Eikaiwa

Nova Corp., reeling from a fraudulent-advertising scandal, is considering shutting down at least 200 out of its about 900 school branches around late September to turn around its operations, sources close to the matter said Thursday.
The nation’s largest English-language school operator plans to close mainly money-losing school branches, but the company is being compelled to close some of the 200 because it has failed to pay their rents, the sources said.

http://home.kyodo.co.jp/modules/fstStory/index.php?storyid=338019

Major English language teaching chain NOVA is considering shutting down a large number of schools, it emerged on Thursday.

NOVA’s income from lesson fees has decreased since the Ministry of Economy, Trade and Industry issued the language school a partial business suspension order over its practices. Because of this, the school is apparently pushing for a turnaround, hoping to cut costs by trimming and merging unprofitable schools.

NOVA currently operates more than 900 schools, but problems with efficiency have emerged.

Officials close to the group said NOVA has already been trimming and merging schools, focusing on unprofitable schools with low student numbers, but in the future the chain will also apply the move to major schools in cities where rents are high and there is more than one school in the same area. As many as 100 schools could be affected.

The language school will reportedly make considerations for students, allowing them to take lessons at other nearby schools.

http://mdn.mainichi-msn.co.jp/national/news/20070920p2a00m0na029000c.html

HUNDREDS of foreign teachers of English in Japan were anxiously awaiting overdue wages from the Nova language school yesterday, amid speculation that the corporate giant was close to collapse.

The country’s foreign workers’ union said it could “only hedge a guess that up to 3000” English teachers, many of them young Australians, went without pay last Friday and were left waiting nervously over Japan’s long weekend for the money.

“But at the very least there are hundreds of them. My phone hasn’t stopped,” said Louis Carlet, from the National Union of General Workers.

Some teachers said they were owed thousands of dollars, while others posted messages to say they were quitting in disgust. “I’ve never felt so defeated in my whole life,” said a 24-year-old American teacher, Jerry Johnston, who was considering leaving Japan after just two months but could not afford the air ticket.

It is the second time in two months that Nova has paid staff late. A recent slide in the company’s stock price followed news of a delay in payments to some of its 2000 Japanese staff last month.

The company employs about 7000 foreigners – more than any other Japanese company. Australians make up the backbone of its 5000-strong teaching staff. The company has more than 400,000 students, accounting for the biggest share of Japan’s multibillion-dollar private English teaching industry.

But it has been plunged into financial crisis this year, partly due to overexpansion, but also because the Ministry of Economy, Trade and Industry banned the company, based in Osaka, from signing new students on long-term contracts for six months.

The order was given after a court ruled that Nova lied about its services and cancellation policy when soliciting students.

The chief executive officer of Nova, Nozomu Sahashi, issued a statement to staff at some branches last Friday to say it had “not been possible to complete all the necessary operations to deposit instructor salaries”.

The statement assured that salaries would be deposited by today. But Mr Carlet told the Herald: “I’m getting reports that they have been cut off by their stationery suppliers, and delivery services, because they’re not able to pay them. They could be on the verge of going under at any moment. It’s very serious.”

Nova posted a 2.5 billion yen ($25 million) loss in operating profits for Japan’s last financial year, which ended in March. An article in the business magazine Toyo Keizai last month said the company was behind in payments to business partners and banks.

Although some teachers said their wages had arrived yesterday, others were still waiting late in the afternoon.

The manager of Nova’s Tokyo branch, Robert Vaughan, could not comment on the matter, and a number provided for media queries at the Osaka headquarters went unanswered yesterday.

A 28-year-old Australian, who works as a teacher at a Nova school outside Tokyo, said: “My pay didn’t come in on time and it was the same for a lot of people here.”

The teacher, who asked to remain anonymous, said: “No one seems to know what’s happening – we’re being kept in the dark.”

http://www.smh.com.au/news/world/teachers-unpaid-as-company-falters/2007/09/18/1189881511712.html

Nova Corp., the nation’s largest language school chain, said Friday its sales for the April-June period plunged 31.9 percent to ¥9.3 billion, reflecting the difficulty the troubled firm is experiencing in luring new students.

