English schools need to hit the books

Geos bankruptcy typifies an industry faced with changing market, bad economy

With stiffer competition for fewer students amid a lingering recession, the nation’s language schools need to develop new and profitable business strategies if they hope to improve their situations, a fact only further highlighted by Geos Corp.’s announcement Wednesday that it had filed for bankruptcy.

“The current economic slump has led to a decline in the number of students, which meant we had to cut our advertising budget. As a result, the number of new students drastically decreased,” Geos executive Hitomi Suhara told reporters Wednesday in Tokyo.

In the 1990s, Geos had increased its number of campuses to more than 400 in an attempt to compete with its largest competitor, Nova Corp.

In 2008, Geos began closing, abolishing or consolidating unprofitable schools. But these measures came “too late,” according to one industry insider.

According to Yano Research Institute Ltd., the nation’s language school market for fiscal 2009 was estimated at 738.6 billion yen, down 10.6 percent from its fiscal 2005 value.

With the persistent economic downturn, language schools have seen a decrease in the number of commuting students and corporate language programs, contracts for which are considered to be steady forms of income, according to the research institute. Further complicating the matter was Nova’s 2007 bankruptcy, which turned many potential students against language school operators.

Meanwhile, the advent of new types of learning tools, including online English conversation programs and software for mobile phones, also have made competition fiercer within the industry.

There is an increasing number of price-busting schools, which hire Filipino teachers, who are native English speakers and work for less than other English-speaking peoples. These schools offer lessons for as little as several hundred yen for 30 minutes–without any admission fee.

On the other hand, as English instruction will be mandatory at primary schools starting next academic year, business endeavors geared toward children have grown steadily.

According to one Industry Division official at the Economy, Trade and Industry Ministry, “The industry needs to come up with a business strategy that targets growing fields, such as providing special lectures for children.”