Business of Education in Brazil

For-profit education: blessing or curse?

Do schools like the University of Phoenix or Devry ring a bell?  They should, particularly since the University of Phoenix name adorns the Arizona Cardinals (professional) football stadium, not to mention the millions spent on advertising their services to the public.  Unlike many of the non-profit education institutions, these schools offer for-profit services and are even publicly traded companies (Apollo Group Inc, which runs University of Phoenix, is listed on NASDAQ as APOL).

Our last Study Tour class brought in a managing director from Barclays and the founder of a for-profit education provider in Brazil.  Both of our guests are intimately familiar with investment in for-profit education as either a beneficiary or investor, insisting that these institutions offer a helpful path to bring "non-traditional" candidates into higher education.  Through a curriculum that emphasizes flexibility, these institutions offer students the ability to take night classes, fit in class time between jobs, and bring more people into the education system.

However, the issue of quality was less straightforward.  After healthy debate, it seemed that the traditional measures of quality and success--drop-out rates, after-school employment, average salaries-- were less appropriate given the targeted population.  This left me wondering how we can appropriately capture the effectiveness of for-profit education.  I'm curious to see how this plays out on our visit to Brazil.  Is there a distinction in quality between for-profit and non-profit education providers?  Hopefully I can report back after our “on the ground” experience in Brazil!

Business of Education

Listing to Jason Williams and Edwardo Wurzman talk about the business of education made me think about the real challenges that face the Brazilian expansion of private education in the future. As Jason, an MD in the service sector for Barclays, elaborated on the 3 stages of the private education industry (Growth, Consolidation, Competition) he mentioned that the U.S. system is currently in the competition stage of the life cycle. Many private education companies that spawned in the U.S. over the last 25 years reached a point of inflection 10 years ago and went through an acquisition phase that brought maturity to the industry. Post consolidation, the remaining big players in the industry have gone through growing pains; many have faced criticism regarding the quality of education provided and how customers are recruited. These issues appear to be the side effects of running a mature business in education as these big players struggle to define their competitive advantage.
My concern though lies in what this phenomenon means to private education industry in Brazil. A significant majority of growth in higher education in Brazil has developed from the private for-profit sector. Currently the country is still at a 17% penetration rate of higher education whereas the U.S. has a 82% penetration rate. This means that the Brazilian education system is still very much in the growth stage of the life cycle. 10 to 20 years from now, after expansion and consolidation is no longer the easiest way for these for-profit companies to create value, what type of side effects will we see from these them when they begin to define their competitive advantage? I hope the quality of service provided becomes the measuring stick which these companies compete on as opposed to costs.