Balancing Labor and Capital in the Private Tuition Market

Author: Shiven Mohindra

The BRB Bottomline

With college applications as competitive as ever, every high school student is going to extreme lengths to ensure that their order qualifier, their GPA, is as high as possible. Despite a plethora of syllabi and different higher education programs, Asian countries have been stereotyped for having a rigorous core curriculum and the smartest students. This leaves a huge gap in the market for private tuition, let’s analyze the ways companies are able to capture the market share and develop into an organization that benefits all students.

The GPA: More Important than Ever

Whether it be the Primary School Leaving Exam (PSLE), the 11 Plus, GCSE’s, the IB programme, or AP credits, students’ grades and GPA’s are of the utmost importance when applying to universities. With every student striving for the top grades, they are doing everything in their power to increase their chances of getting into top tier colleges. The most effective way of doing this is through out-of-school private tuition. The graph above illustrates the rapid increase in Ivy League colleges’ average GPA over time, proving that the market for private tuition is growing rapidly in an attempt for students to achieve their aim of reaching these highly prestigious colleges.

The Enigmatic Blend of Labor and Capital

Textbook economics explains that the four key factors of production (land, labor, capital and enterprise) are mutually exclusive, however Math Vision Enrichment Centre (MVEC), a private tuition center located in Singapore that dominates the market when it comes to private tutoring for international students, challenges these theories. Many syllabi are rather rigid, with strict protocol as to what can and can not be tested. MVEC takes advantage of the rigidity in syllabi by putting their tutors through a comprehensive training program which creates consistency among tutors. Tutors are taught how to help students revise chapters of the syllabus for a majority of the lesson and end with a Q&A to allow the students to clarify any doubts they may have. The consistency within the organization is their key to success as students don’t feel the need to have a specific tutor teach them as they are all so similar. This allows the organization to have more students come in for lessons and thus increase their revenues. The organization invested a lot of money into research and development because once they have the model for the ‘ideal tutor’, through their training regime, they are able to pass on their practices to other tutors. Like with any company, as they begin to grow in size, they enable economies of scale, lowering their average cost and making adding more labor easier and seamless. 

A Win-Win-Win Situation

In this industry, there are three key players: the management of the organization, the tutors and the students. Let’s analyze how they all win and how this model is so successful. One clear winner is the student as they are paying for a service (education) and are receiving what they paid for: a comprehensive review on subject matters they aren’t confident with. The tutors at MVEC are predominately current college students or recent graduates who are looking to make extra money and gain some work experience. These students are willing to learn how to teach and are very familiar with the syllabus and exam logistics as they have recently completed the exact course that they are teaching. They have thrived at the course the student is taking, and so it makes it much easier for them to teach their students. Anyone can teach the content of a syllabus, but what differentiates these tutors is their experience in the course since they took the course themselves. The management of the organization is winning as well as they are making the money and are able to reduce variable costs as they are also doing the tutors a favor by letting them work at the organization since the tutors are looking for experience. Due to their comprehensive training regime, the student is still getting a top-tier education, which allows the organization to charge the student a premium price. 

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