INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

Strategy of CL Educate Ltd.

An assignment submitted to
Instructor: Prof. Amit Karna
Academic Associate: Mr Ajaydeep Deora

In partial fulfilment of the requirements of the course

Strategic Management (2017-18)

On
March 23, 2018
By Group: E6

Raghaw Jhunjhunwala 17272

Saumya Porwal 17321
Piyush Raj 17237
Pranav Tyagi 17245
Yashasvi Joshi 17403
Debasish Sahoo 17098

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Contents

Introduction ................................................................................................................................ 3

Competitive Forces Shaping the Industry .................................................................................. 3

Power of suppliers .................................................................................................................. 3

Power of Buyers ..................................................................................................................... 3

Threat of Substitutes............................................................................................................... 4

Threat of New Entrants .......................................................................................................... 4

Rivalry among Existing Competitors ..................................................................................... 5

Industry Attractiveness:.......................................................................................................... 5

Elements of CL’s strategy .......................................................................................................... 5

Arena ...................................................................................................................................... 5

Vehicle ................................................................................................................................... 6

Staging.................................................................................................................................... 6

Differentiators ........................................................................................................................ 6

Economic Logic ..................................................................................................................... 7

Recent Strategic Decision: Acquisition of ETEN ...................................................................... 7

Strategy Evaluation .................................................................................................................... 8

Identification of strategic drivers ........................................................................................... 8

Access to new distribution channels ...................................................................................... 8

Obtaining new products ......................................................................................................... 8

Strengthening reputation ........................................................................................................ 8

Testing the Quality of Strategic Decision .............................................................................. 9

Endnotes................................................................................................................................... 10

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Introduction

Company Selected: CL Educate Ltd. (Career Launcher)

Industry: Test Preparation (Education)

About Career Launcher

Founded in 1996, Career Launcher is a private coaching institute involved in providing

academic support for a wide array of examinations, catering to the needs of a diverse set of
students, right from class 6th to post-graduation (NET). It is among the first few and the
foremost education start-ups in India. It is one amongst a select few educational companies to
have successfully gone public in India.

Competitive Forces Shaping the Industry

Power of suppliers

Primary suppliers come from two sources:

 Content providers (faculty)

 Technological infrastructure and software developers.

The availability good quality teachers is limited and these teachers have multiple options to
deliver their service viz. schools, brick and mortar coaching centres, online portals or their
own facilities. Moreover, customer loyalty is teacher driven which implies that coaching
centres would like to maintain a certain level of quality and consistency in their faculty, and
thus, would be unwilling to switch the content providers.

For the tech providers and software developers, the percentage of their business coming from
education industry is low, giving them the position to extract good profit from the firms as
they do not depend heavily on this source of revenue, which is the case vice versa.

Conclusion: Power of suppliers is thus moderately high in this industry.

Power of Buyers

The key decision making unit for the buyer segment are-

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  Parents for students in classes 8-12
 Students in undergraduate and master’s segment.

Students in K-12 segment generally prepare for entrance examinations such as BBA, BMS,
IITJEE, CLAT etc. With 70% of parents claiming that investment in their child’s education is
the best investment they could make, the price elasticity of demand for education is low as
their primary focus is on quality. However, there are multiple players in test prep industry
increasing the number of options available to them, bargaining power is quite high in this
case. Undergraduate and Master's students generally prepare for higher education entrance
examinations such as CAT, GMAT, GRE etc. In their case also bargaining power is high
owing to fragmented market.

Conclusion: Power of buyers is fairly high.

Threat of Substitutes

Though there are not major specific substitutes available to test prep industry, certain
colleges/educational institutes have started incorporating courses related to entrance test
preparation in their curriculum. The more professionalised and successful these courses
become, the more would be the threat to the current test prep industry. Also, free material is
becoming readily available. Channels such as Youtube, Facebook Groups etc attract a lot of
students seeking support on a daily basis. The duration till which these channels remain free
determines the threat.

Conclusion: Threat of substitutes, as of now, is low.

Threat of New Entrants

Owing to low entry barriers in this industry, threat of new entrants is very high. Also, there is
customer loyalty evident towards people from the same industry, for example, a fresh IIM
graduate could start providing free content and mentorship thereby attracting hordes of
students, seeking guidance from people who have been recently been through the same
rigmarole. Post a short duration, once trust has been built up with these students, he/she could
start charging a nominal amount in lieu of starting a course/sharing of new material, thereby
becoming a part of industry themselves.

Conclusion: Threat of new entrants is very high

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Rivalry among Existing Competitors

Each segment of the industry is oligopolistic in nature with a few dominant players. For
example, in law CL-LST, CLAT possible and Legal Edge dominating the industry, in MBA it
is CL, TIME and IMS etc. Thus, the industry in itself is divided into sub-segments with
different players available in different segments and few being common across. Smaller
players, in different sections, cater to a specific niche/loyal segment of customers. Moreover,
global organizations such Khan Academy and Coursera have also started to focus on the
Indian market for the potential it offers.