Nova’s image took a beating in June when the Ministry of Economy, Trade and Industry ordered the Osaka-based company to partially suspend business for lying about its services and cancellation policy when soliciting prospective students.

Speculation ran rife that Nova was strapped for cash when it failed to make salary payments at the end of last month. Nova said wages were paid on Aug. 1 and apologized for the trouble caused to its investors and others concerned.

Nova posted an operating loss of ¥4.6 billion and a group net loss of ¥2.4 billion. The figures cannot be compared with last year’s because they were not disclosed.

But in the full year to March, Nova posted a net loss of ¥2.5 billion.

“We are taking (METI’s suspension order) very seriously and have set up an outside panel to study ways to reform our business,” the company said in a statement.

Initially scheduled for Aug. 10, the release of Nova’s financial report for the three months to June was postponed to Friday because more time was needed to calculate how much had to be set aside to pay refunds, the company said.

In the financial statement, the company said it set aside ¥1.6 billion.

The language school chain misleadingly informed prospective students they could book lessons “any time” and at any of its 900 branches nationwide.

http://search.japantimes.co.jp/cgi-bin/nb20070825a1.html

The NOVA chain of conversation schools — whose slogan is “ekimae ryugaku” (study abroad in front of the train station) — operates roughly half the English conversation schools in Japan. Earlier this year, in response to a stream of bitter customer complaints, the Ministry of Trade, Economy and Industry and the Tokyo Metropolitan Government investigated the company and confirmed that some of NOVA’s 800 schools had indeed engaged in a number of dubious practices, such as refusing to refund tuition fees to students canceling lessons.

As a result, on June 13 the chain was ordered to partially suspend business for six months — a draconian penalty by Japanese standards, and one that threatens the company’s very existence.

Writing in Sapio (7/25), a biweekly self-described “international intelligence magazine,” business pundit Ken’ichi Ohmae asks why these problems occurred. And more to the point, he ponders, with so many Japanese enrolled in conversation schools, why does the nation’s level of spoken English remain so poor?

For a time NOVA grew, and founder and CEO Nozomu Saruhashi was praised as a dynamic and charismatic businessman. But like so many success stories these days, Ohmae notes, it was an illusion, analogous to the tale of the emperor’s new clothes. NOVA began running out of steam and has finished in the red for the last two fiscal years.

How did this mess come about? The first problem, Ohmae points out, is inherent in the English-teaching trade itself. For the past decade, while demand for English has been booming in other countries, from South Korea and China to Germany and France, the Japanese have been spinning their wheels. Japan’s average TOEIC (Test of English for International Communication) score results are the lowest among all advanced economies, around the level of North Korea.

This situation, Ohmae writes, has fostered a “loser mentality,” where learners feel that there is no benefit to continuing their studies. Of course the conversation schools are not entirely to blame: It’s students’ lack of persistence, which leads to their piecemeal, on-again, off-again approach, that stands in the way of language mastery.

A second problem relates to NOVA’s management. In recent years, the media has loved to lavish attention on flamboyant, high-profile entrepreneurs. These so-called “shogun-sama” businessmen typically set unreasonably high objectives for their companies, and while achieving initial rapid growth, they often begin to overlook the key source of their success — which, in the case of English schools, are the students who constitute the source of revenues.

NOVA’s high growth trajectory was achieved on the basis of aggressive marketing, such as its management’s boast that it would “open 1,000 schools,” — when what it should really have been doing was vowing to raise the level of its students’ English ability.

Of course, Ohmae points out, problems are by no means confined to conversation schools, but are rampant throughout the Japanese business world.

A common factor in recent scandals involving the Goodwill Group (C0MSN nursing homes), Katoyoshi (frozen foods), Reins International (food retailing) and others, says Ohmae, is the presence of charismatic and energetic founders who, at some point in their companies’ meteoric growth lost sight of their customer base and forged ahead with their eyes focused only on the bottom line. Because of the personalized, do-it-alone style of top-down management, such companies typically fail to benefit from frank advice offered by directors or advisors from outside the organization. And if the regular directors fail to speak out at policy meetings, then no devil’s advocate is in a position to restrain the cocky leader’s impulses.

