2012-06-03 20:49
Foreign language institutes for precollegiate students have eclipsed those for adults in sales, as many of them franchised themselves, a report by a think tank affiliated with KB Financial Group showed.
Revenue of foreign language hagwon for preschoolers, elementary, middle and high school students such as Cheongdahm Learning, JLS and Avalon, increased 22.4 percent on average annually from 137.5 billion won in 2006 to 378.6 billion won last year, according to the industry analysis.
This contrasts with the meager 4.6 percent annual sales growth on average of language hagwon for adults including YBM and Pagoda from 170.4 billion won in 2006 to 213.8 billion won in 2011.
The KB research center attributed the precollegiate hagwon’s rapid growth to aggressive expansion of franchises which propelled the size of English hagwon businesses to the corporate level.
Small office and home office foreign language institutes run by individuals have been seeing declines in revenue since 2008 due to the increasing presence of hagwon mega-chains and the growth of the online education market.
However, competition intensified among these SOHO institutes as their numbers increased by 2.3 times in five years to about 7,600 last year. Their combined revenue peaked at 370 million won in 2008 and fell back to the level of 2005, or 250 million won, last year.
“The hagwon industry has low entry barriers while there is a great demand for foreign language education. This prompts many college graduates and retirees to open small-sized language institutes for students,” said Kim Dong-woo, an analyst at the KB think tank.
“Despite the growth of the overall private education market, it is not easy for such small institutes to survive without competitive instructors or educational contents. They need to hire native-speaking instructors and specialize to attain competitiveness.”
Growth in the nation’s foreign language hagwon industry has slowed since 2009 with tightened regulations of the private education business such as limitations on tuition fees, late night classes and rewards for those who report violators.
The average number of students per hagwon dropped last year.
The average revenue of mega-sized hagwon, on the other hand, continues to surge as the chains diversify their businesses with e-learning, sales of educational contents, franchises and publishing in addition to traditional hagwon lessons, according to the report.
The KB think tank expects the introduction of the state-administered National English Ability Test in the second half of this year to be an opportunity for further growth of precollegiate English hagwon.
Unlike the market for institutes for adults which has already reached a stage of maturity, the hagwon market for primary and secondary school students is showing the characteristics of an industry in a growth phase such as wide ranges of fluctuation in profitability, active mergers and acquisitions, frequent market entries and exits, as well as sharp sales growths, according to the report.
Source: http://view.koreaherald.com/kh/view.php?ud=20120603000352&cpv=0
Sunday, June 3, 2012
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