The United Arab Emirates International School is a more developed educational trust, which wants to open an international school in Oman, knowing that there is currently an opening for international schools in the educational sector. This Research includes important analysis for the United Arab Emirates International School to work with to allow them to learn about the international school's in Oman, like the surroundings surrounding them which is Political, Economical, Social and Technological factors and also known as the PEST Analysis. Other than that the people that can have an effect and impact on the business will be included as part of the analysis, like customers, suppliers, substitutes, new entrants and opponents and also called the Porters Five Forces. So by conducting these analysis and learning them the business will then be able to find out their opportunities and threats that happen to be part of the SWOT Analysis including the Strengths and Weaknesses. These analyses will be measured for three different cities and three different regions which can be Muscat City in Muscat Region, Sohar City in Batna Region and Buraimi City in Dhahra Region. Then finally we will be able to give the United Arab Emirates International School recommendations.
Definition
PEST analysis is a method used to identify, evaluate and evaluate external factors affecting the performance of an organization. A PEST analysis is undertaken to help a business gain a knowledge of the wider business environment and could be carried out as part of an ongoing process of environmental analysis or scanning. The aim is to provide information to assist those in charge of strategy development and decision making. PEST analysis may be used in the context of overall organizational strategy or even more specifically to evaluate the feasibility of a new service or product, or expansion into a fresh market.
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Advantages of PEST analysis.
PEST analysis:
* provides an knowledge of the wider business environment
* encourages the introduction of strategic thinking
* may raise awareness of threats for an organization's ongoing profitability
* can help an organization to anticipate future difficulties and take action to avoid or minimize their effect
* can help a business to spot business opportunities and exploit them successfully.
It helps the firm in many ways, it is important that environmental analysis is completed before getting into the industry. PEST analysis is a helpful method of summarizing the external environment when a business operates. Nevertheless, it will follow up by considering what sort of business should act in response to these influences.
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Political and legal factors:
Political factors are rules and regulations that are created by the government which has a direct impact on the business. These rules affect the daily running of the business enterprise as it pertains to policies and regulations. We believe that the school should consider the next political factors:
Employment Laws: Every country has its regulations for a fresh foreign organization entering the country to establish its business, when discussing regulations for example Omanization the country's rule is that these foreign companies must recruit Omani citizens as employees in reducing the unemployment in the country and to gain experience from the foreign employees as well, in addition to that local partnership is one of the guidelines that a foreign owner must take in consideration which is also known as (Foreign Trade Regulations). Talking about international schools in Oman SABIS of Muscat is one of the schools that are owned by both a foreign and local partners.
Government Stability: Because there is no war in Oman the government is stabled, secure and safe and not much of an alteration with the federal government. There are plenty of foreign and local companies checking in Oman, there are extensive international schools existing in Oman including the AMERICAN BRITISH ACADEMY (ABA) if the government had not been stabled then these types of schools won't exist because of the continuous changes with the federal government therefore there will be less or no foreigners surviving in Oman. It really is absolutely safe for just about any foreign organization to determine its business in Oman.
Economical Factors: All companies are influenced by economical factors nationally and globally. Whether an economy is at a boom, recession or recovery will also affect consumer confidence and behavior. Equally monetary factors affect the purchasing power of potential customer, and the state of the internal/external economy in the short and long-term. The machine might need to consider:
Unemployment: Oman has been encouraging Omanisation to reduce the level of unemployment in the country. By the entrance of the International school from the UAE into Oman, it'll are likely involved in reducing the unemployment and providing more jobs for local Omanies.
Disposable income: Oman is facing a boom in the economy because of the surplus they are receiving from oil sales. Accordingly consumer spending is high. With higher consumer spending, an increase of demand will arrive. This demand will have to be satisfied. Because of this, the International school will have the chance to gratify this increasing of demand.
Socio-cultural Factors: social factors includes the demographic changes, trends in the manner people live and think. Moreover, it also includes the cultural areas of the macro environment. These factors influence customer needs and how big is potential markets (outside and inside of the International school).
Lifestyle changes: by time the life span style in Oman changed and it is continuing to improve. People have different views over many things such as: Education. A long time ago there have been no private schools in the country and girls were made to stay at home and appearance after their parents. After a while by, things changed. Omani citizens thinking have changed. They started sending all their kids to school, to be able to gain education. In addition, when private schools exposed in Oman, families didn't mind sending their regardless of the mixture of both male and female. Moreover, Omani families started going out and eating out more regularly.
Population: it's the number of individuals in the country, when it comes to that the population in Oman is on the rise. Companies and organizations take population in consideration, since it means that folks increase and the needs increase too. For example, for schools increase in the population of any country or a city means upsurge in quantity of students every year. The Chart below can be an example of the rise in population in Oman.
Educational levels: the level of education throughout the years has increased tremendously, and the demand of International schools in some parts of Oman is high, due to the increase of foreigners in the country for work purposes.
Technological factors: technological factors are essential for competitive advantage, and are the major driver of change and efficiency. Technological factors can for example lower barriers to entry and reduce minimum efficient production level. New technology comes with an impact on changing the way business operates. The Internet gets the most influence on the strategy of organizations.
New discoveries and development: the advancement in technology has been beneficial to the International school on the market. Due to technology the administrative staff is now able to access to the Internet 24 hours per day comfortably from their homes. Another advantage that technology has given the International school industry is the capability to reduce their costs as new machinery is now available for them to reduce their paper work and also decrease the time wasted. In fact the Internet allows the managers of the International school to use video conferencing to maintain to date using their other branches without to physically go there. This technological revolution means a faster exchange of operating environment.
