The quality of South African education has been a problem for several years. The lack of education in younger people results in unemployment which hinders economic growth. According to the Dataset website the South African education system faces the following challenges:
- Lack of quality teachers
- Poor functioning of schools
- A backlog of infrastructure
- Absenteeism from both students and teachers
- Poor delivery of the curriculum
The South African government spends 20% of total state expenditure on education. With this being about 7% of GAP it is also the highest spend on one sector. This is one of the highest expenditure on education in the world. Even though this sounds promising, pupils are still not finishing school and the unemployment rate keeps increasing annually. Currently, registered private schools only provide 3. 7% of South Africans total schooling population.
Occur as a system
A system is a regulated sets of relationships. Parts interacting and interrelating for a puppets, the nine has an impact on the other. Schools within the holding company function independently but if one of the schools should lag and not perform it could drag the brand’s reputation down. This could have a detrimental effect on the portfolio of the company which will negatively influence the share price.
When applying Albrecht law that with interaction of the parts the whole gains meaning, we will see that the value of Occur does not lie in one school, but in the network of schools together as the Occur brand. 5. The 7 forces driving an organization.
The ethos is the most important building block of an organization, it should clearly define the reason why the organization exists, its purpose. The ethos forms the foundation of the rest of the 6 forces in an organization.
The culture and core values of an organization will determine the way the organization operates on a day to day basis and will influence how decisions are made. Cursor’s ethos is to supply affordable private education to the middle class of South Africa, while operating within a Christian values. Their aim is not to compete with the state or Advance, but to differentiate themselves in the current uncovered APS in the market. The only other listed competitor is Advance which caters for the higher-end market. Cursor’s customers are the middle class parents of South Africa.
PEST analysis to understand contextual environment (macro environment) The organization has no control over this environment and have to adapt to it. They need to be able to identify drivers of change and identify opportunities and threats in this context. If a factor has an influence it will be discussed, otherwise t will not be explored. One needs to identify drivers of change in this context and identify what will change to what.
POLITICAL. The government of South Africa is currently spending a huge amount of their capital budget on education, but will most likely focus on expanding schools into poorer areas which is not the target market of Occur. The state will thus not be a threat to Occur and as Van deer Merge states, he is of the opinion that Occur is relieving some of the financial burdens of the state. Thus the one organization is complementing the other and the two can co-exist. Currently the government is thus not a driver of change. Some investors believe that it is unethical to exploit a market such as education to make a profit. This might have a detrimental effect on the share price if more people starts to feel this way.
ECONOMIC Independent private schools do not receive any financial support from the government. Educational facilities get tax benefits though, and should this change it could have an impact on Cursor’s bottom line. Occur makes use of debt funding to an extent. The interest rate will thus be a driver of change, since it will influence the financial position and specifically the bottom line of Occur if the interest rate fluctuates. They use their properties as security I presume, so if there is a decline in the property market it will influence the valuation of Occur as it will affect their balance sheet.
SOCIAL The current middle class of South Africa is growing rapidly, which means the demand for good quality education will increase over the next years. The demographics of South Africans population shows that the younger population will be a higher % than the rest of the age categories of the population in the near future. (See Appendix A. ) Here the driver of change is the fact that the demand for education will only increase in the future.
TECHNOLOGICAL Technology can change the face of education with the next few years. Occur should keep up to date with the newest developments, but this may mean even more capital injections might be necessary. This can also be seen as an opportunity to be the leader in their market. Occur is already busy developing a communication system that makes communication with parents easier and helps track pupils when doing home- work and assignments when not at school. This shows that they are pro-actively embracing new technology and using change in the environment to their benefit.
A SOOT analysis on the internal environment can discover new opportunities and manage and eliminate threats. It helps you to identify gaps in the market and shows how you can create a sustainable competitive advantage for yourself.
STRENGTHS Occur is a settled brand with a unique business model that has been proven successful. They address a basic need, and fill a gap in the market in South Africa Industry expertise – the CEO is a former teacher from model C schools Efficient operating model Occur is the market leader with their own niche in the market They invest in the training of their own personnel Occur finances their operations with debt, which means they make use of hedging.
WEAKNESSES Occur is capital intensive since it constructs or acquires all of the property on which schools are situated. This improves risk for investors. There’s a very high fixed cost base in running a school, with virtually no variable cost per scholar. They need numbers in pupils to cover their fixed costs and debt obligations.
