COVID-19 Special Edition III
Will all international schools survive? A deeper dive.
This is a bonus edition of EDDi.
Last week’s special was exceptionally popular - thank you to everyone who read, commented on, engaged with, and shared the piece.
The article was so popular, and the feedback so overwhelmingly positive, that it inspired us to follow up with some further COVID-19 related insight.
This week we offer:
A podcast from Persyou examining one school’s response to the COVID crisis.
An examination of China’s crucial role in which schools recover.
A deeper dive into the ‘survival matrix’.
Scroll down for the articles and links.
For the next edition, normal service will resume. We have a themed series of articles on female leadership (or, rather, the relative lack of) in international schools. We are also offering a free book chapter. Subscribe to ensure it lands in your inbox.
Stay safe and thanks for reading.
As a companion to last week’s long read article, we are delighted to offer this aural alternative.
It’s a 45 minute podcast. A case study of how one school responded in the early days of COVID-19.
In the podcast, Nicholas McKie, Dierctor of Persyou, interviews Chris Seal, Principal of Shrewsbury International School, Bangkok. They discuss how Shrewsbury reacted to the crisis, changes to management structures to increase speed of response, and examine the leadership skills needed in times of crisis.
The Harvard Business Review article mentioned in the interview is here.
More on Shrewsbury International School, Bangkok.
If you like the podcast, let us know in the comments and we will showcase more of Nick’s work in future EDDitions.
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WHICH SCHOOLS WILL SURVIVE?
THE CHINA ELEPHANT
Northern Thailand is one of the most delightful and still relatively unspoilt parts of South East Asia. From the peak of Doi Inthanon, across the Chiang Mai jungles of Doi Suthep, and eastwards to the famed Golden Triangle of the Mekong River, this land is simultaneously enticing and enchanting, remote and mysterious.
It attracts tens of millions of tourists and travellers every year, or did so up until Thailand closed its borders to all incoming flights a few weeks back. Now even the elephant breeding camps are deserted; not a single tourist seeking the thrill of riding through the forest on the back of one of these serene beasts.
Drive out of Chiang Mai city heading west and you’ll come to the Samoeng District, once a spread of emerald green rice paddies but now a desirable location for wealthier Thai families. The Sameong road takes a sharp right away from this middle-class enclave and leads you into the jungle covered mountains. Thirty minutes later, or much longer if you are cycling, and some 1,000 feet higher, you find yourself passing an international school.
The first time I noticed this school was about 20 years ago and it seemed incongruous back then. Who would have had the ambition, confidence, even impudence to establish an American international boarding school out in the isolated mountains of Doi Suthep National Park, Chiang Mai - where not even a 7-Eleven store deems it safe to venture?
Well, someone did and in the last few years that impudence must have paid off because the school has duly thrived and expanded.
But not because Thais have enrolled in their hundreds. This international school, like most every other quality international school in Thailand, has been riding its own elephant to success. And the name of that elephant is China.
The China Connection
Before we proceed further, an important note. We at EDDi are not economists, we are not avid data collectors, we are social commentators - trained sociologists who happen to have extensive experience of the world of international schooling. What follows is not based on quantitative evidence so much as our particular insights into international education, framed by a healthy and realistic awareness of what can go wrong as well as what can go right when leading an international school.
We have witnessed first-hand, and indeed played some part in, the phenomenal growth story of international schooling over the past 15 to 20 years. From 2,000 schools world-wide when we started our professional journey to over 11,500 today.
And if you are an international school teacher or manager, you too are part of that story, you too have made your contribution and, hopefully, will continue to do so for many years yet. But right now, today, neither you nor EDDi can be sure just what the future holds.
But what we all know, and indeed fear, is that without an ongoing China connection, the future of international schooling will be very different to its past.
Without a China connection, who would risk building high quality, American, Canadian, or British curriculum international schools in the midst of the South East Asian jungle? Only the very brave or the very naïve. And after experiencing Covid-19 not many of us are naïve, nor feeling especially brave.
