Porter’s 5 Forces - ISB

1. Porter’s 5 Forces - ISB Naomi Chhatwal Philippine Van Campenhout Julita Borys Sena Aksoy Bartu Kaleagasi Katie Olney Celine Bierman Eddie Benedetti Gustavo Adade

2. What is it? Porter’s 5 Forces is an analytical tool used to evaluate the competition of a business in its market.

4. Bargaining Power of Supplier

5. What is bargaining power of supplier? • The bargaining power of a supplier directly affects the cost of the item or service that a business buys. • A supplier tends to have more power if: • many buyers want this product • a supplier's goods are unique or highly differentiated with few or no substitutes • suppliers are forward integrated • high costs are involved in switching from one supplier to another

6. Real-Life Examples • Ferrari • Differentiated Product – no other company in the market can provide the same product • Rolex watches • good quality and unique products which created their brand • Microsoft • Has power from being an almost monopolistic supplier of PC operating systems • Few substitutes

7. Why ISB has supplier power Look at ISB as a supplier of education • Low competition - St Johns, BSB & SSB • Longest history – since 1951 • High standard of education • Unique and highly differentiated • Largest campus – 40 acres • Varied courses and learning environment • Sports program • Variety of clubs

8. Education • 8:1 teacher student ratio • Offers and IB diploma, AP program, ISB diploma • Variety of courses • Over 77 courses in HS • Standard courses + 2 electives in MS • Counseling even after graduation • Trips offer learning in different environments and by direct interaction

9. 14 sports – 56 teams • Sports facilities • International Schools Competitions Sports Program ISB Football Team in Germany Offers students an opportunity to compete with different schools, develop their skills, commit and work as a team PE every day in ES &MS

10. ISB offers a variety of clubs run by students for other students to gain deeper understanding of the global issues, provide opportunities and involvement in making a change. Clubs & Extracurricular Activities Clubs offer an opportunity for further development of skills and passions, such as the ones in visual and performing arts Esther Yoo performing at Queen Elisabeth Competition Women for Women fashion show – money raiser

11. Bargaining Power of Buyers

12. Buyers (Customers) • The bargaining power of customers is also described as the market outputs: ability of customers to put the firm under pressure, which can affect the customers sensitivity to price change. • Buyers also refer to the customers who finally consume the product or the firms who distribute the industry's product to the final consumers. • Strong buyer can extract profits out of industry by lowering the prices and increasing the costs.

13. Buyers (Customers) • Purchase in large quantities. • They get fully informed about the product and also the market. • They give a good word about the quality of the product and also the market. • They pose a threat of backward integration. • They are also considered as a threat in this situation.

14. Who are the Buyers of ISB? • The parents of the students are the buyers of the school. • Although not every parent pays the school. • Majority are the companies and the embassies that pays for the school. • Examples: Embassies, ExxonMobil, Pharmaceutical companies, etc.

15. How does ISB convince the Buyers to choose us instead other schools of the market? • What ISB does is that they show the plan and what they have to offer from their school • ISB Offers; • The biggest sports program in the market • IB diploma program • Large number of trips they offer • SAT’s • Special Education Program • Good school facility

16. The Power of the Buyer • Even a difference of merely 30-40 buyers can mean a lot as tuition can increase and the revenue can be increased up to 3 and a half million within three years. The Bigger the student body is the more competition there is to enter the school expenses however also seem to maximize as student’s join more sports programs and more teachers are needed to maintain the student to teacher ratio.

17. School Enrollment relation • 2009/2010: School year 1462 students • 2010/2011: School year 1461 • 2011/2012: School year 1499

18. Attraction of buyers • To keep buyers attracted to ISB there need to be continuous checks upon teacher’s performances to make sure they are the best set of instructors in the area to offer. • ISB’s campaign of advertisement is already immense as seen in examples such as ISB appearing in sport ventures, flights and on videos as well as adverts online.

19. Threat of Substitutes

20. What are Substitutes? • Substitutes are businesses that offer a very similar alternative good or service • The Threat of Substitutes to a business is affected by pricing, competitive advantages, andunique selling points • The power of substitutes determines how much of the market share they can gain, which generally results in increased revenue

21. Real-Life Examples • Apple is seeing an increasing amount of substitutes in the market of smartphones (Samsung, HTC, Nokia) • Substitutes for Shellin the petrol station industry’s Belgian market (Q8 and Lukoil)

22. Substitutes for ISB Realistically, there are 3 direct substitutes to The International School of Brussels: • British School of Brussels • St. John's • Scandinavian School Although there is also the European School, it is not regarded as a substitute as it does not offer a full IB program and has restrictions in terms of admissions (in regards to European Union employees).