OPPORTUNITIES With the exponential population growth expected for South Africa for the next few years, the middle class in South Africa is also expected to grow more, so this being Cursor’s target market there are huge opportunities. The state is aiming to build schools in poorer areas so will not be competition, and advance is targeting the upper class market. Technology advancing – online and distance learning will be an opportunity in the nearby future. Cursor’s profit drivers “
- South Africans public education system is in decline
- A growing middle class that’s placed an emphasis on a quality education
- Private school attendance has the potential to double
- No new schools being built in affluent areas
- Operating in areas where private schooling is lacking
- Barriers to entry for other players
- Affordable fees could drive student numbers.
THREATS With Occur being capital intensive and funded by debt, it can create cash flow problems for the company if not managed well. Competition – Advance is the only other listed company in the private education sector. They are currently catering for the high-end market, but they might choose to expand into Cursor’s market, since this is where the most opportunities for growth will lie in the near future. The cost of education is growing at a rate higher than inflation. Occur operates on a low-cost model, but will not choose to compromise on quality of their personnel and will thus face this increased cost as a threat to their profitability.
3 AIMS The most important role of aims is to provide direction, the means to the ends through process. Other roles are to inspire, motivate, organism information and create alignment. Aims are multi-dimensional. “Occur is firmly of the view that the purpose of education is to empower every person with the opportunity to achieve their potential as individuals and members of society. Education is one of the cornerstones of society, providing the main strategic thrust to long-term South African development. Occur will therefore expand its group of private schools by means of new developments and acquisitions.
This strategy will not only support the public sector, but will also provide parents with additional options for their children’s education. Occur believes that private schools will increasingly improve educational standards, which will lead to the further development of the South African population, which in turn will contribute meaningfully to enhancing economic growth. “
Vision and Mission
The long term goal of Occur is to make education more accessible to learners, grow to 80 schools by 2020 and accommodate 80 000 learners. They are well on their way doing this, currently growing by an average of 10 schools per year.
Their website stipulates that Occur strives toward excellent learning. Their curriculum is relevant to the changing world we find ourselves living in. The positive values and norms indicate that Occur functions within a Christian ethos and strives for the following: A child friendly environment – core value: respect Positive discipline – core value: self-respect Creativity Excellence – core value: independent thinking The schools aim to include all learners: fast, average and slow. Smaller classes accommodates individual attention. Occur encourages faster progress for advanced pupils.
They believe in investing in human potential, both their earners and staff. Cursor’s teachers are bilingual and well qualified, but most importantly they all love children. Positive thinking forms an important part of the schools ethos, they believe there is a future for each and every child. To achieve the vision, Occur divided the original brand into five brands, or lines of business
- Occur Private Schools
- Meridian Private Schools
- Select Private Schools
- Occur Castle Nursery Schools
- Member institute for teacher education
These brands enables Occur to differentiate themselves in the market and serve a broader spectrum of customers.
The Occur business model has two pillars. -Teaching in classrooms – Building their own schools to minimize costs The second pillar allows Occur to offer affordable education to the middle class of South Africa. Occur differentiates themselves in the market by targeting middle class areas which are not currently being served. They offer a unique product in a niche market where they are the current leader, their value proposition is unique, to offer quality education for an affordable price.
The business model adapt with the changes in the curriculum to stay relevant and up to date with market changes. Cursor’s success recipe is to provide an affordable option of an essential service that can be applied to a profitable section of a mass market. They have tweaked their original business model of building their own schools to also acquiring existing schools. Occur is focused on the successful delivery of new schools, the efficiencies of their personnel, their management information systems and debt funding.
Building on their values of quality assurance and innovation they focus on Occur curriculum development, heir teacher’s college, international benchmark testing( Cambridge A-levels), extensive personnel training and aggressive introduction of technology as educational aid. (Laptops,projectors,interactive boards and tablets. “Occur works very hard to create facilities and opportunities for learners to participate and achieve on the sports field and on cultural terrain, because Occur sees education as a holistic process.
However, the learning process inside classrooms is Cursor’s core business. ” Tit 4000 learners. Hostel accommodation ill be a feature at these schools FUTURE Rapid expansion “It’s an ambitious plan at Occur: 40 schools and 45 000 pupils by 2020, with profits after tax of Rearm being penciled in. ” Cursor’s strategy is to invest in both the mid-range and upper range of the private school market, where up to 200 new schools are needed in AS to meet the rising demand for quality primary and high school education.
The roll over the next few years will be intense, but efforts are focused on areas where government will probably not be building new schools and the likelihood of new private schools being set up is limited.