The Thai Experience
Where the courageous and imaginative lead, the rest follow and that is especially true of profit.
One hasn’t needed to be a Warren Buffet or Bill Gates to spot where the opportunities are in international schooling. From a small handful of international schools back in the late Nineties, to over 250 today, Thailand illustrates the maxim that ‘one can never have too much of a good thing’. It is not simply growth in number but growth in school size which proves the point; the latest ‘big player’ to enter the Thai market being Verso International School, boasting facilities and resources designed to put its competitors very firmly on the back foot.
But take a closer look at the Thai market and one is bound to ask, where are all the extra students expected to come from?
Even before Covid-19 ripped up all the Thai government and economist’s forecasts for GDP growth over the next few years, the economy was hardly robust. Sure, international school fees of between 150,000 THB and 900,000 THB for top tier schools is well below what a parent would pay in, say, Hong Kong or Shanghai, but when the average wage in Bangkok is just 26,000 THB per month (US$800) being middle class in Thailand doesn’t automatically equal being able to pay for an international school education. Indeed, ‘middle class’ in most of Asia invariably means living close to if not beyond, one’s means, relying constantly on bank loans, credit cards, and regular employment to stay solvent – most of life’s luxuries and excesses are the privilege of the upper-classes, not the middle-classes.
It is salutary to note the immediate and dire impact of Covid-19 on the Thai economy. Virtually overnight, tourism declined to near zero while, like most every other government, the Thais have been forced to pump masses of borrowed money into the economy, equivalent to 10% of GDP.
Of course, if you have recently invested a small fortune in a grand scale new international school in Thailand, or indeed in Singapore, Jakarta, Kuala Lumpur, Ho Chi Minh City, Yangon, or Hong Kong, then you’ve not done so based on economic estimates of local GDP and middle-class average incomes. Well, if you have then you’ve made a big error in judgement.
No, being an astute entrepreneur, you’ve made your investment on the basis that China continues to be the elephant to ride. With hundreds of thousands of baby elephants all trudging confidently to your school gates carrying on their backs delightful, and prosperous, Chinese students.
At this point we leave behind the economic facts and venture into the sociological, because much as business people, and economists, like to rely on quantitative data and empirical forecasts to judge their estimates, investments, and risks, the truth is all profit is a consequence of human action, plus a good dollop of emotion. In other words, if you want to predict the market movement, you are just as well asking a psychologist or a sociologist than an economist.
In our EDDi article ‘The Future of International Education’, we listed the six core aspects of being human:
Willingness to put self and family first
Desire for a more comfortable life
Preparedness to make sacrifices for one’s children
Cultural myopia mixed with cultural curiosity
Need for social connection and community
Inability to learn from history
While these are, as we claim, universal and inviolate, as far as the China elephant is concerned, Number 4 is the one we should all be looking at.
Throughout its history, China has been inward looking, trapped in cultural myopia. Despite being one of the world’s first ‘great nations’, for over 2000 years its people have stayed rooted to their Confucionist values and insular lifestyle. We hear much nowadays about the ‘belt and road’ initiative - Chinese leader, Xi Jinping’s very personal dream to project Chinese soft power and economic clout around the world - but it’s worth remembering that the first railroad in China only opened up in 1876, by which time the West ‘boasted more than 350,000 kilometres of railroads’ (Harari, 2015).
And as for venturing into and exploiting the unknown, as Yuval Noah Harari notes, China left that task to the Europeans. The largest of the 15th century sea voyages of Admiral Zheng He of the Chinese Ming dynasty comprised almost 300 ships and carried 30,000 people. Admiral Zheng visited Indonesia, Sri Lanka, India, the Persian Gulf, the Red Sea and East Africa. Did Zheng then take this opportunity to plant the Chinese flag in East and South Asia, colonising in the name of his Emperor? No, he promptly went home:
“The great fleet was dismantled, crucial technical and geographical knowledge was lost, and no explorer of such stature and means ever set out again from a Chinese port.” (p. 324)
To put that in historical perspective, Christopher Columbus’ fleet of 1492 consisted of just three small ships and 120 sailors.
