Ecommerce Industry Analysis

Industry Analysis: On-Line Higher Education Industry

Today’s industries of Higher Education are witnessing a burgeoning interest in the use of the Internet. The rise of the Internet, by information technologies and business application, represents a large base of potential customers for e-commerce activities. Generally, it can be said that e-commerce is a highly significant way of conducting business. For that very reason, a widespread of universities and colleges actively exploit opportunities created by the growth of e-commerce by initiating on line courses and degrees to accommodate this demand. This industry analysis will capture the principal effects that e-commerce, i.e. on line courses, may have, as compared to those of conventional Higher Education Industries, as well as explore the barriers and opportunities that may face each. These issues are examined using market research, newspaper articles, and annual industry reports.

Higher Education Firms are undertaking growing numbers of e-commerce initiatives and increasingly offering on-line incentives required to participate in the growing online market. A range of on-line incentives includes expedited degrees, decreased tuition fees and minimal face-to-face time with instructors. However, to realize these gains of on-line courses and the associated incentives requires fundamental Internet knowledge and a high degree of competency with on-line universities in offering adequate resources. Higher Education institutions are producers of information concentrated products, and may face a raft of challenges when instilling these new competencies.

The Gartner Group estimates that firms creating e-commerce sites spend $1 million in the first five months, and $20 million for a place in cyberspace that sets them apart from the competition. These costs are projected to increase at a rate of over 25% per year over the next two years. An examination of the annual reports of Online Higher Education companies reflects the magnitude of these costs. South University’s annual report for 2003 reveals that the firm spent $152 million on advertisement, equipment, and software, amounting to 9% of their annual revenues for the year. This figure for Capella.edu is $34 million (16% of revenue). Once these investments are in place, the costs of entry into virtual universities mainly include considerable marketing expenses. Activities such as the placement of banner ads in portal sites are $12 million (12% of revenue). Transaction and organizational costs affect every educational institution. The potential of Virtual Universities to reduce these costs is most important, because the cost affect the consumers.

Comparisons to campus education also create economic challenges to online institutions.