Nous Group Case Study

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Establishment of Golden Coast Tech

Nous Group interactive case study

Nous Group interactive case study Establishment of Golden Coast Tech | 30 April 2013

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© Nous Group


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Contents

1 Introduction ....................................................................................................................................... 3

2 Case study .......................................................................................................................................... 4

2.1 Background ............................................................................................................................. 4

2.2 Question 1 ............................................................................................................................... 5

2.2.1 Answer to question 1 ................................................................................................. 6

2.3 Question 2 ............................................................................................................................... 7

2.3.1 Answer to question 2 ................................................................................................. 8

2.4 Question 3 ............................................................................................................................... 9

2.4.1 Answer to question 3 ............................................................................................... 10

2.5 Question 4 ............................................................................................................................. 11


2.6 Question 5 ............................................................................................................................. 13


2.7 Question 6 ............................................................................................................................. 15



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1 Introduction

Thank you for taking the time to work through this practice case study. It provides an example of the work we do at Nous Group (Nous) and the foundational skills we expect from our consultants. It also offers an example of the type of question you may be asked at a candidate interview, though it is likely to be briefer in an actual interview. Just like a real interview case, information outside of that provided is not required.

As with a real interview case, you should be less concerned with getting the right answer in a precise sense, and more focused on how you approach the problem. The solutions we offer are just one possibility. Importantly, they provide a structured approach to thinking about the problem.

Feel free to provide any feedback at [email protected] if you think we could make this case even more useful.

Thank you,

People Team


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2 Case study

2.1 Background

USEQ is looking to capture growth

The University of South East Queensland (USEQ), a traditional research-based university, is looking to open a subsidiary university. The proposal is in response to changing conditions in student demand for bachelor-level qualifications. Over the past few years, USEQ has observed growing demand in the region for:

bachelor degrees in particular areas of regional skills shortages

bachelor degrees based on a more practical – rather than theoretical – pedagogy

bachelor degrees that include work placements during study and a fast track to employment.

The subsidiary university, to be known as Golden Coast Tech, would focus on meeting these new sources of student demand, most likely in a way that would complement USEQ’s current – and preferred – strategy of focusing on students with an Australian Tertiary Admission Rank (ATAR) greater than 70.* If established, Golden Coast Tech would also operate in the south east Queensland region at a site already owned by USEQ.

USEQ has engaged Nous Group (Nous) to determine the high-level feasibility of establishing Golden Coast Tech as a subsidiary university. USEQ requires a report for its governing body, which is meeting in three weeks.

* A student’s ATAR measures how they fared in their Year 12 studies relative to their peers in each state. For example, an ATAR of 90 implies a student was in the top 10% of their year; an ATAR of 80 implies the student was in the top 20%; and so on.


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2.2 Question 1

To determine the high-level feasibility of Golden Cost Tech a number of pieces of analysis will be required. A Nous Principal has asked you to think about the areas of analysis we should primarily focus on considering the short timeline for the project’s delivery.

a. Of the following modules of analysis, what should be the core focus over the three-week engagement? Select 3 to 5 to focus on.

Attractiveness of the tertiary education market

Competitive environment

Legal and regulatory environment for new tertiary education institutions

Scenario analysis

Business relationship between Golden Coast Tech and USEQ

Analysis of overseas models of tertiary education

Management skills of USEQ executives

Value chain analysis

Golden Coast Tech’s potential students

Student satisfaction with USEQ.

b. Of the 3-5 modules you have selected above, list 2-4 more specific areas of focus (i.e. sub-questions) that you think the team should focus on.


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2.2.1 Answer to question 1 Suggested modules – and most critical areas in each – to focus on

1a (i) Attractiveness of the tertiary education market

(ii) Golden Coast Tech’s potential students

(iii) Competitive environment (iv) Business relationship between Golden Coast Tech and USEQ

(v) Legal and regulatory environment for new tertiary education institutions

1b Specific areas to consider:

Market size

Forecast market growth, including likely trends in tertiary education

Market profitability (revenue and expenses)

Financial barriers to entry, i.e. start-up costs

Likelihood of relevant federal and state government policy changes.

Specific areas to consider:

ATAR band

Type of qualifications of interest

Desired delivery styles and learning methods (e.g. classroom, on-line, work place)

Willingness to travel to access preferred tertiary education course/institution.


Threat of substitutes, i.e. other higher education providers

Market share

Market fragmentation, i.e. possibility for market share to be eroded over time.


How should Golden Tech be branded?

Should Golden Coast Tech compete with USEQ, with similar course offerings?

Should Golden Coast Tech be a ‘feeder’ for USEQ, i.e. preliminary courses that provide a basis for further university study?

Is there a possibility for USEQ to redefine its own strategy to further complement Golden Coast Tech?