In short, there is no historical precedence which suggests China is willing to assume leadership of the 21st century globalisation project. It may, or it may not. Up until a few months ago, it seemed safe to assume that the Chinese-globalisation relationship was as secure as the Hong Kong-Zhuhai-Macau Bridge. Whether you believe it remains as secure today depends on whether you believe the Chinese are ditching their historical myopia for a great deal more cultural curiosity. And not just curiosity, but a real willingness and desire to step into the global leadership vacuum created by four years of Donald Trump.
This is the elephant all international schools are now hoping gets driven to their respective school gates. Because if that elephant, like Admiral Zheng’s fleet, never again ventures beyond its borders, then international schools everywhere are in for a very hard time.
As sociologists, we suggest therefore, that it is more useful to look at history and culture than simply at crisp, hard, GDP and economic data when forecasting international school growth.
Globalisation has been around for a very long time, but as far as the Chinese nation is concerned, this is a very recent phenomenon. Which makes it a lot more tentative and insecure in the Chinese cultural and social psyche than it does in the average Western one.
Yes, we know that Chinese people have populated every part of the globe, and that diaspora is impressive by any measure, but international schools which have come to rely on Chinese nationals enrolling every year without fail, are in reality relying on Western culture, values, even soft power to continue to be the magic that spurs the average Chinese parent to dip their hands in the pockets to feed the elephant.
For us, this is the burning question now facing international schools: Will Chinese nationals continue to embrace Westernisation (through international education) or does Covid-19 signal a return to their historical myopic cultural identity?
This question may be of somewhat less immediate importance if your school is in, say, Latin America or the Caribbean (hello to our EDDi subscriber in Barbados), but it is still relevant. The reason being, as Covid-19 has confirmed if we didn’t already know it, this is a very small world and we are all in it together.
Let us therefore hope then that, along with the Chinese tourists coming by plane, train or automobile to your country, so too do the Chinese elephants continue their regal trek to your school gates, carrying with them their Chinese students.
Lead Author: Dr Stephen Whitehead
A brief intermission…
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THE MATRIX (RELOADED): CAN ALL INTERNATIONAL SCHOOLS SURVIVE?
If ever a question seems to have resonated with EDDi’s audience, it was last week’s.
Can all international schools survive?
Some 5,000 people have read the article (available here), many taking the time to thank the EDDi team for sharing. A few people asked for additional information and insight. Where possible we have responded to these enquires directly. We value the EDDi community and it gives us great pleasure to engage with its growing membership.
However, it simply wasn’t possible to respond to everyone. A collective and resounding thank you will have to suffice.
We have though aggregated some of the questions, offering the following deeper dive into the matrix.
The matrix was presented as a heuristic. By no means intended as predictive, the hope was to promote reflection – which, judging by the article’s positive reception, it seems to have done.
Firstly, some further detail on the axis:
Competition: The y-axis encourages reflection on the volume/intensity of competition a given school faces. So, the number of competing schools primarily, but also geographic distribution and proximity vis-à-vis one another. The closer schools are grouped, and the more of them there are, the more intense the competition.
Market Focus: Expressed here as fee level, though easily substituted with notional tiering (upper-tier, mid-tier and lower-tier), the x-axis reflects a school’s market position relative to its competitors. A high-fee/premium school will obviously be focussed on a different market segment than a low-fee/lower-tier school; they are not in competition with one another.
Note that no assumption about quality is made. Indeed, in the original piece, we suggested that quality is a moderator of likely survival/success. We hold to that position here - a low-fee school, with otherwise poor chances of survival, but with a reputation for offering a high-quality education may fare much better than its rivals.
Secondly, a deeper explanation of each quadrant:
Excellent Prospects of Survival: Hopefully this is fairly obvious. A premium school, charging high-fees, and faced with limited competition has a strong chance of survival.