(http://www. btinternet. com/~katrina. severn/avce/PESTAnalysis. pdf)
After considering all four PEST analyses we assume that Sohar is the best place to open a global school due to the increasing of population by both local and foreigners. Also adding to that Oman generally have a political stability because of the ruling of the Sultan rather the change of government, economical Oman is stable at the moment sine they are at the boom due to the surplus of the oil sales but this will not mean it will remain stable forever things might change if there was a reduction in oil prices. The socio- cultural in Oman is defiantly on the change to the better people are moving forward and want the best for themselves and families.
We have identified earlier PEST analysis which includes the external environment and it was figured the environment is at a favorable condition for the UAE International School to enter the Omani market. However, we should consider the internal environment. These factors are within the control of the organizational members, to take action a Porter's Five Forces analysis must be completed.
Porter's Five Forces Analysis:
Porter's five forces model is a framework that describes how an industry grows, behaves and responds to five primary "external" and "internal" forces. The Porter 5 forces model is a framework for understanding the underlying structure of an industry or business segment, built throughout the five primary and dominating competitive forces that affect the short, intermediate and long-term effects of an industry's size, strength, vitality, and profitability. The value of the 5 Forces model and subsequent analyses is to help understand and predict the behavior of the industry, and most importantly, the actions of rival companies.
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There are five essential forces which have been introduced by Michael Porter for the analysis, these are:
The threat of New Entry: The likelihood of new businesses entering the industry impacts competition.
The threat of Substitution: as those products that are available in other industries that meet the same or similar need for the finish user.
Supplier Power: A business that produces goods requires raw materials. The power of the suppliers to operate a vehicle up the prices of your input.
Buyer Power: The energy of buyers describes the impact customers have on an industry.
Competitive Rivalry: the effectiveness of competition on the market.
Threat of New Entry:
Competition within an industry will be higher if entry into the industry is simple; therefore barriers to entry are there to safeguard the high levels of profits. Barriers decrease the rate of entry of new firms in order to allow the existing businesses to enjoy levels of the profits.
Product Differentiation: since there are very little or no product differentiation in the International Schools industry, new entrants may feel that competition will be strong and profits will be hard to earn.
Capital Costs: Any normal person will see it hard to create the costs required to open an International School, as it is difficult to find and purchase a land large enough to accommodate such requirement. They would also need to pay suppliers for the initial stock, employees, etc. Capital costs are unbelievable high for this kind of industry since initially great deal would be needed to buy land, resources, advertisement, etc.
Economic of Scale: this identifies the decline in unit costs of something or a service occurring as the absolute volume of production per period of time increases. Economics of scale gives the International School competitive advantage as they can price their fees at less price than others, and a fresh entrant will see it hard to compete with the low prices. It is because there is no product differentiation so opponents must compete in conditions of price.
Threat of substitutes:
Substitutes are goods or services that meet the same customer needs. A threat from substitutes exists if alternative products with lower prices and better value satisfy the same need. Inside the International School Industry the substitutes would be the competitors. The threats of substitutes are determined by factors such as:
Customer Relationship: it is important to build a good relationship with the customers to avoid them from shifting to the substitutes, if a person were to feel that he/she has an improved relationship with a certain school than others then that customer is much more likely to go this school than others.
Supplier Power:
It is very important to The UAE International School to obtain the resources that is needed to allow them to successfully operate the school, therefore it is crucial to allow them to have a good relationship using their suppliers. Moreover, for the UAE International School to succeed, they must make an effort to reduce the power of their supplier, because the higher the bargaining power the supplier, the bigger will be the price of resources.
Buyer Power:
Buyer Power is the energy of customers to operate a vehicle down your prices. If we try the conditions of the UAE International School, the buyers would be the clients which come to them and they have great power on the UAE International School, then the school will be required to lower their value. Two factors of buyer power are included as examples, which can be:
Brand identity: Is how the company wants the buyer to perceive the image with their product. The buyer has a power as it pertains to brand identity it's because they choose the brand that satisfies them the most. So if the brand in your company does not fulfill consumers then you'll either have to lower your prices or lose the buyer. For instance, if the UAE International School does not offer branded items to their customers, while Muscat International School offers branded items, then most of the buyers will choose the branded school.
Threat of Backward Integration: This is when the customer changes from buying your product to purchasing your competition product even though these are similar. The reason why of this maybe the price or the grade of the product and so forth. So in cases like this the buyer has power within the supplier. For example, if the customer compares between two international school like Muscat International and Sabis, they could find that the purchase price differs in both schools, where Muscat International School might be cheaper, so the buyers would go for Muscat International School. So the UAE International School must consider the opponents price and make an effort to offer lower or the same price or better quality, and they would also have to consider the needs of the buyers and try to reach their satisfaction.
Competitive Rivalry:
The intensity of your competition between exciting firms on the market can be analyzed. It's important for the school to know the amount of its competition such as: Azzan Bin Qais Private School, Muscat International School, Sultan Private School, Sabis International School and Sohar International School. Because the products will tend to be the same (homogenous), the UAE International School will have to find a way to offer different things to its competitors. High competition results prices and margins thus, the profitability of the industry.
Product Differentiation: this is when the customers are made to feel that a brand differs from another even although product is the same and since all products are provided at the International Schools, competition will be high, because all will be competing with the same products for the same crowd of customers.
Customer Relationship: it's important to build a good relationship with the clients to prevent them from shifting to the substitutes, if a person were to believe that he/she has a better relationship with a certain school than others then that customer is much more likely to go the particular school than others.
Looking as of this, we can easily see that three out of the five forces are favorable into the UAE International School. In brief the inner environment is in good condition for the institution to enter. From your analysis it can obviously be see the fast that there surely is no product differentiation is a significant issue to the industry.