Conclusion: Competition is very high in this industry

Industry Attractiveness:

Based on the analysis of competitive forces shaping this industry, the industry
attractiveness is on the lower side primarily because of high bargaining power both
upstream and downstream with the presence of high competition.

Elements of CL’s strategy

Arena

 Test preparation and coaching for entrance exams for

Product Categories
MBA, Banking, Law and State Staffing Commission as
well as international education (SAT, GMAT, GRE)
 Courses for Engineering, Medical and Civil Services
 Grade VIII-XII tuitions
 Published material, online videos and content development
for entrance exam preparation
 Integrated business solutions to corporates through the
Kestone vertical of the company

 Grade VIII-XII students

 College students (Engineering, Medical, Law, BBA, CA
Customer Segments etc.)
 Graduates appearing for entrance exams (CAT, GMAT,
GATE, GRE, SSC, RBI etc.)

Geographical Areas  170+ test prep centres in over 90 cities in India

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  Present in South Asia through Singapore based subsidiary
Kestone Asia PTE Limited

 Mobile apps like CL Exam Guide, Smart CAT cracker,

Smart CLAT cracker etc.
Core Technologies
 IIM profilizer, CAT percentile predictor, CLAT rank
predictor etc.

 It is present as a content developer, content publisher and

content distributor
Value Creation Stages
 Service providers to the end customers through online and
offline coaching for students

Vehicle

Product creation, rampant training of the faculty and

Internal Development franchisees, marketing, technological support and
administrative and ERP support for franchisees

Franchising based model to start new coaching centre, with a

Licensing/Franchising
rigorous six step process to select a franchisee (2)

High focus on acquisition based expansion into various

product categories and new technologies (3):
 Acquisition of Professionals Online limited, Lohana Test
Series, Paragon class
Acquisitions  Entry into vocational training: acquisition of Kestone
 Entry into publication business and content development
through acquisition of GKP
 Acquisition of ETEN – Pearson's CA & IAS Test Prep to
cater to CA students

Staging

 Mission 1000- 2000 franchises by the year 2020 within

India (currently 200+)
Speed of expansion
 Slow expansion in Dubai through COCO (Company
owned company operated)

Expanding in India first with focus on increasing the number

Sequence of Initiatives of product categories. Latest expansion being entering into CA
preparation through acquisition of ETEN.

Differentiators

Image Recognised as a company being closest to the actual exam

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 (CAT, CLAT etc.)

Maximum number of stock keeping units (SKUs) compared to

Customization the competitors. Special personalised programs available for
the students.

Charges higher price, acts like a benchmark in the industry,

Price competitors charge their product (5-10%) lesser than that.
Premium pricing in case of specific streams (Law etc.)

User friendly interface of the website, personalised according

to the product and ordering of items on the website is on the
Styling basis of importance from the viewpoint of the customer.
Home page ordering is from the viewpoint of the company,
the products they want to sell.

Customer find product to be extremely reliable. In an audited

Product Reliability result it was found that 97% of people were satisfied that if
existed, queries were solved within the stipulated time period.

Economic Logic

Lowest Cost through scale

Achieves economies of scale for publishing and printing.
advantage

Premium prices charged for majority of the products. For eg-

Law, where they have more than half the market share. Also,
certain niche products where they have first mover advantage.
Premium prices due to
For eg- MBA’s night classes.
unmatchable service
They have certain tools which no one in the industry was able
to imitate successfully, for example- CAT score booster,
percentile predictor etc.

They own certain tools that they have applied patents for.
Premium prices due to These are like features of the products that they sell and will
proprietary product features help them make their products even more attractive for the
students. For example- IIM profilizer.

Recent Strategic Decision: Acquisition of ETEN

Career Launcher acquired ETEN, the test prep division of Pearson's IndiaCan Education
Private Limited on 13th April 2017. The deal consisted of a staggered payment of ₹6 crore
over two and a half years and revenue share of 4% for the next three years.
About ETEN

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ETEN is the test preparation business division of the publishing giant Pearson's JV-
IndiaCan. Pearson India in an attempt to move away from non-core areas has been divesting
off its business divisions.
CL's brief acquisition history
Career Launcher has been acquiring companies in an attempt to diversify its offerings.
Through acquisitions, it has focused on filling gaps in its product offerings and acquiring key
technologies. Some of its key acquisitions have been mapped here-

Strategy Evaluation

The acquisition of ETEN has been evaluated by

1. Identification of strategic drivers for synergy

2. Testing the quality of strategy

Identification of strategic drivers

Various strategic drivers which were the reasons behind this acquisition are:

Access to new distribution channels

Career Launcher gets access to the VSAT network of ETEN through this acquisition. The
widespread VSAT network of ETEN in over 100 centres across India gives Career Launcher
the opportunity to sell its existing popular CAT prep offerings to Tier 3 and 4 cities through a
low cost delivery network.

