Environmental Analysis for a Strategic Plan

The University of Phoenix is in a peculiar position as being an organization with one foot in a traditional learning institution, while the other is moving forward and utilizing technology to provide new ways of learning. The following environmental factors provide insight into many of the strengths and weaknesses that the university can employ to further their mission and reach new areas of success.

Remote Environment

Remote environment factors include many issues that organizations must contend with but are unable to control. The University of Phoenix must be concerned with issues including economic, social, political, and technological. These factors link together by the direct impact they have on the potential market and how they react to each other.

Economic and Political Factors

Economic and political factors provide the greatest entry barrier for students to pursue secondary education. The Lumina Foundation is an organization centered on offering opportunities for students who are otherwise not able to attend college. The foundation explains, “A fundamental barrier to increased college access and success is financial aid. Specifically, the barrier is the inability of federal, state and institutional financial aid programs to make up the difference between family finances and college prices. During the last two decades, the sticker prices of postsecondary institutions have soared, while the purchasing power of need-based grant aid has declined. Although financial aid dollars have increased, in many cases, these dollars have not kept pace with escalating prices and demands.”(What We Know, 2006)

The battle between increasing tuition costs and stagnant financial aid opportunities leaves many students forced to provide a large amount of money up front, which is difficult to provide for the average working adult. Some working adults are also faced withpaying for their children’s education, an increased weight that could deter a student from pursuing thier own education.

Beginning in the 2006/2007 school year loan amounts will increase, unfortunately this will meet a tuition increase that colleges make. The Department of Education determines every aspect of financial aid within the country. This includes the loan and grant amounts, the requirements students must meet, and whether or not an institution is even qualified to offer financial aid. UOP is forced to comply with the DOE in order to retain their ability to offer financial aid loans; a completely necessary function as over 70% of revenue generated by UOP is through students using financial aid as their payment option.

Social Factors

The social environment in the United States has involved an increased push towards developing working adults who have a high-level of education. The workforce in many fields demands education to be a top priority for employees. The “information age” and the necessity of technological skill has forced individuals to take an active route to develop themselves as valuable and well-rounded employees. In an article titled “Understanding Emerging Workforce Trends” Kerry Harding describes that, “There is a new worker emerging in America today-one who has redefined traditional concepts of loyalty, job satisfaction and career advancement. In many ways the result of downsizing and an upsurge of outsourcing, this “Emerging” worker spans across all age groups, industries, and regions and is expected to represent the majority of the American workforce in the near future.” (2000)

Previous generations viewed loyalty as the most desirable trait to have, younger generations have been faced with increased layoffs and threats of outsourcing, resulting in a new “working adult” who must be able to adapt and change. This bodes well for educational institutions that can provide individuals tools to develop a range of skills they can take through many different career paths. However, this also creates competition as the number of degree granting institutions grows rapidly.

Industry Environment

UOP is firmly entrenched in the industry of adult education. This industry has been dominated by traditional institutions that cater to young adults. Changing social factors have given established adults a need to further their education. The education industry is wide reaching, enveloping varied and countless areas of expertise and methods for teaching the curriculum. The greatest tool a new educational organization can offer is product differentiation, and the knowledge the degree will mean something to potential employers.

Entry Barriers

There are several common barriers to entry, each having an impact on UOP, including economies of scale where potential organizations must come into the industry on such a large scale, they may not be able to keep up with the already established entities. Product differentiation, as previously mentioned this can give an organization, like the UOP, the edge in the face of students who are concerned with the validity of their education program. Next is the capital startup requirements, a problem that could have squashed UOP as they were using technology to create a brand new learning model. Had the model not been successful, the resources would have been gone and the company back to square one. As with any industry, entering into said industry with a brand new model can be a dangerous risk, but success could far outweigh any risk.

Supplier Power

Supplier power is directly tied with the supplier’s ability to determine the price and quality of the product. UOP is directly responsible for setting the price and the quality of their educational programs. By creating their own learning model and delivering the model in a method that is untraditional, UOP is in a position to set the price and quality of their product without having a direct example to influence the results.

Buyer Power

Buyers are in a peculiar position when dealing with UOP. Tuition costs are not negotiable, and the amounts of financial aid are set as well. In most cases, the buyer is left with a “take it or leave it” option that is not always favorable for the university. A greater balance between the supplier and buyer power could create greater revenue streams for the university.
Competitive Rivalry and Substitute Availability

UOP has stepped in to the industry and viewed every other educational institution as competition. By not limiting their competition to just the online environment, the university has demonstrated a competitive edge that stands out in the education industry. However, many traditional educational institutions have begun to develop online programs. While still the leader in the online environment, UOP is faced with increasing substitutes to their learning model.

Operational Environment

The operational environment is of great importance for any organization as it deals with an organization being able to procure the resources it needs to effectively operate within the industry. Several factors influence the operating environment, including competition, customer profiles, and other factors.

Customer Profiles

Evaluating other organizations operational environment also helps an organization to create customer profiles that can help an organization to better understand the market. Pearce and Robinson explain the usefulness of a customer profile that, “Developing a profile of a firm’s present and prospective customers improves the ability of its managers to plan strategic operations, to anticipate changes in the size of markets, and to reallocate resources so as to support forecast shifts in demand patterns. The traditional approach to segmenting customers is based on customer profiles constructed from geographic, demographic, psychographic, and buyer behavior information.” (2004)

Understanding consumer behavior is a great asset for any organization. The customer profile, in conjunction with several other tools explained here can give UOP incredible insight into what their potential student’s desire and how to best serve them.

Long-term objectives

UOP has several potential long-term objectives that would provide increased success within the education industry. The number one objective and something the university has already begun to implement is molding the established learning model into something that can be offered to young adult students just leaving high school. This is a market that UOP has largely stayed away from as they focused on working adults.

The university has a great tool at their disposal with their already established technology. Students are much more computer savvy than previous generations and in many cases will feel much more comfortable in an online learning environment. The university will need to establish customer profiles for their new customer base to get a feeling of the needs that these students have. However, consideration for the economic factors may outweigh the social factors that are a benefit for the university. The high tuition costs will need to be reevaluated for these new students who essentially can not afford a program at this price, when alternatives such as community colleges come at such a lower price.

Balancing the economic factors, while not sacrificing technology or learning quality, will provide the university with a brand new, and basically endless supply of potential students. On the other hand, UOP needs to keep focus maintained on their established market. Working adults who employ financial aid as their payment option stand as the highest contributor to the universities bottom-line. Since they cannot control the factors surrounding financial aid, the university should focus on developing new payment options for its students or increasing the number of organizations they work with to provide tuition assistance for their employees.

The long-term objective would rely on developing relationships with new organizations. Creating partnerships with an organization can benefit both companies greatly, the university will have more students, while the specific company could provide a benefit for their employees and retain employees who have increased skills and knowledge.

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