23. The British School of Brussels • Tuition fee: €28,500 • Application fee: €1,000 • Programs offered: A-levels and IB Diploma • Notable extracurriculars: International Award, Cricket, Netball, Gymnastics, MUN • Weakness: Affiliated with “British” nationality

24. St. John’s International School • Tuition fee: €29,695 • Application fee: €1,000 • Programs offered: AP and IB Diploma • Notable extracurriculars: International Award, Philosophy Society, Puppetry, Handball, Hockey • Weakness:“St. John’s High School is Christian in principle”, Religious studies is mandatory to receive a diploma

25. Scandinavian School of Brussels • Tuition fee: €20,000 • Application fee: €650 • Programs offered: National Scandinavian programs and IB Diploma • Notable extracurriculars:Mandarin Chinese, Gymnastics, Handball • Weakness:Affiliated with region of Scandinavia

26. International School of Brussels • Tuition fee: €32,100 • Application fee: €1000 • Programs offered:AP and IB Diploma • Notable extracurriculars:Widest variety of sports, arts, societies and clubs in Brussels • Weakness: High price of tuition (staff = 75% of budget),but for quality education/maintenance

27. ISB’s Unique Selling Point Then what does ISB draw its success from? • Only school in the Brussels area that is not affiliated with any Nationality, Religion or Region • Truly international and culturally diverse • More than a school, a large community • Secure environment, friendly society and campus • IB offered longer, more choice, good IB teachers and results against worldwide averages • Longevity of leadership

28. ISB’s Unique Selling Point …and most of all • Brand name: The International School of Brussels

29. Future of ISB in the Market • Market has reduced, but enrollment is growing and sustained. This means that market share of ISB has gone up and perhaps that of substitutes has gone down.

30. Future of ISB in the Market Growth plans include: • Building an underground car parking to keep the social environment of community for parents • Thinking of opening a crèche outsourced to entrepreneurs as a partnership

31. Threat of New Entrants

32. Threat of New Entrants • Definition: If a new business enters the market there is a threat to existing companies in the market. • Analyze the reasons why it is or is not a threat to the company.

33. Real-Life Examples • McDonald’s is a leading brand in the Fast Food market • If a new Fast Food restaurant were to open • Would not be a threat to McDonalds because of barriers of entry • Economies of Scale, high start up costs, brand loyalty

34. Threat of New Entrants to ISB Positives: • Economies of Scale (Commercial, Financial) • Local reputation/brand loyalty • High startup costs • IB Negatives: • Lower cost • More Varied options • Better facilities • External Moderation (MS)

35. Economies of Scale • Def: the reduction of the overall cost per unit due to an increase in production • ISB – Commercial and Financial • Commercial – buying textbooks, tablets, sports uniforms • Financial • Difficult for new businesses to enter the market

36. Local Reputation/Brand Loyalty • ISB – 60 years, experience and history in the area • Well known brand – English-speaking International school • New entrants don’t have this

37. High Startup Costs • Location – land • Building • Staff • Supplies • Technology • Sports facilities • ISB has all of these already

38. International Baccalaureate • Been offered for longer • More choices • Good teachers • Non-exclusive • Good results

40. Threat of New Entrants to ISB New school with lower fees • This is possible, but in the long run unlikely because for a new school to become as successful as ISB, there are certain challenges such as: • The saturated market – already many schools in the Brussels area. • High start up costs • Economies of scale

41. Threat of New Entrants to ISB New school giving extra subject options/ External moderation programs: • More IB subject options (this would mean having to hire more teachers) for example: • Film studies – BSB subject • Psychology – BSB subject • More AP Classes • A – Levels • GCSE’s (External examination Program for grades 9&10) Parents might choose this or any other equivalent for their child as they would like it as a practice for their eventual diploma examinations (IB, A-levels, AP)

42. Threats to ISB • New school that would compete with ISB for better/more innovative/Eco friendly facilities

43. What gives ISB its power? • Been in the area • Constantly improving: new fields, new high school, underground parking lot • Listens to parents • Good reputation • Aware of competition

44. Intensity of Rivalry

45. Intensity of Rivalry • Porter’s 5 Forces are made of four components New Entrants, Suppliers, Buyers and Substitutes • Together they make the Industry Competitors, in other words Intensity of Rivalry

46. Intensity of Rivalry Intensity of Rivalry between competitors in an industry will depend on: • The structure of competition • The structure of industry costs • Degree of differentiation • Switching costs • Strategic Objectives • Exit Barriers

47. The Structure of Competition The competitors of ISB: • St. Johns International School (STJ) • British School of Brussels (BSB) • Scandinavian School of Brussels (SSB) • IB Diploma: • STJ • BSB • SSB

48. ISB’s biggest competitor • St. John’s • International School • Tuition fees: STJ= 29,695 Euros ISB= 32,100 Application Fees (both schools)= 1000 Euros • High School Diplomas: IB + AP • Enrollment: Pre-Kindergarten to 13th grade.

49. The Structure of Industry Costs • ISB= highest tuition fees of all schools in Brussels • High intensity of Rivalry -> Scandinavian school of Brussels • offer the IB diploma • SSB’s tuition fees= 20,000 euros • 12,000 euros less than ISB

50. Degree of Differentiation • Tablets incorporated in their Tuition Fees • Fully International School unlike BSB and SSB • Has no religion; (STJ is a catholic school) • A community-> like a family • Special Education program • Athletic program • Big campus