canadians. Statistics Canada Publication, Catalogue no. 89-622-XIE
The University of Third Age (2008). Annual Report. Retrieved November 20th from http://www.u3a.org.uk/dmdocuments/Annual_report_2008.pdf 
UMUC (2008). Strategic Plan 2009 - 2013. Retrieved from the wide world web September 29th http://www.umuc.edu/gen/strategic_plan.pdf
UMUC (2007). Fall 2007 Fact Book. Retrieved from the wide world web September 29th http://www.umuc.edu/ip/PDFs/UMUCFall07FactBook.pdf 
UMUC (2006). Self Study Report. Retrieved from the wide world web September 29th http://www.umuc.edu/middlestates/accreditation1.shtml 
U.S. Census Bureau. (2002). Median Value of Assets for Households, by Type of Asset Owned and Selected Characteristics. Retrieved November 22nd 2008 from http://www.census.gov/hhes/www/wealth/2002/wlth02-1.html
Zelinski, E.J. (2007). How to retire happy, wild and free. Berkeley, California: Top Speed Press.

Learning in Retirement Websites: Checked November 25th 2008

American Association of Retired Persons: http://www.aarp.org 
Edmonds Community College, Creative Retirement Institute http://cri.edcc.edu/ 
College for Seniors (CFS), North Carolina Center for Creative Retirement http://www.unca.edu/ncccr/CFS/
Harvard Institute of Learning in Retirement: http://www.hilr.harvard.edu/member.jsp
Lassell College, Learning in Retirement Courses. http://www.lasellvillage.com/html/course_samplings.html 
Senior Net Learning Centers. http://www.seniornet.org/
University of Maryland University College http://www.umuc.edu/aboutus.shtml 
University of Wisconsin Institute of Learning in Retirement: http://www.uwstout.edu/chd/ilr/
 University of Oregon Osher Lifelong Learning Institute:http://center.uoregon.edu/lli/index.php
Valdosta State Education, Learning in Retirement. http://www.valdosta.edu/conted/lir.shtml