Ultimately, the main cause of NOVA’s problems can be attributed to slumping demand at English conversation schools. To some degree, the media has reported that English-related business has become saturated and that schools have become overly aggressive in soliciting students, but this doesn’t reflect the actual situation. The prolonged decline of conversation schools can be laid at the door of their failure to show concrete results: I.e. the ability of their students to speak the language hasn’t improved.

Despite the expanding status of English as the de facto standard for international business communications — as evidenced by the learning boom it enjoys in many other countries at present — it strikes Ohmae as exceedingly strange for demand to be on the decline only in Japan.

“I get the impression that over the past 10 years or so, Japanese have become resigned that their English won’t get any better, and that their desire to master the language is presently on the decline. If that’s the case, then it’s natural that a company like NOVA, which is going against the prevailing trends by attempting to expand, would become so bent out of shape.

“That said,” Ohmae concludes in Sapio, “The apparent decline in the desire for self improvement may spell even bigger problems for Japanese.”

http://mdn.mainichi-msn.co.jp/waiwai/news/20070721p2g00m0dm002000c.html

Major travel agency H.I.S. Co. is considering extending assistance to the scandal-tainted Nova Corp. language school chain in the form of a business tieup or financial assistance, sources said Monday.

H.I.S. Chairman Hideo Sawada met with Nova President Nozomu Sahashi late last month in Tokyo to ask about Nova’s financial conditions, according to the sources.

Assistance from H.I.S. would prove a godsend for Nova, which is in desperate need of funds to shore up its sagging operations after the government ordered it to suspend part of its operations as a penalty for fraudulent business practices, the sources said.

Sahashi said in mid-June that Nova will study a capital and business tieup with a partner in another line of business “if necessary,” when he said the company might issue new shares to bolster the firm’s capital base and dispel investor fears.

Meanwhile, an H.I.S. representative said, “The talks (between Sawada and Sahashi) did take place, but no specific deal is in the making.”

An alliance with Nova would probably be appealing to H.I.S. because customers studying foreign languages at Nova could bring in new business for the travel agency, according to industry observers.

Osaka-based Nova, Japan’s biggest English-language school chain, has about 480,000 students. It has been deep in the red for the last two years. Amid its financial plight, allegations surfaced that the company lied to customers in soliciting students and then reneged on the terms of enrollment contracts.

The Ministry of Economy, Trade and Industry issued an order June 13 for Nova to suspended part of its business for six months.

http://search.japantimes.co.jp/cgi-bin/nb20070703a2.html

A tie-up between Nova Corp. and H.I.S. Co. would be interesting, as Nova and H.I.S. have much in common, both being no strangers to disregarding the laws of Japan:

The nation’s largest discount travel agency, HIS, which also runs foreigner-friendly No.1 Travel, has based the price of some air tickets from Japan on the nationality of the traveler, possibly in breach of Japanese law, The Japan Times has learned.

Foreigners trying to buy discount tickets through the company were quoted higher prices than Japanese customers purchasing discount seats on the same flight.

The policy came to light when the company offered a discount ticket to Los Angeles over the telephone to a Japanese caller, but said it was no longer available at the quoted price after finding out a Canadian was the intended traveler.

It then informed the caller that the price for the ticket would be higher for a non-Japanese customer.

However, Japanese Air Law, Article 105, Paragraph 2, clearly states that “no specific passenger or consigner will be unfairly discriminated against.”

http://search.japantimes.co.jp/cgi-bin/fl20060704zg.html

Major travel agency H.I.S. Co. may form an alliance with Nova Corp., the English conversation school operator struggling under a government order to partially suspend operations, sources said.

H.I.S., known for its sales of discount airline tickets, is leaning toward providing financial support to the nation’s largest conversational English school in return for a chance to recruit its students as customers, the sources said.

http://www.asahi.com/english/Herald-asahi/TKY200707030119.html

The Economy, Trade and Industry Ministry issued a document in June 2002 that tolerated English conversation school industry leader Nova Corp.’s controversial practice of minimizing refunds of students who terminated their contracts, according to sources close to the issue.