Legal relationship with USEQ, i.e. part of USEQ or completely separate?

Time and cost to obtain initial regulatory approval

On-going legal and regulatory requirements.

The areas identified aim to broadly determine feasibility:

A. Is there sufficient demand?

B. Can we compete?

C. Can we implement?


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2.3 Question 2

The following questions will explore the first three modules. Let’s begin by reviewing the attractiveness of the market.

The Nous project team has examined federal government data on undergraduate enrolments to gain a macro picture of domestic demand for tertiary education (see Exhibit 1 below). All students who gain a place in a bachelor degree are selected on the basis of their ATAR, except those listed below as non-ATAR entries (e.g. mature age students).

Exhibit 1: New undergraduate enrolments in Australian universities

CAGR refers to the compound annual growth rate, i.e. the rate of growth if this growth were at a steady rate.

What are the key insights from this chart?

28.3 28.8 29.4 30.0 30.6 34.2

25.4 26.1 26.9 27.7 28.532.2

22.6 23.5 24.4 25.4 26.4

30.116.0

17.619.4

21.323.5

28.2

7.28.2

9.510.9

12.5

15.7

1.72.1

2.53.0

3.6

4.7

1.92.4

3.03.7

4.7

6.3

0

20

40

60

80

100

120

140

160

2007 2008 2009 2010 2011 2012

Non-ATARentries50 or below

50.05-60.00

60.05-70.00

70.05-80.00

80.05-90.00

90.05 or more

CAGR (NB: Total = 8%)

27%

22%

17%

12%

6%

5%

4%

Students (000s) grouped by ATAR

band


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2.3.1 Answer to question 2 The market for tertiary education is dominated by those with ATARs of over 70, even if lower ATAR cohorts are increasingly enrolling in undergraduate degrees in Australian universities.

Student enrolments have grown moderately each year, except in 2012 where growth was more significant.

Fastest growth is in cohorts with lower ATARs and non-ATAR entries, with year-on-year growth in the cohorts of students with ATARs of 70.05 and above lower than the overall CAGR of 8%.

Note that with growth from 2011 to 2012 being much higher than earlier, the CAGR of 8% over the entire period is potentially misleading. An important question to consider is whether this is a once-off trend (possibly due to a population anomaly) or is indicative of future growth in tertiary education.

Based on the trajectory of previous enrolments, there would appear good prospects for continued growth, particularly in students with lower ATARs.


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2.4 Question 3

Let’s now review the potential for Golden Coast Tech to focus on a particular segment of the market for students in south east Queensland.

The Nous team prepared Exhibit 2 to better understand the opportunity for students in the region, again with a focus on ATARs.

In conducting this analysis the team was reminded by the client of USEQ’s strong preference to remain a traditional research-based university with a focus on students with ATARs above 70. This may provide a market opportunity for Golden Coast Tech to focus on students with lower ATARs and to occupy a complementary market position.

Exhibit 2: Undergraduate enrolments in south east Queensland universities (2012)

What are the key insights from this chart? What does this mean for Golden Coast Tech’s opportunity considering USEQ’s preferred strategy?

Students grouped by ATAR band

38%48%

69% 70% 71% 74% 79% 82% 84% 87%

56%45%

24% 27% 26% 23% 17% 16% 15% 12%6% 7% 7% 3% 3% 3% 4% 2% 1% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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50.00 or less

50.05 -70.00

70.05 ormore


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2.4.1 Answer to question 3 Undergraduate enrolments are generally dominated by students with ATARs of 70+, but there is some variance amongst degrees.

Information technology and business degrees comprise a comparatively larger share of students with ATARs below 70. Accordingly, the large number of students seeking one of these degrees provides a captive market for Golden Coast Tech if USEQ focuses less on those students with ATARs less than 70. The size of this captive market depends on the extent to which USEQ has market share of south east Queensland in these areas.

Another (counter) inference might be drawn: there is a captive market for those courses at the right end of the chart because students who would like to study courses in these areas (e.g. science and engineering) are not currently able to do so in south east Queensland. However, this chart provides no indication of the size of this potential grouping. Moreover, there may be other reasons why students with lower ATARs are not typically enrolled in these courses, e.g. typical difficulty of such courses. For these reasons, the former inference is preferred.


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2.5 Question 4

Let’s continue with the second module of analysis to gain a more detailed view of the type of student – in terms of their academic standing – that Golden Coast Tech might focus on.

The Nous team is aware that an education researcher, Professor John Kimble, has just finished a study looking at completion rates at Australian universities based on a student’s ATAR (see Exhibit 3). In his sample, he looked at degrees that are:

1. vocationally focussed, e.g. applied business, applied information technology

2. theoretically focussed, e.g. traditional humanities, science, engineering.