Obtaining new products

ETEN has a strong product portfolio consisting of IAS, CA and CS preparation owing to its
high quality faculty. Career launcher has been trying to develop its knowledge based test
prep portfolio and didn't have CA preparation products. Through this acquisition, Career
Launcher gets a well-structured CA preparation platform with proven performance
of benefitting more than 30,000 students.

Strengthening reputation

ETEN has a strategic partnership with Khan Study Circle (KSC) with a history of producing
All India Rank 1's like Tina Dabi (2015) in civil services exam. This will help in gaining
credibility for the IAS offerings of Career Launcher itself. Moreover, this also enables Career
Launcher to position itself as a low cost, high quality educational content provider thereby
competing effectively with Byju's which has a similar value proposition.

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Testing the Quality of Strategic Decision

Q1. Does your strategy fit with what’s going on in the environment?

The success of Byju’s has shown that there has been a shift in Indian preferences for test prep
delivery through high quality videos. Worldwide, MOOCS like Coursera and Edx are
ushering in a new revolution of delivering education through internet. Therefore, acquisition
of ETEN fits perfectly with the environment and offers a healthy profit potential in future.

Q2. Does your strategy exploit your key resources?

This acquisition leads to a wider product portfolio for the existing, broad student base of
Career Launcher. Students will be provided with test prep content from high profile ETEN
teachers. It’s technical prowess also gets bolstered via this acquisition enabling it to target its
existing students with live VSAT classes.

Q3. Will your envisioned differentiators be sustainable?

ETEN acquisition opens up access to newer markets through VSAT and therefore the
combined entity now has a strong presence as a test prep centre for multiple exams and this
diverse portfolio of products will be difficult for competitors to match.

Q4. Are the elements of your strategy internally consistent?

CL’s internal strategy relies on using technology and quality teachers for content
development, publishing and delivery. It already has test prep exams for other entrance
exams and the strategy elements for the existing services are consistent with the requirement
of the combined entity post acquisition.

Q5. Do you have enough resources to pursue this strategy?

Career Launcher earned 156 crore in revenues with a profit after tax of 7.2 crores in FY 17
and has been managing 170+ centers across India. Therefore, an acquisition worth 6 crore
staggered over a period of two and a half years doesn’t place much financial burden on it.

Q6. Is your strategy implementable?

Career Launcher has a history of successfully integrating acquisitions. Moreover, this

acquisition is of a smaller size when compared to CL’s size. Hence it doesn’t place too much
strain on CL’s existing management when knowledge based prep is an organisational area of
focus for top management.

Evaluation: The decision to acquire ETEN seems fairly well in light of the strategy of CL.

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Endnotes

Primary Source:
Gautam Bawa, Group Product Head, Test Preparation, CL Educate Ltd. (Career Launcher)
Email: gautam.bawa@careerlauncher.com
Secondary Sources:

1. Business Of Private Tutorials In India Now A Multi-Billion Dollar Industry. (2018). BW

Businessworld. Retrieved 23 March 2018, from http://businessworld.in/article/Business-
Of-Private-Tutorials-In-India-Now-A-Multi-Billion-Dollar-Industry/28-07-2016-100972/
2. Launcher, C. (2018). About Us - Career Launcher, CL. Careerlauncher.com. Retrieved 23
March 2018, from http://www.careerlauncher.com/aboutus/
3. “How did Satya Narayanan of Career Launcher build a global corporate from a one man
startup”. (2018). Franchiseindia.com. Retrieved 23 March 2018, from
https://www.franchiseindia.com/content/How-did-Satya-Narayanan-of-Career-Launcher-
build-a-global-corporate-from-a-one-man-startup.6006
4. (2018). Guberna.be. Retrieved 23 March 2018, from
http://www.guberna.be/sites/default/files/newsflash/nl_Readers/Are%20you%20sure%20y
ou%20have%20a%20strategy.pdf
5. Pearson sells its CA, IAS coaching arm to CL Educate for Rs 6 cr. (2017, April 13).
Retrieved March 23, 2018, from
https://www.thehindubusinessline.com/news/education/pearson-sells-its-ca-ias-coaching-
arm-to-cl-educate-for-rs-6-cr/article9637740.ece
6. India Infoline News Service. (1970, January 01). ETEN CA crosses 100-centre mark in 18
months. Retrieved March 23, 2018, from https://www.indiainfoline.com/article/news-
sector-others/eten-ca-crosses-100-centre-mark-in-18-months-113101403633_1.html
7. Journey. (n.d.). Retrieved March 23, 2018, from http://www.cleducate.com/cl-
journey.html
8. CL annual report2016-17. Page 7. Retrieved March 23, 2018
9. The Trusted Coach for CA & CS. (n.d.). Retrieved March 23, 2018, from
http://www.etencacs.com/

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