Four months before the document was issued, the Tokyo metropolitan government began its own administrative procedures against Nova, criticizing the Osaka-based chain’s refund method as being detrimental to departing students.

But because the ministry’s document said the refund method was not wholly illegal, the metropolitan government discontinued its administrative procedure.

Nova had continued its refund calculation method until March, when the Supreme Court ruled it illegal.

Under the practice, when long-term students–mostly those with three-year contracts–terminated arrangements, the price of lessons already taken were calculated at higher amounts than agreed at the contract-signing.

The students received less of a refund than they expected.

When the ministry ordered Nova to suspend business June 13 under the Specific Commercial Transaction Law, it pointed out the refund method was unlawful if students attempted to terminate contracts for reasons such as difficulty in booking lessons.

However, the ministry’s June 2002 Nova document, distributed to regional ministry bureaus nationwide, noted the calculation method did not necessarily limit student rights to terminate contracts.

As Nova’s practice of calculating higher prices for lessons was actually applied to some forms of contracts, the document said, “It cannot be said the method lacks rationality.”

Nova also nullified unused points purchased by students in advance to take lessons, when students terminated contracts.

In the wake of numerous complaints on terminating Nova contracts received by consumer consultation centers, the ministry’s Consumer Affairs Policy Division drafted the document after interviewing Nova executives.

Copies of the document were distributed to the ministry’s regional bureaus, prefectural governments and consumer consultation centers, effectively allowing Nova to continue using the calculation method.

In February 2002, four months before the document’s issuance, the metropolitan government began its own administrative procedures against Nova, demanding the company review its business practices, including the refund calculation.

Other problems included false explanations to potential students that they would be able to book lessons at any time, and faulty contract forms.

The metropolitan government said Nova admitted in March that employees had made mistakes in judgment when they made sales pitches to potential students, and that Nova promised to correct the problem.

But Nova declined to discuss its refund calculation method with the metropolitan government and said it would take action after consulting the ministry.

When the ministry presented its opinion in the June 2002 document, the metropolitan government could not continue administrative procedures against Nova.

The number of complaints about Nova received by consumer consultation centers continued to increase even after the ministry issued the document.

The number steadily rose from 855 in fiscal 2002 to 982 in fiscal 2004, and to 1,088 in fiscal 2005. In fiscal 2006, the number reached 1,967, accounting for 53 percent of all complaints about foreign language conversation schools.

In September 2005, a consumer organization demanded Nova review the refund calculation method. Nova replied that it calculated prices for terminating contracts based on consultation with administrative authorities.

An official of the Consumer Affairs Policy Division said: “The government presented its view for a case that caused numerous complaints. Though the document was a reply based on Nova’s explanation that students could book enough lessons, we can’t deny it was later used for Nova’s convenience.”

Koji Niisato, a lawyer with expertise in consumer affairs, said: “It was already widely known more than 10 years ago that there were numerous complaints about Nova. As many former Nova students had to forfeit a lot of money without the chance to file lawsuits, the administrative authorities bear a heavy responsibility.”

“The [ministry’s] interpretation of the refund calculation method was denied by the Supreme Court. It’s obvious the ministry magnified the financial pitfalls endured by Nova students. The ministry can’t deny it made the judgment for corporate rather than consumer interests,” he said.

http://www.yomiuri.co.jp/dy/national/20070702TDY02007.htm

Nova Corp. President Nozomu Sahashi on Thursday refused to resign from the top post at the largest English-language school operator in Japan over a scandal involving exaggerated advertisements.
His refusal came in response to a call for his resignation from Nova shareholders who asked him at their annual meeting to resign to take responsibility for the scandal, which has led to a government order partially suspending Nova’s business operations.

“If I resign, the company will collapse,” Sahashi told the meeting in Osaka.

Sahashi apologized for causing the disciplinary action by the government and said Nova has created a management reform committee to investigate the scandal and consider how best to avoid scandals in the future.

The committee, consisting of four experts on corporate compliance, will compile an interim report by the end of July and a final one by the end of August, he said.

The committee is expected to look into Sahashi’s responsibility and other issues related to the scandal.

http://asia.news.yahoo.com/070628/kyodo/d8q1pfhg3.html