Exhibit 3: Undergraduate completion rates at Queensland universities grouped by ATAR (2008-2011)

What are the key insights from this chart? What does this mean for Golden Coast Tech?

44%

53% 56%67%

79% 77%

55%63% 64%

67% 77%77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

50

or

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ow

50

.05

-60

.00

60

.05

-70

.00

70

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-80

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80

.05

-90

.00

90

.05

or

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Theoreticalfocus

Vocationalfocus


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2.5.1 Answer to question 4 There appears to be a consistent correlation between a student’s ATAR and their likelihood of completing an undergraduate degree.

For students with an ATAR above 70, the likelihood of completion does not vary between vocationally focused or theoretically focused degrees.

For those with an ATAR less than 70, completion rates are much higher for those studying degrees with a vocational focus.


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2.6 Question 5

The USEQ Vice-Chancellor wants a mid-project update.

Nous’ principal on the project has asked you to update the Vice-Chancellor on the team’s analysis and findings to date. The principal asks you to complete a short PowerPoint slide pack (3-5 slides) for the Vice-Chancellor with a summary of our findings so far.

What major points (3-4) would you include in the PowerPoint slide pack, including an overall headline?


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2.6.1 Answer to question 5 A major opportunity exists for Golden Coast Tech to capture the high-growth demand for vocational Bachelor’s degrees by low-ATAR students, particularly in information technology.

There was solid growth in the enrolments for bachelor-level degrees, with CAGR of 8% from 2007 to 2012 (with a noticeable spike from 2011 to 2012).

There was very strong growth in enrolments for students with ATARs less than 70 and those without an ATAR (though from a low base).

In nearly all fields of study most students have ATARs of more than 70. In information technology and business the majority of students have ATARs less than 70.

Students with ATARs less than 70 are more likely to complete their degree if it is vocationally focused.


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2.7 Question 6

Following the briefing from the Nous project team, USEQ asked Nous to undertake a preliminary assessment of the feasibility of establishing a degree in information technology to ascertain approximate students numbers and therefore potential revenue. The selection of a degree in information technology was supported by anecdotal evidence from local employers of a skill shortage in this area.

Now focusing on the third module of analysis, the Nous team and the client agreed this degree could be particularly successful if it:

targeted students with ATARs of less than 70 or applicants without ATARs

is vocationally-focused in terms of its teaching and delivery

has a limited intake of 50 students each year to ensure maximum support for each student such that ‘extraordinarily high’ completion rates are possible.

USEQ has provided some internal analysis about forecast student applications for information technology degrees in the region (see Exhibit 4). This is based on trend data collected by USEQ.

Exhibit 4: Applicants for information technology degrees in Golden Coast Tech’s regional area

USEQ also believes that an information technology degree offered by Golden Coast Tech could 'capture’ a percentage of this available market. Again, based on collected trend data, USEQ has provided likely capture rates, where the capture rate refers to the market share of potential applicants that Golden Coast Tech could expect from the forecast number of applicants for information technology degrees in the region. See Exhibit 5 for these capture rates.

Number of applications

350 361 371 382 394

250 258 265 273 281

210 216 223 229 23675 77 80 82 84

0

200

400

600

800

1000

1200

2014 2015 2016 2017 2018

Non-ATAR entry

50.00 or below

50.05 - 70.00

70.05 or more


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Exhibit 5: Anticipated capture rates by ATAR band

Student cohort Forecast market share or ‘capture rate’ for Golden Coast Tech

Non-ATAR entry 10%

50.00 or below 10%

50.05 - 70.00 5%

70.05 or more 1%

Based on the data provided in Exhibit 4 and Exhibit 5, how many students could Golden Coast Tech expect to be teaching in information technology each year between 2014 and 2018 (inclusive)? Round the number of students (broken down by 1st year, 2nd year and 3rd year) to the nearest integer.

NB: The proposed degree would be for three years of study, and USEQ has requested that Nous assume a 100% completion rate of the degree to provide a maximum possible figure.


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2.7.1 Answer to question 6 Student enrolments were forecast by applying the ‘capture rate’ to each cohort. Each cohort was then summed to provide annual enrolments. For example, year 1 intake in 2014 was calculated as follows: (10% of 75) + (10% of 210) + (5% of 250) + (1% of 350) = 44.5 (rounded to 45). This intake continues in year 2 and year 3.

100% ‘completion rates’ were assumed, meaning that all students enrolled in 2014 proceeded to 2nd year in 2015 and 3rd year in 2017.

For reference, the maximum intake of 50 would be reached in 2018.

Exhibit 6: Forecast enrolments at Golden Coast Tech for an information technology degree

Forecast student enrolments

45 46 47 49 50

45 46 47 49

45 46 47

0

20

40

60

80

100

120

140

160

2014 2015 2016 2017 2018

3rd year students

2nd year students

1st year students

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