Good Prospects of Survival: We suggest here that two types of school have a good chance of survival: premium schools, even ones operating in highly competitive markets, and low-fee schools operating in markets with limited competition.
Premium schools have a good chance of surviving because:
They are more likely to have sufficient cash reserves to survive short-term declines in role/fee income.
They are more likely to have parents whose ability to pay is less income sensitive.
The social factors which have fuelled demand for premium schools will not (for the most part) be offset by reductions in the ability to pay; i.e. parents are likely to forgo other luxuries before they cut back on education, thereby protecting the social capital they accrue from having their children in a prestigious international school.
For those interested in this line of argument, the source paper is worthy of further reading. In short, and mindful of individual exceptions, on aggregate, high-income parents will bear (at least some degree of) financial pain, keeping their children in prestigious schools rather than leaping to alternatives; like frogs in slowly boiled water, staying firmly, if not comfortably, put.
Low-fee schools, those facing limited competition at least, have a good chance of surviving because once committed to an international school education is hard to abandon part way through. International schools, even low-fee ones, benefit from high emotional switching costs - few parents, or children, would wish a return to state education. And, for parents with children in these schools, that may be the only alternative. If parents can scrimp, beg, save or borrow to keep their children in these schools, they may have little other option but to do so. Schools gain significant advantage from the irreversibility of parental decisions.
Poor Prospects of Survival: In contrast, low-fee schools who face significant competition could be the biggest losers. Why?
These schools are perhaps the least likely to have the cash reserves to support their survival.
With a high number of schools competing for a declining pool of parents, price cutting, offers of bursaries/scholarships and other incentives could further sharpen already cut-throat rivalry. Only the strongest may survive.
If a school is forced to cut costs (reducing the number of expat teachers in favour of local ones, for example), rivals who do not have to make the same tough decisions are likely to benefit.
As the original piece argued, the big winners here might be middle-tier schools.
Whilst the premium schools will likely pick up the ‘returnees’, local students now preferring to be educated at home rather than in Western boarding schools, middle-tier schools may attract students for whom the premium schools are now financially out of reach. Indeed, talk to admissions officers in many premium international schools, and they will tell you that there is already a slow trickle of parents forewarning of intentions to leave. Also, as low-fee schools (potentially) go out of business, parents who do not wish a return to state education may be forced to look towards middle-tier schools (at least to those with affordable fees).
So, all things being equal (and, admittedly, they rarely are), middle-tier schools may be in a strong position to attract students from both ends of the market, upper and lower.
In the world of COVID-19 a week is a long time. In the previous article we mentioned fee freezes. Since writing and publishing the EDDi Special only seven days ago, we have already seen increasing evidence of ever more schools freezing fees for 2020/2021.
Even those schools (mostly premium, often in strong competitive position) who have resisted fee cuts for this year, have succumb to parental pressure (moral obligation?) to freeze fees next year.
This too speaks to the prospects outlined in the matrix.
Let’s assume that, across the international schooling fee increases are close to zero next year. A sweeping assumption, yes, but not unrealistic. As above, it is the larger, higher-fee schools who are more likely to have the cash reserves to cope. These schools are also likely to have more wiggle room to make cuts. They are in a better position to forgo an extra teacher here or there, or to sacrifice investment in nice-to-have-but-not-absolutely-necessary resources. Low fee schools may already have been running with very little, if any, slack; cuts may be shallow by necessity, but painful nonetheless.
Sadly, some of these lower-fee schools will not survive the next two to three years.
All of this, of course, is heavily dependent on context. The intent here isn't to predict what might happen in any individual school, it is a macro-level view of the industry in general – with all the speculation and generalisation that requires. We leave the micro-view and the specifics up to you. The matrix is simply a tool; an instrument to reflect on where your school might stand when the COVID-19 rollercoaster finally and thankfully stops.
If you have further questions, please feel free to post comments. We have been delighted with the response to last week’s article and look forward to further engagement with the EDDi community.
Lead Author: Dr Denry Machin
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